A promise and an opportunity, but tread softly

A promise and an opportunity, but tread softly

A promise and an opportunity, but tread softly

Fifth generation or 5G telecommunication services may be a while away from being deployed in the country but it has already become the industry buzzword. It is the next generation, coming after 2G in the 90s, 3G in early 2000s and 4G in the current decade, primarily over the last two years. The technology is still evolving, and globally there are no accepted standards yet. What is known is that 5G will be an overarching umbrella of networks rather than a replacement technology for previous generations, enabling data speeds to go up beyond 500 Mbps, and even up to 1 Gbps, with five times, or more, the capacity. This makes its potential massive, providing advanced solutions in the fields of telecom, energy, healthcare, agriculture, transportation, Internet of Things and logistics, among others.

The key drivers for 5G rollout and adoption are a massive anticipated increase in data consumption, fast increasing digitalised life and services, the growth of smart cities, a sufficiently large digitally-literate population and the need to have an all-encompassing network architecture that can utilise all available spectrum bands rather than replace existing networks. This means more than just the ability to video-conference on your phone or download a high-definition movie in a second.

The biggest expectation is the enabling of IoT, connecting devices and allowing users to control devices via the Internet. Data analytics is another exciting prospect where sensors could give millions of data points and consequent insights, enabling the management of risk and creation of new business models. Then there is the automotive sector, with connected cars and even driverless cars. Augmented Reality (AR) will become far more real. Artificial Intelligence will offer huge possibilities coupled with the 5G revolution.

While most countries are getting ready to embrace this new revolution, as is India, the regulatory and technical standards are globally still under deliberation and likely to be ready only next year. India will also be ready, and unlike with 2G, 3G or 4G, India will lead the world in 5G and not be a late entrant.

The government has created a high-level panel to oversee the roll-out of 5G services and ensure that it is deployed within the next three years. A government research team has already started the ground work and has reportedly filed 100 patents so far, giving India the leverage of Intellectual Property. Last month, the Cellular Operators Association of India (COAI) launched its own multi-stakeholder 5G Forum.

Telecom equipment giant Ericsson has partnered with IIT-Delhi to roll out a '5G for India' programme. The company is setting up an incubation centre and a test-bed to work on the technology. Telecom majors like Airtel and BSNL have partnered with Nokia to deploy 5G networks across the country. Reliance Jio has partnered with Samsung to bring 5G to India as well as enhance its existing 4G network.


But for India, there are some fundamental challenges that need ironing out before rolling out 5G services. Else, it will become a case of trying to run before learning to walk. 5G is an exciting prospect, but the excitement should not get ahead of ourselves. For one, it is cost-intensive and requires major investments and upgradation. Moreover, an entire ecosystem is needed that is just not there yet -- from handsets to 5G-ready networks and technology uptake.

The Indian telecom industry is currently facing its worst phase of hyper-competition, severely depleting margins, and industry-wide consolidation. The current environment makes it very difficult for even the biggest service providers to invest in the new technology. The industry has a cumulative debt of around Rs 5 lakh crore and rising. Revenues are under Rs 2 lakh crore and falling.

Even the Reserve Bank of India has drawn attention to the potential disruption that this financial state of the industry can cause to the economy as a whole. The debt is mainly due to huge amounts paid for spectrum in the last few years. Even that would not have been a problem had it not been for the hyper-competition in the sector now. There is considerable amount of uncertainty in the market currently, and none of the service providers are likely to invest in new services and further leverage themselves. Rather, they are likely to wait and watch, till things ease up a little.

Telecom companies have been urging the government to give them some leeway, through rebates in taxes and levies or even easier payment terms for their debts and for the spectrum they have bought. Currently, they pay more than 30% of their revenues to the government in the form of taxes and levies, a situation further compounded with the increased GST rate of 18% (from 15% earlier). This is far too high for essential services like telecommunications that have to continually invest in new technologies as well as service existing customers, with some of the lowest tariffs and average revenue per user (ARPU) in the world. The fact is, while inflation has steadily risen over the past two decades, telecom tariffs have steadily fallen to unsustainable rates now.

It is imperative that the government does not rush to auction spectrum this year and instead allow the market to settle down, giving time for consolidation to be completed and balance sheets to cover sufficiently for companies to be able to afford 5G spectrum. We estimate that by the latter part of 2018 or early 2019, the consolidation process should conclude and companies would start looking for additional spectrum after synergising operations. The industry and the government have to collaborate to get the best out of a technology that will help the country leapfrog.

(The writer is Director General, COAI)

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