The recently concluded spectrum auction has been a highly successful one, from the government’s perspective, the participating operators’ perspective, and most importantly, from the Indian telecom consumer’s perspective.
The government was able to generate significant revenues in excess of `150K crore; operators were able to acquire spectrum in line with their internal budgets (and strategies), and, for the most part, without bidding too much higher than the reserve prices; all of which means that the Indian consumer will have access to world-class 5G services in the near future, and that too at affordable rates.
There was one particular outcome from this auction, related to Jio acquiring the 700 MHz band, in addition to C-band (and other bands), which might have come as a little bit of a surprise to certain quarters, but to us it does not come as a surprise at all – I say this based on the profound logic and business case associated with the 700 MHz acquisition strategy of Jio. Let us delve a little deeper into that logic and the business case elements associated with that logic.
Benefits of acquiring a combination of 700 MHz and C-band vs acquiring spectrum only in C-band
As background, given the limited amount of sub-GHz spectrum, currently with Indian operators (across the 800 MHz and 900 MHz band); the fact that the sub-GHz bands are currently deployed by operators for 4G (and 2G) services across circles; and combined with the fact that 4G (and 2G, to a lesser extent) will continue to be mainstream technologies for the foreseeable future, acquiring 700 MHz in the recently concluded auction became the only option for an Indian operator to reap the benefits of a sub-GHz band on its 5G rollout, and will deliver significant revenue (market share), and cost-related benefits for such an operator versus the competition.
With above as background, acquiring 700 MHz band in addition to C-band will yield the following benefits for Jio over its competitors:
- Revenue Benefit #1 – Improved market share in the mobile market due to better indoor penetration in dense urban and urban geographies (such as Delhi, Mumbai, Kolkata circles, and large and densely populated cities, such as Chennai, Bangalore, Pune, etc., in other circles) – Our work suggests that all other things being equal, in a country like India, an operator having the sub-GHz (e.g., 700 MHz) spectrum in its 5G layer can gain between 200 and 300 basis points (2–3%) of total subscriber market, and a much higher number (>10% market-share gain) in the 5G-only segment of the market, over an operator that does not have a sub-GHz layer in its 5G rollout.
- Revenue Benefit #2 – Improved market share in the mobile market due to improved throughput – All else being equal, a combination of 700 MHz and C-band in carrier aggregation (CA) configuration, delivers around a 10-percent higher throughput versus C-band on its own. Higher throughput is analogous with better customer experience, which in turn leads to improved market share on 5G versus the competition. This benefit will be reaped uniformly across both urban/dense-urban, and rural geographies within the country; hence it has a pan-India effect.
- Revenue Benefit #3 – Improved market share in the enterprise market once 5G is upgraded to standalone (SA) version – From a slightly more medium-term perspective, once 5G is upgraded to its standalone (SA) version in 2–3 years’ time, having a dedicated 700 MHz layer for 5G will help deliver significantly better experience on the enterprise use-cases that SA 5G will deliver. Initial research suggests a market share gain of up to 5 percent in the 5G enterprise use-case market.
- Cost Benefit #1 – Having a readily deployable sub-GHz band in the form of 700 MHz (in addition to C-band) will provide a much more cost-optimal option that would help significantly reduce coverage site requirements in rural areas. Assuming a similar population coverage of ~90 percent in both scenarios (700+C-band and only C-band), the 700+C-band scenario will require 40–50 percent less coverage sites over the C-band-only scenario.
- Cost Benefit #2 – Having 700 MHz band from the get-go, will help avoid RAN upgrade costs at the time of upgrade from NSA to SA in 2–3 years’ time.
In aggregate, across the revenue and cost benefits, 700 MHz-band acquisition (in combination with C-band, and versus a scenario where only C-band is acquired) delivers significant benefits, which far outweigh the cost associated with 700 MHz band acquisition.
Finally, let us also touch upon the benefits that acquiring mmWave band will yield for all participating operators
In addition to lowering overall SUC costs (for the incumbent operators), the mmWave band will deliver the following benefits:
- In the near term (next 2–3 years), it will help provide a significant capacity layer in high-traffic hotspots, such as railway stations, stadiums, etc.
- Also in the near term, it will help drive exceptional user experience for 5G use-cases, such as streaming and cloud-gaming in the e-Mbb category, and also serve as a potential band for FWA deployment in locations where the economics of fiber rollout do not make sense.
- In the longer term, mmWave will be an indispensable band for delivering ultra-low latency (URLLC) and Massive machine type (mMTC) use-cases on an SA 5G configuration – these two use-case categories are expected to constitute anywhere between 5–10 percent of overall revenues 5–7 years out, and a much higher proportion of overall revenues 10 years out.
In summary, as we stated in the beginning, a highly successful auction, from the government’s, operators’, and consumers’ perspectives.