Govt will not reduce levies, optimally commercialising 5G outside its purview

The government has communicated to telecommunications (telecom) service providers (TSPs) that they need to figure out the viability of 5G services and products being deployed, and that the high cost of new infrastructure cannot be used as an excuse to seek lower government levies, informed officials.

Earlier this month, telecom companies (telcos) raised the demand for lower government levies at a meeting.

“The companies had pointed out that while industry use-cases and business models were constantly being developed, finding ways to optimally commercialise the majority of 5G assets being created would take time,” said an industry insider aware of the developments.

The new income streams expected to be generated from 5G have a long gestation phase. Until then, the massive investments being undertaken by TSPs will remain a significant pressure on the business, they said.

But the government has rebuffed the demands, saying there is no move to change the existing levies.

“Finding viable commercial uses of 5G is an under-process phenomenon the world over. The government is ready to provide all policy support to enable that. But a change in the levy structure is not under consideration,” said an official.

The telcos had requested a reduction in licence fee from 3 per cent to 1 per cent and a temporary suspension of the 5 per cent universal service obligation (USO) until existing unutilised funds are exhausted.

Officially used to enhance mobile and broadband connectivity in rural and remote areas, especially those affected by Left-wing extremism and in the Northeast, the government imposes USO on TSPs of 5 per cent of their annual adjusted gross revenue.

The resultant USO fund had an unused surplus of Rs 64,774 crore as of October 30, 2022, reveals official data.

Major expenditure
Last year, Reliance Jio (Jio) Chairman Mukesh Ambani stated at the company’s 45th annual general meeting that Jio would invest Rs 2 trillion to build a pan-Indian 5G network.

Meanwhile, senior executives from rival Bharti Airtel (Airtel) had said the company targeted Rs 28,000 crore in expenditure per year on the 5G roll-out.

Given that 5G services are being rolled out by only two players in the vast Indian market, speed of coverage expansion has dominated the 5G policy of both companies.

“To get to customers faster, both have had to pay more to quickly source network gear, develop indigenous supporting technologies, and ensure faster deployment,” an executive said.

Case in point: Airtel aims at covering all towns and key rural areas by September 2023, while Jio is looking to spread its 5G network to all urban areas and tehsils by the end of 2022-23.

Already, Jio True 5G services are available in 4,333 cities, while Airtel 5G Plus services are available in over 3,500 cities.

Many use-cases
The advent of 5G technology (tech) will have functions in a wide range of areas, including widespread machine-to-machine communication, 5G voice, edge computing, network slicing, and the metaverse. However, TSPs globally are in various stages of being able to commercialise 5G assets beyond mobile phone tariffs, said a research report by S&P Global Market Research last month.

Cloud gaming is among the segments expected to generate revenue quickly as a result of the extremely low latency offered by 5G.

The building of private 5G networks is another lucrative proposition for TSPs.

“Especially in the manufacturing sector, these high-tech factories will open up areas such as robotics, automation, and advanced logistics management,” a senior executive from a telco said.

Given that manufacturers can expect a rapid improvement in their business processes and output volume as a result, corporations are expected to cough up generously for the tech.

5G is also expected to allow new and potent services, such as agriculture drones for effective crop management.

Jio expects 5G to soon make it possible for immersive experiences like augmented reality to be enjoyed with JioGlass and comparable gadgets from Jio’s partners. Business Standard