India set to become a 5G nation

On August 1, Department of Telecommunications (DoT) completed the first-ever auction of 5G spectrum. DoT managed to sell 71 percent of the spectrum from the total available spectrum on sale i.e., 51.236 GHz out of 72 GHz and generated a record revenue of ₹1,50,713 crore. Along expected lines, Reliance Jio was the largest bidder acquiring 24.74 GHz spectrum at the cost of ₹88,078 crore. Jio was followed by Airtel which acquired 19.867 GHz spectrum at the cost of ₹43,084 crores. Vodafone Idea was a distant third acquiring 6.228 GHz spectrum at the cost of ₹18,799 crores. Adani Data networks acquired 400 MHz of spectrum in 26 GHz band for setting up private networks for captive use. Overall, the auction was a big success for DoT as the spectrum sold is enough to cover the entire country and make 5G services available pan-India.

Telcos’ strategy and rollout plans
Reliance Jio acquired spectrum across 700 MHz, 800 MHz, 1800 MHz, 3300 MHz and 26 GHz bands across all 22 circles for pan-India rollout. Jio was the only bidder in the expensive 700 MHz band which had remained unsold in 2016 and 2021 auctions. Hence, Jio’s strategy is to use high band i.e., 3300 MHz and 26 GHz for upgrading to 5G and use low band i.e., 700 MHz for coverage. Jio is likely to launch 5G services in India from August 2022 onwards, and since it has already carried out 5G tests in nine areas, including Mumbai, Delhi, Chennai, Bengaluru, and Jamnagar, it is likely to prioritize some of these cities for initial launch of 5G services.

Airtel acquired spectrum across 900 MHz, 1800 MHz, 2100 MHz, 3300 MHz and 26 GHz bands across 22 circles for pan-India rollout. It went with the mid-band (1800 MHz, 2100 MHz) and high-band combination strategy as opposed to low-band and high-band combination strategy of Jio since mid-band was less expensive compared to low-band. Airtel has announced its intention to launch 5G services from August 2022 onwards, and has partnered with Samsung, Nokia, and Ericsson for the same. It has also tested 5G services in Hyderabad, Kolkata, and Delhi/NCR, among other areas and is likely to prioritize these cities for initial launch of 5G services.

Vodafone Idea had a decent auction, acquiring spectrum across 900 MHz, 1800 MHz, 2100 MHz, 2500 MHz, 3300 MHz and 26 GHz bands. It acquired 3300 MHz and 26 GHz across 17 priority circles leaving out Assam, Orissa, J&K, Himachal Pradesh, and North-East. As its financial condition improves in subsequent years, it may try and fill the gaps in its portfolio. Vodafone Idea is expected to commence 5G services by the end of 2022.

Adani Data Networks was a surprise entrant in the auction putting up an EMD of ₹100 crore. However, it soon made it clear that it had no interest in consumer mobility space and was only looking to purchase spectrum for setting up private networks for captive use. True to its word, Adani bought 400 MHz of spectrum in 26 GHz band for a price of ₹212 crore for its captive use.

Overall, IDC expects 5G services rollout from October 2022, with August 2022 being launch announcement about packages and commencement in limited cities. Wider rollout is expected from October 2022 onwards.

DoT allows direct purchase of spectrum for enterprises intending to setup private networks
DoT while issuing guidelines for 5G spectrum auction for telcos back in June 2022, also issued guidelines for enterprises looking to purchase spectrum for setting up CNPN (Captive Non-public networks). Under the guidelines, the government allowed:

• Enterprises to lease spectrum from telcos and establish their private network;
• Telcos to offer private network as a service through network slicing model; and
• Enterprises looking to setup private network to obtain spectrum directly from DoT and establish their private network.

The last option has seen strong opposition from telcos as they feel it will hamper their revenue as it is expected that around 40 percent of 5G revenue is expected to come from enterprise segment. However, DoT has not budged from its stance since it is a standard practice followed by many countries. Germany already has over 220+ organizations which have obtained private networks for their captive use.

However, DoT in its guidelines did mention that they will undertake demand study for enterprises looking for direct purchase of spectrum. Post 5G spectrum auction, as of August 9, DoT has invited participation from enterprises seeking to establish CNPN directly from DoT.

Enterprises having a net worth of more than ₹100 crore and willing to set up CNPNs by obtaining spectrum directly from DoT are invited to participate in this exercise. Willing participants can submit details between August 10 to September 9, 2022. Eligible and willing enterprises are required to submit the details such as ownership, net worth, proposed locations, requirement of spectrum in various bands etc. on DoT saralsanchar portal.

However, DoT hasn’t given any framework or the timeframe for the demand studies as to how they will conduct the demand study and how much time it will take to complete the study etc. Hence, it may be a while before we see 5G spectrum allotment to enterprises for setting up CNPNs. Meanwhile, telcos can be expected to go aggressive on securing business from the enterprise segment in next 6-12 months.

5G pan-India rollout challenges
Mobile phones. 5G mobile phones market is not mature in India. As per IDC, India is likely to exit 2022 with 90 million 5G smartphones with possibility of adding another 100 million in 2023. Hence, it will be almost 3 years before India reaches around 500 million odd 5G smartphones. Also, only higher mobile data speed may not be enough to lure consumers to migrate to 5G smartphones. At present, IDC expects consumers to follow regular device refresh cycle for upgrading to 5G mobile phones.

Use cases. 5G will need compelling use cases beyond just the message of high data speeds for consumers and high data speeds, real-time data analysis, and low latency for businesses. For consumers, cloud gaming, apps providing immersive experiences like AR/VR, e.g., Google Maps with AR/VR capability, high-quality (UHD, 4K, 8K) video streaming, etc., will need to be developed to justify upgrading to 5G mobile phones. Similarly, for enterprises, use cases are either still being identified or the ones that are identified haven’t been implemented as yet in most cases. Besides, enterprises will need far more convincing than consumers as they will look at returns to justify the expenditure.

Tariffs. It is likely that telcos may launch 5G services at a premium compared to 4G. However, whether consumers are willing to pay premium for 5G services remains to be seen. In most countries where 5G is already available, telcos haven’t charged premium for 5G services. Hence, it is important that telcos in India to keep the price differential, if any, between 4G and 5G services to a minimum.

Outlook
Despite all the past and upcoming challenges, India will become a 5G nation come October 2022. It will bring about both data and industrial revolution in India, and will act as a catalyst for India becoming a digital economy and unlocking the potential for next wave of economic growth.