Telcos unsure about 5G launch by 2020 after Trai's auction recommendation

Can the government’s ambition to launch 5G services by 2020, in keeping with the rest of the world, get derailed? Telecom companies (telcos), which have to put in the money to make it happen, make no bones about the fact that the recent Telecom Regulatory Authority of India’s (Trai) recommendations to auction 5G could do just that. 

Last week the regulator suggested four things: it identified 3300-3600 MHz as the 5G band for auctioning, imposed a limit of 100 MHz for each player and decided that there would be no roll-out obligation for the winners. 

It is the fourth recommendation that irked: the regulator fixed a steep base price of Rs 4.92 billion per MHz, which telcos say would make any roll out unviable, especially since most of them are burdened by debt incurred to fight a bitter tariff war in 4G services. 

Based on the regulator’s base price, the government could make a staggering Rs 1,476 billion if all the 5G spectrum is sold.  But most telcos cannot pay this price. Telecom lobby Cellular Operators Association of India clearly finds the price of 5G in contradiction with the objectives of the new telecom policy. Says Rajan Matthew, COAI director-general: “The price fixed for 5G in India is over seven times more than in the recently concluded 5G auction in the same band in South Korea. The new telecom policy clearly talks about ‘optimal pricing’ of spectrum related to developmental needs, yet Trai has followed the earlier policy were auction merely meant maximisation of revenues. Repeating that policy will lead to disaster for telcos financially. How can anyone roll out 5G at that price?” 

Matthew’s fears are not unfounded. The high base price in the 2016 auctions saw an estimated 60 per cent of spectrum going unsold.. And no one even bid for the expensive yet much coveted 700 MHz band (used for 4G coverage), forcing the regulator to reduce its base price. 

In fact, the price of spectrum per MHz/population forked out by telcos for spectrum was 50 per cent higher than the median price in developing countries in Asia Pacific between 2000 and 2017 according to a study by GSMA Intelligence. The report says that the impact clearly can be seen in the fact that the 4G penetration in India was 21 per cent of the mobile market (in Q1 2018) compared with 44 per cent, the average for Asia Pacific in the same period.  

Telcos are also asking why the regulator is in such a hurry, when a high-powered committee to set out a 5G roadmap, set up the Department of Telecommunications (DoT), is expected to submit its report in a few weeks. The good news is that the final decision on price lies with the ministry. 

In fact, a member of the 5G committee members say telcos won’t be able to operate 5G only with the Trai recommended band. “It’s a kind of interim band, providinf reasonable data capacity as well as coverage, including in-building penetration. But 5G is all about new applications which will require huge data capacity and low latency. What will be required is a combination of low frequency band which will give coverage and in-building penetration combined with very high frequency bands, which will provide the data capacity required for 5G to be successful,” the member said.

That is why the committee is also looking at recommending auctioning the 600 MHz band to provide coverage and the 26 – 34 GHz bands to provide huge data capacity. While telcos could be offered blocks of 5-10 MHz in the 600 MHz band where spectrum availability is limited, they could be given 800 MHz each in the higher frequency bands where there is no shortage of spectrum availability.  

To the uninitiated, the sub-1 GHz bands are key to providing coverage as well as in- building penetration of airwaves (that is, they can penetrate walls) and require fewer towers and, therefore, investment.  But they can carry limited amount of data. But as 5G requires high data capacity, telcos also require high frequency bands which are above 1 GHz. However, if telcos only have high frequency bands they will have to put in many more towers to ensure coverage and that would require huge investments and make the project unviable. So a combination is key. But it is not only spectrum range and pricing which could derail the 5G roll out. DoT secretary Aruna Sundaranjan says unlike in developed countries where 80 to 90 per cent of the towers are back-hauled through fibre, in India it is not even 30 per cent with the rest on microwave.  But fibre is essential to carry large amount of data in 5G and this would require substantial investments from telcos. The good news is that despite the financial strain, most incumbents are investing money in fibre; the question is whether it is enough. 

Also there clearly is a gap between the government’s ambition and that of telcos and Indian industry on 5G. For DoT 5G provides India an opportunity to be a leader in developing core technology. “5G is a paradigm shift it is not about improved mobile speeds to customers, it is much more fundamental, it is about building applications which meet our developmental goals and we have identified areas like healthcare, agriculture and smart cities,” says a top DoT official. 

DoT is looking at roping in big business to develop core technologies in software for 5G networks as well as leveraging data analytics and designing capabilities. It has also roped in ministries to demonstrate live pilots on applications powered by 5G come September.  And it is talking to start-ups to develop applications relevant to developing countries.  

However, the industry is much more sceptical. Says a senior executive of a leading telco: “For these applications to develop in healthcare and to become commercially viable will take at least three to five years. You need to create the infrastructure too.  So we have to take things one at a time”.  5G is no longer a distant reality. By 2019 commercial services, which will offer speeds as much as 100 times more than 4G, will be rolled out in Los Angeles (Verizon) and then in other cities of US, in UK, South Korea, China as well as many European states and even Qatar. Auctions of 5G spectrum in the first round have already been completed in South Korea, UK, and US.  India cannot afford to miss this bus because of poor policy design.

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