Beyond the high-speed proposition of 5G

Beyond the high-speed proposition of 5G
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Intro strap: To be a success, 5G has to make adequate business sense for all stakeholders, and not be just another higher-speed connectivity option.

 

The pandemic has accelerated the shift to digital everywhere. And this unprecedented shift relies on the backbone of resilient and high-speed telecommunications connectivity. So far, 4G and wired broadband rose to the sudden demand and have delivered. So, do we need 5G in India?

The global demand for high speed and low latency connectivity suggests that the answer is a resounding ‘Yes’. But will the Indian telecom operators implement 5G only for higher speed and competitive pressures unless there are adequate applications and monetisation opportunities to justify the spends?

International situation

Globally, 5G is clearly on. Commercial roll-outs started much before Covid-19 hit and, in some markets, accelerated during the pandemic, and is available across 158 local operators in 67 markets, as of March 2021. Analysts forecast rapid growth.

In a recent report, Grand View Research estimates that the global 5G services market will reach around $665 billion by 2028, registering a CAGR of 46.2% from 2021 to 2028.

This is encouraging if we look at the overall level. However, if we dig deep, then we find that in many markets the launches have been in selective high-potential geographies.

It’s still early days for widespread commercial usage.

Which are the high-potential 5G segments?

While 5G may appear to many as an enhanced mobile broadband for consumer content e.g. media and entertainment, it is the enterprise segment that offers higher potential. Commercial 5G enterprise applications are expected to be in the Industry 4.0 factories and Massive IoT (MIoT) segments e.g. smart cities, utilities, asset tracking, smart agriculture, drones, and in healthcare (robotic surgeries), online education, infrastructure, and transportation. And finally, the Indian consumer segment with high media consumption (and in a WFH/hybrid environment) will fuel the uptake, though the relation between uptake and price points is to be seen.

What are the main challenges?

A bunch of issues, initially around regulations, seem to be the initial showstoppers. However, in my view, none of them are insurmountable. Mid-band spectrum (3.5 GHz) has the widest acceptance across Europe and leading Asia Pacific markets as it balances coverage and capacity; one expects India to follow that trend along with other bands being made available.

Secondly, at this time, 175 MHz spectrum allocated in the mid band seems inadequate for meaningful deployment by three private sector operators. Smaller geographies such as Singapore (200 MHz) and Hong Kong (300 MHz) have allocated more.

Finally, the base price of Rs 492 crore per MHz is significantly higher than the auctioned price in many other countries, e.g. Austria (Rs 7 crore), Spain (Rs 14 crore), Italy (Rs 182 crore), and the U.K. (Rs 70 crore), according to a report by a parliamentary standing committee on information technology.

At this price, the spectrum auction may remain largely muted like in recent years. The frenzy of the first 3G and broadband wireless access (BWA) auctions held a decade ago seem a distant memory now. There are other constraints e.g. optical fibre backhaul, tower infrastructure, spectrum harmonisation, investment appetite of operators, device affordability, and certain geopolitical matters, though these are issues that the industry has navigated earlier. A clear spectrum road map, bands, availability, and reasonable pricing would help accelerate 5G in India.

When would we experience 5G?

Trials are ongoing at this time. Announcements are anticipated soon by two telecom operators on their expected launch. But this needs a resolution of the pending issues, especially around spectrum. Launches may happen early, but more as a pilot in select urban areas and for the enterprise/government segments. It is expected that consumer adoption in pioneer countries would reach 20% of connections only by 2025. A June, 2021 report by a global network OEM pegs India’s 5G penetration at 26% in 2026, which seems aggressive.

Widespread deployment will take time and meaningful adoption may happen only by 2025, in my view. In summary, to be a success, 5G has to make adequate business sense for all stakeholders, instead of being merely a higher-speed proposition.

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Disclaimer

Views expressed above are the author’s own.



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