Telcos, tech firms fight for a share of 5G private network pie

Telecom companies  say that the 5G enterprise business could account for over 40 per cent of their mobile revenues.

Broadband India Forum (BIF) estimates that there is scope for over 150 captive private wireless networks to be up and running once they are given spectrum.  

It is a potentially large and growing market which is why everyone from telecom companies  to global and domestic technology companies are vying for a piece of the pie.

The battle has been joined with new vigour owing to the unexpected decision by the cabinet, overruling the DoT’s stand, to permit enterprises in India to run ‘private captive networks’ by directly acquiring spectrum through an administered price in their quest to move towards the Industrial Revolution 4.0.

For large enterprises such as ITC, L&T Technology Services (LTTS) or Tata Communications, to name just a few, a private captive network makes immense sense. 

It provides them with more reliability in their applications, better cyber security, more latency for M2M applications, and more control and choice in running their networks.

This contrasts with having to be overly dependent on telcos for building the network, choosing the telecom gear vendor, and running the network.

“We have applied for 5G spectrum for our Mysore campus. We are implementing use cases in plant engineering, medical emergency and areas in defence,” said Amit Chadha CEO and MD of LTTS.

But this approach has raised the hackles of telecom operators who want enterprises to only lease spectrum from them or let them run their private networks on their behalf. After all, they can use spectrum slicing in 5G to offer a high quality service. That way, telecom companies  do not lose business.

Telecom companies grumble that the decision has created a non-level playing field; while they have buy spectrum in an auction, enterprises will get spectrum at a nominal price. 

Without the enterprise business, 5G will become unviable especially as telecom operators will have to make huge investments in rolling out networks, quite apart from buying spectrum in the auction.  But for the likes of Amazon, Google, or Cisco, the cabinet decision is a victory. 

They can now offer various technology solutions which they will have to build across the globe to deploy and run these 5G networks for corporates, who still control the spectrum.

They can function as integrators putting together the network with varied hardware and software. This means that telecom companies  will have serious competition. 

T V Ramachandran, president of BIF, said that ‘private 5G networks are best deployed by enterprises through their preferred vendors with specialised SLAs for the specific business needs’.

He added: “Direct allocation of spectrum  will help enterprises to get marked increases in efficiencies, will reduce operational cost by eliminating the middleman, and help them provide a more cost-efficient and quality service to their customers. And telecom companies too will be able to devise end-to-end solutions for enterprises as they roll out domain-specific applications. 

It’s a win-win for everyone.” Ramachandran said that for enterprises, setting private networks was not motivated by revenue generation  but by the need for a tool to sustain themselves in a competitive digital market.  

   

Adding a third front now are Indian software companies. Tech Mahindra’s chief executive C P Gurnani said this week  that free spectrum for a few years should be allotted to tech companies to set up such networks as part of ‘Atmanirbhar Bharat’. The choice of which enterprises want to go to should be left to them and it does not have to be telecom companies . The intense battle on in India is not the first. It has taken place in many global markets where the government has, despite strong opposition from telecom companies , gone ahead by giving spectrum directly to enterprises.

Germany is far ahead of others in this space. It faced criticism from Deutsche Telekom and Vodafone who said that giving 100 MHz of spectrum in the mid band to private networks drove up spectrum prices in public spectrum auctions owing to the shortage. Yet the German government went ahead and pushed the policy aggressively.

Numerous other countries — France, Australia, South Korea —  have followed suit. But even globally it is still work in progress. For example, a report by OOKLA found that, despite 2,018 applications received by the German regulator for private networks, GSA has counted only 45 private networks in the country.  

Moreover, they are limited mainly to manufacturing companies, power and water utilities, and device testing labs. Also, only 25 per cent of the 297 private networks globally are powered by 5G, according to GSA data.

The real take off will happen only after industrial, feature-rich, chipsets hit the market in the next few years. That is when 5G deployment of private networks will move beyond trials.

In the midst of the battle, telecom companies  and enterprises are also exploring ways of working together. 

Globally, over 70 telecom companies  are already involved in building private networks, according to the GSA. Telefonica is working with Mercedes Benz to build a private network with Ericsson providing the equipment. In the US, Verizon is working with Corning to build a 5G network in the latter’s factory.

This is clearly a route which Indian telecom companies can take. Bharti Airtel has recently announced its successful trial of the country’s first 5G private network at automotive company Bosch’s facility in Mumbai.

Even Ramachandran points out that there is nothing to prevent enterprises which buy spectrum directly from the government from getting their networks built by telecom companies.

But till a middle ground is found, those who want to set up private networks or new players who want to enter, will remain worried about the DoT slowing down the process because it has still

not undertaken a demand study of spectrum before it goes to the regulator to fix the fee for the spectrum. That could well be the next big step.

WHY ENTERPRISES WANT PVT NETWORKS

• Enterprises get more choice than depending overly on telecom companies. They can now choose from an array of telecom gear vendors and alternative solution providers like Amazon AWS, Google or Cisco
• More competition will bring down the costs of deploying and maintaining such networks
• Private networks also allow better cybersecurity, reliability in applications, and control