5G rollout unviable if captive private networks allowed, telcos tell govt

Telcos point to global trends and contend that 40 per cent of 5G revenues are expected from the enterprise segment and captive 5G networks will make 5G rollout unviable

The Cellular Operators Associa­tion of India (COAI) has bluntly told the government there is no reason for its members to roll out 5G networks as they will be unviable if ‘captive private wireless networks’ are allowed to be run by enterprises.

The COAI, which has Bharti Airtel, Reliance Jio and Vodafone Idea as its key members, has written to Communications Minister Ashwini Vaishnaw saying there is ‘no business case for the roll out of 5G networks’.

Permitting such captive networks will ‘diminish the revenue so much that there will be no viable business case left for the telecom service providers and there will not remain any need for 5G network roll out by telecom service providers (TSPs)’.  

This strong stance by telcos could adversely impact or delay the country’s 5G roll out expected by the end of the year. It could even force them to relook at their 5G spectrum auction strategy, though most say they are unlikely to pull out from participating in the auction altogether.  

Telcos decided to respond strongly after it seemed possible that the DoT could, in its note for cabinet approval, allow captive private wireless networks to be run by enterprises, as recommended by the Telecom Regulatory Authority of India (TRAI) earlier.

If that happens, it would be a complete volte face. Earlier, the Digital Communications Commission (DCC) had rejected the idea in its final meeting on 5G spectrum pricing on 18th April.  

But many leading companies such as Tata Communications, ITC and the Broadband India Forum which has Google and Facebook as members have also been pushing for permitting such networks.

Tata has already written to the regulator that bands in sub 6 GHz (at least 100 Mhz) and millimetre band (at least 400 Mhz) should be reserved for private networks at a nominal fee — as happens globally in countries like the UK, Germany, Brazil and Australia — to harness the Fourth Industrial Revolution, or Industry 4.0.

ITC has also said that telcos might charge a hefty price because of their monopoly in specific regions based on their licences.   

The general thinking in the government at the highest levels is in line with TRAI’s recommendation. First, that enterprises should be allowed to run their own captive networks and get allocation of spectrum directly from the DoT at an administered price.

Second, they should also be given the choice to lease out spectrum from telcos and run their own networks.

The DCC had rejected both of these recommendations earlier and had only permitted TSPs to set up captive networks for enterprises using telcos’ spectrum.

In its letter, the COAI has explained to Vaishnaw that wherever 5G has been rolled out, there has hardly been any consequent revenue increment from the retail segment. The revenue and efficiency enhancement can happen only from the enterprise segment.  

According to telcos, as much as 40 per cent of the revenues in 5G come from this segment. Only 3 per cent of hand sets currently are in 5G, so business viability is only possible if they don’t lose enterprise business.

A study by Vodafone India presented to TRAI shows that in 24 countries, average revenue per user actually had zero or negative impact in the first six to ten quarters of a 5G launch.

The telcos also argue that it is a myth that telecom service providers are allowed to run only public networks. Under the UASL licence, they can run both public and private networks.

Even worse, they say that while they will pay huge amounts for spectrum in auctions, enterprises will buy it at an administered price, going against the idea of a level playing field.      

Broadband India Forum (BIF), which supports private networks, issued a position paper on Thursday in which it has challenged the premise that telcos would lose revenues. It believes that private 5G will lead to increased productivity for enterprises which will in turn increase the need for more external communications, thereby driving TSP revenues too.

Besides, TSPs have been allowed to lease their spectrum to such networks and earn revenues.

BIF also rejects the contention that this would lead to loss of revenue to the government because private networks will purchase the spectrum at a price fixed by the government and allocated administratively. They will also have to acquire the necessary licence and pay a licence fee.

Telecom gear makers, however, say that for enterprises to run 5G networks is a difficult task as it is not their core competence, especially with stiff service level requirements.

For example, in Germany, while Mercedes Benz owns the spectrum for a private network, allocated by the government, it has tied up with telco Telefonica to run the network and with Ericsson to provide the equipment.

BATTLE MODE ON

• DoT has rejected regulator recommendations to allow private captive networks run by enterprises either by being allocated spectrum directly or by leasing it from operators. But now there is a rethink
• DoT only agreed to allow TSPs to build such networks based on their own spectrum on behalf of enterprises
• Telcos say a bulk of 5G revenues will come from enterprises, making it unviable
• Tata Communications, ITC, BIF support captive private network as key for harnessing Industry 4.0