India joins global league after allowing private captive telecom networks

Lufthansa Technik AG announced that it was setting up a 5G private network which would be operated by Vodafone plc and use Nokia Oyj equipment

Despite the vehement protests of telecom companies, the Union Cabinet has gone ahead with allowing direct allocation of spectrum to private captive networks, in line with the growing global trend.  

According to the Global Mobile Suppliers Association’s (GSA’s) internal report last month, 794 customers have deployed private networks out of which 37 per cent (297) are powered by 5G. Around 75 of these 297 are used in manufacturing. Twenty-five countries already have dedicated private networks or are considering it.

The reason for the trend is that enterprises are demanding more reliability in their applications, better cyber security, lower latency for m2m applications, and also more choice and control in running their networks rather than depending on telcos.

What is interesting is after the initial opposition, 70 telecom network operators (counting national operators within the same group) are already involved in private mobile network projects, according to the GSA.

Mercedes Benz is building a private network in its factory in a tie-up with Telefonica, with the equipment coming from Ericsson. Lufthansa’s subsidiary Lufthansa Technik AG is setting up a 5G private network which will be operated by Vodafone using Nokia Oyj equipment.

In the US, Verizon is delivering a 5G network to Corning’s manufacturing plant in north Carolina. Based on reports in fiercewireless.com, its top executives have talked enthusiastically of the ‘triple digit funnel of opportunities’ afforded by a private network. In the UK, British Telecom just a few days ago announced that it has struck a partnership with Ericsson to offer 5G private networks to businesses across the country.   

Proliferating private networks

• India will now join Germany, UK, France, Italy, US, South Korea, Japan, China and Saudi Arabia – which have assigned spectrum for private usage of 5G.
• Private networks can be used in manufacturing, mining, power utilities, railways, oil and gas, seaports, airports, power plants, warehousing, hospitals, public venues, wind farms among others.
• Competition for private networks is hotting up – they can choose from more vendors as well as tie up with IT companies and global tech companies and not depend only on telcos

In Germany, private network licences have been taken by even telecom companies including T-Systems of Deutsche Telecom, Verizon Germany, LS Telecom, and Telefonica, among others.

The Indian government’s decision enables enterprises to have more choice to set up their own networks. According to the GSA, over 50 global vendors offer equipment with an array of hardware choices for enterprises to choose from, instead of having to depend on what telcos choose. 

Of course, telcos can also get licences or collaborate with enterprises but competition will be fierce, and not limited to a few telcos.

For instance, Google can offer solutions to provide networks. AWS Private 5G already offers 5G managed services that makes it easy to deploy, operate and scale up enterprise private networks with hardware and software provided by them. IT companies such as Tata Consultancy Services, Microsoft and Cisco could also join the party.         

India is not alone in having telcos who oppose private networks for fear it will impact their business.  In Germany, which has been a pioneer in this area, Deutsche Telecom had protested that private networks have driven up spectrum prices for public networks and reduced corporations’ dependence on them.

But the German regulator rejected this view, arguing that the private use of 5G represents a disruptive technology.

Many other countries have also decided to go ahead - the UK, Italy, France, US, Japan, China and South Korea, among others. Now India joins that list.   

Globally too, the same arguments have been made against private networks as India telcos have made here. Last year, the GSM Association argued that commercial mobile operators were well-equipped to provide the needs of verticals.

While it pushed regulators to allow spectrum leasing by telcos or offer them unlicensed spectrum as viable options, it fiercely opposed earmarking spectrum in core 5G bands (like 3.5 GHz in Germany).

The reason was that this could lead to underutilisation of valuable spectrum and seriously impact the wider success of public 5G, including slower roll outs, reduced coverage, and weaker performance.

Indian operators are peeved that while they will have to buy spectrum through auction, private networks will be assigned spectrum at a nominal price, making it a ‘non level playing field’.

Yet that is exactly what regulators in Germany and the UK have gone ahead with. In Germany, the fee for the use of spectrum is determined by the regulator based on the bandwidth asked for and the size of the area covered. Companies have paid around 1000 to 1 million euros for the licence.

In the UK, the regulator offers shared spectrum (which has already been licensed to an operator but which is not being used), to enterprises who wish to set up a private network for £ 950 for three years.

In India, these details will be worked out by the regulator once the Department of Telecommunications makes an assessment of demand for spectrum.