5G shouldn’t be rolled out in a hurry

It is widely acknowledged that 5G is an evolution not a revolution. There is a myth surrounding that 5G is a progression of the other Gs of limitations on bandwidth. 5G would be the elder brother providing at least five to six times multiples of the 4G bandwidth, some 100 mb/s at the very minimum. Higher bandwidths create many applications that will have a multiplier effect on the economy. Are not these gb/s bandwidths available today by way of Fibre to the Homes (FTTH)? Has a study been carried out for the “on-the-move requirements” mobility?

The key component required to use such bandwidths would be devices. Are affordable devices available? Undoubtedly, higher bandwidths are needed, but questions that need answers are: when, how, and cost-effectiveness. Is the environment and eco-system ready? Before we talk of more investment in the Indian context, particularly at a time when the industry is bleeding, these questions and concerns must be addressed, shorn of the hype and euphoria.

Inexplicable haste

But 5G in India continues to be promoted with zeal, stoked by vested interests of the telecom equipment manufacturers citing the many wonderful applications that will be enabled — faster phones, easier access to on-demand video and simpler networking.

Our telecom mandarins continue to put elaborate plans in place to set a price and auction spectrum (airwaves) this year. This despite the fact that the current 4G networks power the latest iPhone and Android smartphones and they’re increasingly integrated into cars, or we use them for video downloads or stream our daily dose of Netflix on our mobiles.

Our haste on 5G is in some ways inexplicable, given that our beleaguered telcos are staring at huge debt and their financial outlook remains bleak. On a quarterly basis, revenues have been declining on a year-on-year basis since the end of 2016. Total mobile revenues in India have fallen by more than 20 per cent over the period and ARPU (average revenue per user) levels have fallen significantly in recent years, despite strong data volume growth, to levels that are likely to prove unsustainable. Curiously, the growth in subscribers over the same period has been exponential. This clearly suggests that Indian consumers are only willing to pay for faster mobile broadband up to a point.

Host of unknowns

It is also to be noted that merely eight countries in the world have over 80 per cent 4G penetration currently. And even technologically advanced countries like Israel are refusing to implement 5G on account of a host of unknowns — not least of which are the potential health hazards of tens of thousands of radiating base stations.

As with any emerging technology, there are numerous challenges to developing 5G. One of the major challenges is standardising an approach and bringing all of the major technology partners on board. Fragmentation of next generation approaches will only mean that development time and costs will increase.

As it stands today, 5G is not a defined standard — it is rather a set of ideas. KPMG in its report, released at the Indian Mobile Congress 2019, predicts the cumulative impact of 5G in India at $1 trillion by 2035. But these predictions need a reality check using two critical components: viable use cases/applications or the capacity to pay for such services; and infrastructure (capacity to support such high-end applications end to end).

Let’s look at viability or the capacity to pay. 5G global deployments are being led by captive networks — factories using robotics on the shop-floor, manufacturing controls and automation in warehouses (with wireless instead of cables), machine to machine communications, and IoT.

Pricing issues

However, over 31 per cent of Indian businesses do not even have a roadmap for a digital strategy according to the same KPMG report. Then, there are the pricing issues in the mass market. The case of 4G substantiates this clearly. There was an explosion in data usage after Jio launched free introductory offers at ₹10/gb/month compared to prevailing rates of ₹200/gb/ month. Everyone celebrated and the regulator was the cheerleader. But this was clearly not sustainable as demonstrated by the marked decline when the inevitable price hikes kicked in.

The International Telecommunications Union (ITU) has validated the correlation between broadband price and adoption levels: A 1 per cent increase in mobile broadband prices results in 0.13 per cent decrease in adoption rates (low income). And a 1 per cent decrease in mobile broadband adoption results in 0.19 per cent decrease in GDP per capita (low income).

Thus price increases of 30-50 per cent can lead to a decline in broadband adoption by 3.9-6.5 per cent, leading to a decline of GDP per capita by 0.7-1.2 per cent. A significant number (close to 300 million) of users are still on 2G/2.5G networks — and feature phones are widely in use. Device cost is of relevance to a price-sensitive market such as ours.

5G smartphone models are likely to cost much more than the most advanced 4G devices currently available — with enhanced features, additional cameras and sensors to support AR and VR applications. These handsets will also need to support multiple spectrum bands as well as 4G and 5G in the same form factor.

There is a growing handset manufacturing ecosystem in India that could provide the basis for the domestic production of 5G devices, but it will likely take several years for some of the technological issues to be addressed and for device and component manufacturing to scale and bring 5G devices costs more in line with existing 4G devices.

Demand maybe subdued

In fact, even the auction of the proposed 5G spectrum bands (limited to only some frequencies) is a cause for concern. The DoT, the primary beneficiary of these auctions, has expressed this fear in its letter of July 2019 to TRAI — “the demand for spectrum is likely to be subdued”, says the letter, while seeking TRAI inputs on pricing and process.

After 26 years of opening up the telecom sector we must not lose the lessons of 2G, 3G and 4G auctions, which seem to have created a permanent state of crisis in the sector.

The current hype about 5G’s possible future needs to be replaced by a more balanced and practical view of its potential applications over the next decade. Realistic and gradual expansion up the value chain is needed. In this scheme of things, more mature policy making is expected.

The writer, a former CMD of VSNL, is Senior Advisor, Dua Consulting

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