Sunday, 25 August 2019

Regulators must resist the urge to cash in on 5G spectrum, or risk jeopardising India’s $1tr ‘golden decade’ of progress

Chris Kelly
Friday 02 August 19

India’s mobile network operators spoke with one voice at the ET Telecoms 5G Congress in Delhi this week, as they called for a big reduction in 5G spectrum pricing

India’s telecoms regulators must resist the urge to make a fast buck from 5G when it puts spectrum up for auction later this year, or risk jeopardising the dawn of a ‘golden age’ of technological progress and prosperity in the world’s most populous democracy. At the ET Telecom 5G Congress in Delhi this week, a host of industry experts gathered to chart the course of India’s long road to 5G. Among the chief complaints from operators and vendors alike was that spectrum costs in India are simply too high. Earlier this year, India’s Ministry of Telecoms revealed that the government hoped to raise 9.83 trillion rupees ($84 billion) when it puts 8,600MHz of spectrum up for auction over the  coming two years. The spectrum on offer will cover 4G and LTE usage, as well as airwaves for TV services but the vast majority of the $84 billion revenue target is expected to be raised through the sale of 5G spectrum…

India’s telecoms regulators must resist the urge to make a fast buck from 5G when it puts spectrum up for auction later this year, or risk jeopardising the dawn of a ‘golden age’ of technological progress and prosperity in the world’s most populous democracy.

At the ET Telecom 5G Congress in Delhi this week, a host of industry experts gathered to chart the course of India’s long road to 5G. Among the chief complaints from operators and vendors alike was that spectrum costs in India are simply too high.

Earlier this year, India’s Ministry of Telecoms revealed that the government hoped to raise 9.83 trillion rupees ($84 billion) when it puts 8,600MHz of spectrum up for auction over the  coming two years.

The spectrum on offer will cover 4G and LTE usage, as well as airwaves for TV services but the vast majority of the $84 billion revenue target is expected to be raised through the sale of 5G spectrum. Considering eyes were raised at the 6.55 ($7.25 billion) made at Germany’s 5G auction earlier this year, $84 billion is a decidedly spicy target.

Unsurprisingly, operators in India have baulked at the prospect of having to shell out tens of billions of dollars on the spectrum required to launch 5G, with senior representatives lining up to say that spectrum costs must come down.

“If we direct our investment to just buying spectrum [that investment] is actually useless, unless it is deployed in terms of capex to fulfil the dream of digital India,” said Bharti Airtel’s CEO, Gopal Vittal.

Vittal also claimed that the current policy towards spectrum pricing was evidence that India’s telecoms sector was in a “broken situation” and needed to be fixed.

T.K Arun, Editor, The Ecnomic Times of India; Balesh Sharma, CEO Vodafone Idea; Smt Aruna Sundararajan, India's former Telecoms Secretary; Jay Chen, CEO of Huawei India; and Gopal Vittal, CEO of Bharti Airtel, gather on stage at the ET Teecoms 5G Congress in New Delhi, India. 

 

Vittal's thoughts were echoed by Huawei’s CEO for India, Jay Chen, who said that regulators needed to take a long view on spectrum pricing for the greater good of the country, rather than inflating spectrum licence fees at auction.  

“India is one of the country’s in the world with the highest price for spectrum. The Indian government has done a really good job over the last couple of years on focussing on spectrum availability but now the challenge is to address pricing,” he said.  

“India is in a position to welcome ten golden years of growth and development. Let’s choose the right direction and capture the right opportunity to change this industry and this country,” he added.  

The CEO of the newly merged Vodafone Idea, Balesh Sharma, said that getting 5G right was absolutely crucial to the country delivering on its Digital India 2025 objectives – a set of government targets which seek to grow India’s economy to $5 trillion, while simultaneously boosting productivity and creating millions of jobs. Of that $5 trillion target, India’s digital economy is expected to contribute $1 trillion by 2025.

“In a nutshell, delivering on the country’s Digital India 2025 objectives, really depends upon 5G happening. It is fundamental to the digitalisation of our economy,” he said.

“One thing we must remember is that 5G is the opportunity of a lifetime,” he added.

With so much of the country’s success leveraged upon the creation of a high performing digital economy, India’s network operators appear to have a point in terms of spectrum pricing. The $84 billion to be raised at auction for 5G spectrum licences seems like comparatively small change, when set alongside the $1 trillion digital economy that is at stake.  

The sheer quantity of spectrum required to launch 5G in a country the size of India is galling. With a population of 1.2 billion and a land mass of 3.2 million square kilometres, it is perhaps to be expected that total revenues from India’s spectrum auction will top those in Europe or the US.

Bharti Airtel’s CEO, Gopal Vittal, said that each of the country’s operators would need 1,000MHz of spectrum, including 75-100MHz of contiguous C-band spectrum, in order to launch 5G properly in India. Compared to the amounts of spectrum held by operators in Europe that is a serious amount of spectrum. However, expecting India’s cash strapped operators to pay out 10 times more than their comparatively affluent European counterparts at auction is hardly going to be a winning strategy. Indian telcos will certainly be hoping for some pretty hefty discounts for buying in bulk.  

If negotiations fail, the Telecoms Regulatory Authority of India and the country’s Ministry of Telecoms may be forced to revise their pricing policy, as two of the country’s biggest operators threatened to boycott the auction unless prices are revised. Both Bharti Airtel and Vodafone Idea have said that they cannot afford to proceed under the current pricing structure and may boycott forthcoming auctions.  

“It doesn’t make sense for us to buy at these levels, when the ecosystem won’t be developing for the next two to three years,” a top Bharti Airtel official told the Economic Times of India, last month.

These thoughts were echoed by Ericsson's senior representative for South East Asia, Oceania and India, Nunzio Mirtillo, who said that Indian telcos would struggle to meet the excessive cost of 5G given the current challenging market conditions.

"The proposed reserve price for 5G airwaves in India is expensive, given the health of the telecom players in India. If the aim is to ensure that everyone gets access to 5G, telcos need spectrum at fair and reasonable prices," he said. 

So, it seems clear – nobody wants to be ripped off at auction. Operators are in the process of haggling regulators down to less exorbitant levels of cost but who knows where the deal will settle.

Indian’s are masters of doing business and have turned the process of haggling into a fine art, as any visitor to Delhi’s nearby Chandni Chowk market will attest. The country’s telecoms regulators would do well to remember the old adage that a commodity is only worth as much as the customer will pay for it. The bottom line is that India’s network operators are struggling to cope with the significant capex demands of building their 5G network infrastructure. They simply do not have a spare $20 billion to throw at a spectrum auction. TRAI and the Ministry of Telecoms will have to dramatically reduce their spectrum pricing or risk seeing swathes of spectrum being left unsold. In an industry that is crying out for spectrum to be made available, that would be insane.

Despite the numerous calls for a reduction in spectrum pricing from every man and his dog, the mood at the ET Telecom 5G Congress was decidedly upbeat and optimistic. Operators and vendors alike stressed that their was good dialogue between the government and the industry’s key players and that they were hopeful of resolving the issue of spectrum pricing.

“We trust the government to proceed with wisdom [on spectrum pricing],” said Huawei’s Jay Chen.

 

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