No call to rush for 5G in a hurry
2020-02-295G is an evolution not a revolution and creating it is challenging. Higher bandwidths create many applications that will have a multiplier effect on the economy. The key component required to use such bandwidths would be devices. But question stand tall is: Is the environment and eco-system ready? Along with when, how and cost effectiveness comes next.
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.
Our telecom mandarins continue to put elaborate plans in place to set a price and auction spectrum (airwaves) this year. 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. 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).
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.
However, over 31% 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 International Telecommunications Union (ITU) has validated the correlation between broadband price and adoption levels: A 1 percent increase in mobile broadband prices results in 0.13 percent decrease in adoption rates (low income). And 1% decrease in mobile broadband adoption results in 0.19% decrease in GDP per capita (low income).
Thus price increases of 30-50% can lead to a decline in broadband adoption by 3.9-6.5%, leading to a decline of GDP per capita by 0.7-1.2%. 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.
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.
This article has already been published in The Hindu BusinessLine
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