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17 May 2019

India’s operators call on government to avoid past auction mistakes with 5G

India’s track record on releasing spectrum in a timely and affordable manner is very poor, and operators have suffered, through the 3G and 4G eras, from high reserve prices, small bandwidths, complex roaming and sharing restrictions, and long-winded regulatory processes. There are signs that the government wants to get it right for 5G and push the country into the front rank of deployersm and the Department of Telecom (DoT) has recommended freeing up a huge 6,000 MHz of spectrum for 5G.

This would be spread across 11 bands, four of which – 700 MHz, 3.5 GHz, 24 GHz and 28 GHz – could be made available quickly because they are not occupied. Although operators have expressed concern that they might not have the financial reserves to afford 5G auctions if those are scheduled too soon, they have started to plan their 5G trials in light of the DoT’s plans.

After a wave of consolidation sparked partly by the entry of disruptive Reliance Jio to the market there are three major private MNOs with near-term 5G ambitions – Vodafone Idea, Bharti Airtel and RJio – plus the troubled state-owned duo, BSNL and MTNL. The three private companies have submitted plans for 5G trials which could start as early as June and will last about a year.

The network vendors involved include Cisco, Samsung, Ericsson and Nokia, but so far there is no sign of Huawei or ZTE. That suggests the operators may be acting cautiously until they know whether India will follow the USA in barring purchases of 5G equipment from Chinese companies – despite some restrictions on Chinese procurement, implemented several years ago, India does not have a bar on Chinese vendors. But the MNOs are deeply hostile to any restrictions on their choice of suppliers in a particularly cost-sensitive market, and late last year, Vodafone Idea gave Huawei and ZTE a bigger role in its 4G network than before, when it awarded $3.1bn of contracts to multiple OEMs.

Another area of uncertainty is whether the DoT will support the operators in their wish to run trials for at least a year. Currently, the government has said its policy is to limit allocation of spectrum for trials to a maximum of 90 days which the MNOs say is not long enough to gain meaningful results. The telecoms minister, Manoj Sinha, may be trying to compress the timescales to hit his own targets of holding an auction in early 2020, ready for the first commercial services later that year.

The operators are also lobbying hard for the government, and regulator TRAI, to impose lower spectrum reserve prices this time around and so make 5G spectrum more affordable. Vodafone Idea’s chief regulatory officer, P Balaji, also recently called on the government to abandon plans for a 50% market cap on 5G spectrum ownership, which he argued could result in lower competition and even a 5G duopoly. Vodafone wants lower caps to encourage equal access to spectrum for all the major MNOs.

“While the pricing for the future spectrum is very important, access to spectrum is equally important,” Balaji told the Economic Times of India. “If 5G is the game of the future from 2020 onwards, then it is very important that all telcos should get access to 5G, and not just opportunity to buy 5G airwaves.”

Meanwhile, the large MNOs may be seeing their market stabilize somewhat after a couple of years of intense M&A, but they still have many challenges long before they embark on large-scale 5G. A major one is that Indian consumers, like those in most markets, are increasingly influenced not just by price but by quality of experience, and of the services and content available on the mobile network. This should be good news for MNOs which have become too accustomed to trying to make a profit on the lowest ARPUs in the world. Price wars worsened after RJio launched with an offer of free mobile data, but all the major operators are now focused on building services platforms to attract higher value customers and compete on more than cost.

But that requires that they invest in high quality networks, and most Indian operators have a long way to go on that front, having been constrained by their small ARPUs and spectrum holdings from focusing on quality of service or customer support. Vodafone Idea, now the largest Indian MNO, has enlisted the help of IBM and Ericsson, which will deliver cloud platforms to improve the quality and agility of the network.

IBM has signed a multimillion dollar, five-year deal with Vodafone to improve customer experience for consumer and business services. The vendor said its hybrid cloud platform will enable “more intimate engagement” with more than 387m subscribers, by supporting the use of big data analytics, artificial intelligence and cloud security. IBM and Vodafone Idea will also work on joint developments related to AI and the Internet of Things.

Vodafone Idea will also deploy Ericsson’s cloud-based enhanced packet core (EPC) to enable it to use network resources more flexibly and cost-effectively to enhance QoS. This is one of the largest vEPC contracts Ericsson has ever won. Among the virtual network functions (VNFs) which Vodafone will use are the Evolved Packet Gateway (vEPG), Service Aware Policy Controller (vSAPC) and NFV Infrastructure (NFVi), which should help the operator to introduce new services more rapidly and to improve service continuity.

Vodafone will deploy the technology in its 22 data centers across India as part of an ongoing $200bn network expansion project to meet soaring data usage demands while improving quality and preparing for 5G.

“As users across India consume more and more data, packet core networks will need to be enhanced,” said Alvise Carlon, Ericsson’s head of digital services for south east Asia, Oceania and India. “This will not only provide VIL the scale and reach to address the growing data traffic levels in India, but the advanced cloud infrastructure will also enable VIL to tap new revenue streams in small and medium enterprises and IoT.”