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Where Reliance Jio and Bharti Airtel are Standing for 5G Technology in India?

The two largest telcos of India are getting hyped in the race for a 5G solution. While both are focusing on the open-source s

A few days ago, the Parliamentary Standing Committee on Information Tech reviewed the preparedness for 5G technology in India. The panel had also invited telcos representatives, DoT, Department of Telecommunications, and TRAI, Telecom Regulatory Authority of India, to hear their views.

According to a recent search report (1) from Motilal Oswal Financial Services, the Capex requirement for 5G network coverage pan India would be at 1.3 to 2.3 trillion INR considering the mid- or low-band spectrum.

Moreover, for Delhi and Mumbai alone, the total capital expenditure requirement to roll out 5G is estimated at 18,700 crore INR.

The report further stated that the Capex need for getting a 100MHz mid-band spectrum in Mumbai would be 84 billion INR based on TRAI’s price. If we assume that we would require 9000 cellular sites for full coverage with the cost at 2 million per site, the Capex requirement would be 18 billion INR, taking the total need to approximately 100 billion INR to roll out the 5G network in Mumbai.

Meanwhile, for the 5G rollout in Delhi, the Capex requirement would be 87 billion INR assuming the 100MHz mid-band spectrum base price at 69 billion INR.

On the one hand, Vodafone Idea (Vi – 2) and Bharti Airtel seek to delay in 5G spectrum auction due to their financial situation; Reliance Jio has asked the telecom department to speed up the proposed auction for 5G spectrum.

The Cost of 5G Network Pan India

For a pan India 5G network coverage, investments are needed in the key components. It includes spectrum, fiber, sites at the estimated amount of 1.3 to 2.3 lakh crore INR as per the Motilal Oswal Financial Service report.

The report further stated that the amount needs to be reduced to 78,000 crores to 1.3 lakh INR for coverage only to metros and A circles.

The Indian telecom industry observes Capex peak out, particularly for Bharti Airtel and Reliance Jio, and increases the free cash flow. However, several risks started to emerge because of the increased Capex towards 5G upgrade and the coming spectrum renewal.

The report added that the spectrum that is up for renewal in the next six to twelve months would require 28,000 crore INR for Reliance Jio, 12,000 crore INR for Bharti Airtel, and 8,300 crore INR for Vodafone Idea at a reserve price.

Further, there are no new players, developing use cases, spectrum woes, limited incremental revenue potential, and low ARPU structure in India. Telecos are likely to wait for the 5G technology to stabilize across the globe to reduce equipment costs before releasing new technology, which could take 3 to 4 years.

“Undoubted, the quantum of investment is exorbitantly high, given the stressed balance sheet of telcos and the low prevailing ARPUs. Therefore, we believe in the initial phase; telcos may selectively choose spectrum in a few circles and run 5G for select enterprise-driven Internet of Things (IoT) operations”

– Motilal Oswal Financial Services Report (3)

India’s Debate Over 5G

The DoT, Department of Telecommunications, had asked the Indian government to free up 3000 MHz in the 26GHz to 28GHz band for 5G. Notably, operation Reliance Jio has indicated its support for a homegrown 5G connectivity.

Moreover, DoT is not alone to request operators to access airwaves in the 26 GHz and 28 GHz band. There are urgent requests from the industry for this band spectrum, inspired by the International Telecommunication Union or ITU approval for the 26GHz band for 5G.

There is a clear appeal for operators for 26-28GHz as they see it ideal for ultra-fast wireless broadband services. It also has the backing of ITU for 5G standards. The development is also a part of a long-running saga where DoS, India’s Department of Space, has claimed the 26 GHz frequency range.

However, can India sidestep ITU standards? Notably, Reliance Jio has backed the proposal of the TSDSI, Telecom Standards Developmental Society, India, for a country specific 5G standards, which also implies a potential Indian 5G IPR.

On the flip side, Bharti Airtel and Vodafone Idea, rival operators are not happy with the idea. They pointed out that the 5G specifications of TSDSI are not interoperable with the 3GPP standards defined globally, underpinning 5G rollouts in several countries.

Even if it is only used in India, a purely India-centric 5G radio standard would mean that India requires hardware changes in base stations and mobile handsets, which requires additional cost. As for other nations, whether the first IPR of India in the global 5G space would have a meaningful impact on the international market is reasonable.

Nevertheless, Reliance Jio seems to go ahead with its 5G technology is likely to be ready for field deployment by next year.

Jio to Fast Track 5G Network Infra

Reliance Jio, the digital subsidiary of Reliance Industries Ltd, and Qualcomm Technologies Inc based in the US are developing 5G solutions to fast track 5G network infrastructure and services in India.

According to its press release, Qualcomm and Jio Platforms, along with its subsidiary Radisys Corporation, announced their extended efforts to develop open and interoperable interface-compliant architecture-based 5G solutions with a virtual RAN.

The partnership between Jio and Qualcomm is a step closer to the telcos led by Mukesh Ambani’s aim to roll out the indigenous 5G network as soon as the government auctions off the spectrum.

“Jio has developed a complete 5G solution from scratch. It will enable us to launch a world-class 5G service in India using a 100% homegrown technology and solution”

– Mukesh Ambani, Indian Business Magnate, and Chairman and MD of Reliance Industries Limited (4).

During RIL’s 43rd annual general meeting in July, Mukesh Ambani further stated that the made in India solution would be ready for field deployment next year. Moreover, Jio would easily upgrade its 4G network to 5G because of its converged network infrastructure.

While Jio is confident of its 5G launch, its rivals Airtel and Vodafone Idea stated that India is yet to develop a state-of-the-art technology ecosystem and the spectrum band’s price for 5G services are too high.

“The development of secure RAN solutions with Qualcomm combined with Jio Platforms and scale provides the ideal combination for local manufacturing and for accelerating the realization of Atmanirbhar Bharat for an inclusive 5G nation.”

– Mathew Oommen, President of Reliance Jio Infocomm Ltd (5).

Moreover, the 5G technology would allow users to experience faster data speed, enhanced digital experiences, and low latency communications across connected devices such as smartphones, AR and VR products, enterprise laptops, and the internet of things (IoT) solutions.

Notably, in only four months of 2020, Jio Platforms had secure more than 1.5 trillion INR from investors like Google and Facebook to achieve its digital targets. The investment arm of Qualcomm Incorporated, Qualcomm Ventures, had also invested 730 crore INR in Jio Platforms to scoop a 0.15% stake.

Jio and 5G Connectivity in India

Only a handful of countries such as the USA, Australia, Germany, Switzerland, and South Korea offer 1 GBPS speeds to its 5G customers. But India currently does not have 5G services, and the government is yet to allocate spectrum to telecom operators for running field trials to promote a domestic ecosystem for 5G technologies.

Notably, Qualcomm and Jio have announced that they have achieved the 1 GBPS milestone on the Reliance Jio 5GB solution and the Qualcomm 5G RAN Platform.

According to TRAI’s data, in July, Reliance Jio had added 35.34 lakh subscribers, while Vodafone Idea had lost 37.26 lakh subscribers. Meanwhile, Bharti added 32.6 lakh subscribers, BSNL 3.88 lakh subscribers, and MTNL lost 5,475 subscribers.

Moreover, Jio Platforms has more than 20 startup partners with capabilities in technologies such as 4G, 5G, Cloud computing, Big Data, Devices and OS, AI, AR/VR, and blockchain.

Last month, Reliance Jio became the first telecom operator in India to have more than 40 crore total subscribers. As per reports, Reliance Jio is also planning to launch a 5G smartphone in India at 5,000 INR and gradually decreasing the price to 2,500 to 3,000 INR per unit.

Nevertheless, Jio has developed a 5G solution for India from scratch, and it is ready for trial as soon as the Indian government avails a 5G spectrum. The firm is also likely to be prepared for field deployment in 2021.

Airtel and Vi Don’t Belive in Reliance Jio’s 5G

Jio’s homegrown 5G offering will undoubtedly put it ahead of its telcos competitors, Bharti Airtel and Vodafone Idea. Jio is also looking to get native IPR, intellectual property rights by backing the Indian standards set by TSDSI, Telecom Standards Development Society India.

However, Airtel and Vi believe that the means of Jio would fall short of global standards, and hence its 5G will not be viable commercially.

For those unaware, the telecom operators of other countries like the US and Australia, and many others are operating under the 5G standards set by the 3rd Generation Partnership Project, or 3GPP. It suggested that the telcos should deploy 5G in 700 MHz bands with mobile towers at a distance of 6 km.

On the other hand, TSDSI has recommended 3.4 GHz bands and towers at a difference of 12 km for ideal network coverage for users in rural India.

Jio has already developed its 5G technology and equipment to reduce its dependence on foreign vendors and have cost-related advantages. It has also designed its 5G hardware that the firm will use for 5G trials with IoT equipment for security, surveillance using drones, industrial IoT, and digitization in the agriculture industry.

Reliance Jio has already deployed its IMS, IP multimedia subsystem solutions, vIMS for VoLTE, and VoWiFi. Its rivals, Airtel and Vi, have submitted similar applications with the telecom department for its 5G trials.

“Jio supports the India-centric approach and the 5G standard and does not agree with the views of our other members who want the gaps within the current TSDSI standards to be addressed before adoption in India and other global markets to ensure it is interoperable, implementable and has benefits for the entire India market.”

– SP Kochhar, Director-general of Cellular Operations Associations of India, COAI (6).

No Use of 5G in India Right Now: Airtel

Bharti Airtel, one of the top three teleoperators in the country, stated that it sees no use for 5G in India. It added that so, considering the industry’s state and prevailing spectrum prices, 5G is at least 2-year away in the country. The comment came less than a month after its rival; Reliance Jio, announced that it is ready to deploy 5G networks in India and likely do it next year.

5G is the fifth generation technology in wireless communication and has 10 to 20 times more data capacity if the spectrum is increased four times. It also promises low latency, 5 to 10 milliseconds compared to 4G, 30 to 50 milliseconds.

Gopal Vittal, the CEO of Airtel, gave two reasons why an Indian telecom operator cannot think of launching 5G.

First is the lack of technology adoption that requires low latency and high throughput connections such as automatic cars, VR, remote surgeries, etc. Secondly, there is no way the current Indian consumers can afford 5G services if priced at 50,000 crore INR.

The Cost

A decade ago, telcos received a relatively large block of 20 MHz of pan-India, high-capacity 4G spectrum at 12,847 crore INR, or 642 crore INR per MHz.

This time, TRAI’s recommended base price is about 50,000 crore INR for a Pan-India block of 100 MHz for the 5G spectrum. Interestingly, it is cheaper than what teleoperators paid ten years ago for the 4G range, as it is about only 500 crore INR per MHz.

However, the requirement for a high number of spectrum for 5G services is what distorting the math. While a telco can run a decent 4G service with a 20 MHz block, 5G needs a minimum of 100 MHz or 50,000 crore INR to deliver the promised speed of 1000 MBPS, or 1 GBPS compared to 100 MBPS for 4G.

Hence, operators such as Airtel wants a block of at least 100 MHz size at an affordable price. However, it may be difficult to come as India plans to auction only about 225 MHz among three players. It means each player is likely to get only 75 MHz at the cost of about 37,000 Crore INR.

The numbers are comparable to what these entities have spent on the 4G spectrum. In the past decade, each of these three telecom companies has spent between 25,000 crore INR to 30,000 crore INR to expand their 4G spectrum holdings.

According to Gopal Vittal, if they are spending another 37,000 crore INR to ramp up their data capacity by 10 to 20 times, then there must be a demand for so much data in the market. He added that it is prominent that customers are willing to pay for higher consumption.

Unlike setting up 5G, if the idea is to increase its existing data capacity instead of catering to new, latency-sensitive applications, operators can easily use a part of the money to add more spectrum to their existing networks. Because setting up 5G requires to put new towers and base stations.

Vittal suggests that the ARPU level’s fundamental issue is that 5G offers higher speed and lower latencies. If you have more 4G spectrums and no radio deployment, you can still get higher rates. The issue is not between 4G and 5G, but how much is loaded for a particular site and capacity consumed.

“The price of spectrum in 5G indicated by TRAI is very, very expensive, and we won’t be able to afford it at those levels. We don’t believe there’s a business case at those levels.”

– Gopal Vittal, the CEO of Airtel (7).

Two Years Away

Vittal further pointed out that there must be a demand in the market for low-latency and high-throughput wireless data connectivity for 5G to work out. It is a primary requirement for services such as augmented reality, remote surgery, and so on.

At present, the ecosystem required for 5G is very nascent in terms of applications and devices. He believes that it would be a few years out before 5G has any significance and meaningful impact in India. Airtel CEO added that the prices are very high right now, and they see no reason to hurry.

Conclusion: Reliance Jio May Be Set for Another Mega Disruption

If you are a customer or market observer who can sense a feeling of Deja Vu after hearing Vittal’s comments, then you are forgiven. Incumbent operators like Idea Cellular also used to maintain similar illustrations about 4G five to six years ago. And we have all seen how it helped newcomer Reliance Jio to seize the market.

In July 2014, the CEO of Idea, Kapania, had suggested that the Indian market is not ready for 4G services, and adapting to it would only make sense if the 3G networks run out of capacity.

While pointing out that 3G usage was only 12% at that time, Kapania added that we could not afford expensive LTE with the country’s per capita income. It includes both in terms of handsets and equipment costs.

We should launch LTE only when the overall ecosystem becomes more favorable with equipment supply and devices. The adoption of 4G from all across the world reaches billions of customers, and then it would be better for India to roll out 4G services.

However, while these operators led the belief that 4G device and equipment prices would remain too high to be affordable for Indians, they failed to realize the threat posed by Reliance Jio. Even as these operators dismissed the possibility of 4G ever taking off in India, newcome Jio was busy building its 4G network pan India.

Over the next four years, Jio captured most of the country’s wireless data market under the noses of Vodafone, Airtel, and Idea. Since then, these incumbents have struggled to compete with the newcomer because of the higher operating expenses of 2G and 3G legacy technologies.

Something similar may play out in the 5G market as well. 5G promises that it would drastically bring down the cost and change the way of telecom networks’ constructions and operations.

Conventionally, telecom networks have a sizeable hardware-cum-software market. It means that the core logic in running these networks lies in software embedded in the switches, other equipment, and base stations to construct the system.

In other words, you also purchase the software when you are buying the hardware.

However, 5G technologies offer telecom operators new ways to slash equipment prices by separating equipment from traffic management, making it more like a computer network.

In recent years, several collaborative open-source projects came up to deliver equipment-agnostic network management software. Then, one deploys this software to regular computers to consistent traffic flow and network equipment.

Since one can centralize such control, a 5G network can be redesigned and reconfigured on the go. For instance, if the operator decides to re-route traffic from a particular town via a backup route, if there is congestion in a primary way, one can do it without sending a single engineer on location.

The essential advantage of such 5G open source projects is cost. Since the software is open-source, it would be free of charge.

Moreover, the software code would be available to everyone to examine; hence more vendors would design hardware compatible with the software, increasing the competition, and reducing the prices in the hardware market.

The operator can efficiently run Linux or a mini-computer instead of purchasing a base station box from a vendor. Then he can download and install the corresponding software of the base station on it.

Both Jio and Airtel have indicated that they are working on creating and testing such an open platform. A few months back, Mukesh Ambani announced that he has the 5G solution ready and emphasized the importance of available technologies for its 5G solution.

Suppose Jio can deploy such a 5G solution against the 4G networks of its competitors. In that case, it could set off another mega disruption in the market, similar to what we saw when it launched its 4G service at a lower cost.