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5G, competitiveness, and growth

The use cases of the low latency (lesser delay) and reliable connectivity 5G will determine the revenue streams and dictate whether investments by telcos become sustainable or not.

5G, competitiveness, and growth
One hopes that lessons are learnt from such bad experiences so that the consumer and the economy would benefit.

By Pradeep S Mehta & Prince Gupta

Today, technological advancements are happening at an unprecedented pace. The benefits of these should reach every consumer at the earliest. However, when governments dilly-dally to sign off approvals for their usage, consumers remain deprived of the benefits. One hopes that lessons are learnt from such bad experiences so that the consumer and the economy would benefit.

For example, Indian consumers have remained deprived of using 5G technology when it has already been launched in more than 60 countries. Thankfully, now, the Department of Telecommunications (DoT) has scheduled auctioning of 72,000 MHz of spectrum for 5G in the coveted 3.3-3.63 GHz band as well as the cheaper 26 GHz band. Telecom companies (telcos) are gearing up to garner a share of the offering.

Utility of 5G technology
The value of a technology is determined by its utility. The use cases of the low latency (lesser delay) and reliable connectivity 5G will determine the revenue streams and dictate whether investments by telcos become sustainable or not. Promising a wide range of use cases, it can be utilised for setting up both public and private captive networks. Public networks can be used in the consumer telecom market, and thus, airwaves for public network usage are being auctioned to telcos by the government. Private captive networks can only be used for private use within an organisation or enterprise, offering the enterprise direct control over data and security. It finds its application in industrial needs such as robotics and factory automation, among others. Thus, private captive networks can be utilised by telcos to make enterprise-level offerings by giving the network on lease. It can also be utilised by non-telco tech companies, such as big-tech firms, for their private communications. While the utilisation of 5G airwaves through public networks will result in consumers experiencing faster internet, private captive networks can further foster growth.

The DoT has already stated that it will soon be providing spectrum to the private sector for private captive networks by way of allotment. It is also allowing companies to join the auction and buy spectrum for their own private usage.

The 5G auctions
The telecom sector in the past decade has always been riddled with policy uncertainty. It has become a concentrated space from too many players in the market to very few, with only three private players and one moribund government operator. Competition theory states that a competitive market can offer lower prices to consumers, support innovation, and thus enhance their welfare. Markets become more competitive with the entry of new players unless they collude.

Today, the telecom industry demands the entry of newer players to enhance competition in the industry. At this juncture, the entry of Adani Group in the 5G spectrum auctions seems to be the most opportune moment for increasing competition. Though the spectrum will only be bought for the Gujarat circle, perhaps to test its utility, it has the potential to challenge existing players. However, the Adanis have announced that they will be using the bought spectrum only for private captive use and will not enter the consumer market.

The group is building an infrastructural empire with heavy investments in ports, airports, cement, power, and other industries, and has recently ventured into the healthcare sector. It sees the potential to utilise the 5G airwaves for its own growth. Thus, this entry does not promise to offer competition to the existing telcos and is unlikely to provide any benefit to consumers at large. However, if the group only wishes to utilise the spectrum it will gain for its private usage, it could also have gotten the same by way of allotment for no price. Its stance can also change in the future.

Thus, this should be critically analysed. Spectrum gained through auctions can be used for commercial purposes, and nothing prevents the Adani Group from entering either the enterprise or the consumer market, thus leading to increased competition. The private captive network services are stated to determine a large chunk of the revenue stream for the bidding companies. If existing operators lack quality and have high prices, by offering better quality and cheaper services, the Adani Group can become a competitor in the enterprise market, at least in the Gujarat circle. However, a sudden entry may also lead to unwarranted disruption, causing a loss in revenue streams for the existing telcos. Stiff competition may also drive out the already cash-strapped VI, which will again concentrate the market, an undesirable outcome.

Conclusion
The adherence to the principle of enhancing competition can lead to an optimal solution. Thus, Adani Group’s entry to the 5G space is welcomed. However, its unwillingness to enter the consumer and the enterprise market is unlikely to cause any changes to the telecom industry. Further, a sudden entry of Adani Group in a distortionary fashion may lead to unintended consequences. Thus, the best-case scenario would be for a calibrated entry by Adani Group in the consumer and enterprise market from the very beginning.

The authors work for CUTS International, a global public policy research and advocacy group.

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