By Shiv Putcha, Founder and Principal Analyst, Mandala Insights
2018 has seen several murmurings from communication service providers (CoSPs) and the vendor community about the rapidly accelerating timelines for 5G. In the end, the United States has become the first to launch 5G, with Verizon Wireless launching its fixed wireless access (FWA) service on a proprietary pre-5G version called 5GTF. Despite the limited rollout and the proprietary nature of the rollout, Verizon’s launch is the opening salvo of what will soon be followed by AT&T and T-Mobile in the United States, South Korea, and China in early 2019, and Japan likely in mid-2019, with other potential launches in the Asia/Pacific region as well as in Europe.
What is unmistakable in all of this momentum is that it doesn’t really include any emerging markets. Not even the large ones like India, Indonesia, and Brazil. With so much of the early narrative focused almost exclusively on mature markets and their use cases, there is a school of thought that 5G is not really relevant for emerging markets, or at the very least, that it will not be necessary until 2022. In this blog, we examine this hypothesis in some detail by focusing on one of the largest emerging markets, India.
India in 2018: A year of tumult
Depending on your point of view, the period beginning in October 2017 has proved to be an exciting or tumultuous time in the Telecoms industry in India. The sector added one giant new private entrant in Reliance Jio, concomitant with the exit of several marginal service providers. The competitive intensity has also increased tremendously, brought about by bold pricing strategies of Jio and the struggle of the incumbents to respond adequately. 2018 has not seen a significant relief from the competitive intensity, despite Jio starting to charge for their services.
The overall financial health of the Indian telecom sector today is either “less than rosy” or “dire” depending on the party spoken to. Highly leveraged (over $65 billion at the end of 2017) with the bulk of network assets still servicing 2G customers, it is certainly true that the Indian industry is not currently financially geared to making the necessary investments that are required for nationwide 4G deployments, let alone 5G. The Indian government’s National Digital Communications Policy (NDCP) was finally issued in September 2018, after being widely circulated for stakeholder inputs. Notably, it doesn’t include specifics on how to mitigate these financial challenges for the major service providers remaining in the market. Industry demands have included lower taxes, increased spectrum at low reserve prices, infrastructure status, and related benefits amongst others. Against this backdrop, it is altogether fair and relevant for critics to target 5G as a nice to have or even a pipe dream, no pun intended. However, the truth is that India needs 5G, despite the challenges, or it risks being left behind as other nations move rapidly and garner significant benefits. Indeed, 5G is not only beneficial for the telecom sector but the wider economy as well.
Is the business case for 5G a tough sell? Not if positioned as pervasive connectivity
The business case for 5G in the current market landscape in India is viewed by many as a tough sell in a market in the midst of deep structural transformation. How do we make the case for an “expensive” technology like 5G in an emerging market like India that has only recently begun upgrading their networks to handle data connectivity? Even by the capital-intensive benchmarks of the telecom industry, the investment needed for 5G seems prohibitive for those who are just beginning to enjoy the benefits of 4G and get comfortable in their newfound mobile broadband-enabled digital lifestyles.
Beyond the costs involved in the network upgrades by service providers, consumers will need to acquire new devices, going beyond the smartphone to include a variety of smart home and other Internet of Things (IoT) devices across their home and work domains. The total cost of ownership (TCO) of these devices, assuming 5G, could be argued to be unaffordable to the average Indian. There has been a slew of affordable devices pioneered by Jio and matched by Airtel and Vodafone Idea but these are 4G feature phones.
However, we mustn’t make the mistake of viewing 5G through the prism of legacy thinking about connectivity. The people of India are no longer lukewarm to mobile broadband. Adoption has proved to be highly elastic in India, with declines in pricing leading directly to greater adoption. Almost overnight, per capita data consumption surged with India now amongst the world leaders in MBs consumed per month. For the first time, consumers in India are starting to expect anywhere, anytime connectivity to aid in their consumption of video, entertainment, and other services, all delivered on the latest 4G LTE Advanced networks offered by their CoSPs. Demand, from both consumer and enterprise segments, is now shifting to pervasive connectivity. But if pervasive connectivity is the ultimate goal, then 4G is not sufficient to meet this demand. This is because pervasive connectivity is not just about enhanced mobile broadband (eMBB) but also about machine to machine communications (MMTC) and ultra-low latency communications (URLLC).
Of course, stripped down to its component parts, the most immediate benefit of 5G for India is ultra-fast mobile broadband, a massive upgrade on the throughput benefits that consumers got to enjoy as networks were upgraded to 4G. These will be followed by benefits like mMTC, which could drive the Digital India vision as well as URLLC. In the India context, there is yet another imperative for 5G. That is to provide connectivity to the masses, the “Next Billion” who are currently beyond the pale of today’s communication networks. India has proposed a formulation called Low Mobility Large Cell (LMLC) which would extend 5G cell coverage radius to beyond 100 km. All of these benefits of 5G would drive an era of pervasive connectivity.
5G is crucial for the Digital India vision to succeed
India’s government has launched an ambitious series of digitization initiatives, with a vision to “transform India into a digitally empowered society and knowledge economy.” The plan is ambitious and if successful, will have far-reaching and transformative impacts on India’s economy. The plan explicitly recognizes that “a well-connected nation is a prerequisite to a well-served nation.” Hyperbole aside, pervasive connectivity is crucial for India to achieve its digital goals. This is the essence of the 5G evolution, making 5G the crucial foundation technology for Digital India. Put another way, 5G needs to be the broad policy objective, the glue that will drive many related objectives for Digital India.
In India, access to connectivity and broadband has been overwhelmingly skewed towards mobile networks. Wireless networks have had to and will continue to be the primary carrier of massive data traffic. However, going forward, the rising importance of wireless networks as reliable access networks simply can’t be achieved without reliable, high capacity wireline networks. India’s government has taken cognizance of this and outlined a host of initiatives in the new NDCP to drive national fiber connectivity. Indeed, the distinctions between wireless and wireline will start to rapidly fade with new network architectures that leverage a converged core that provides greater wireless access matched with greater wireline transport. A good example of this is the type of upgrade that CoSPs like Reliance Jio is making to their optical fiber backbone networks. These upgrades will be crucial for the kind of backhaul requirements that are emerging due to the boom in data consumption. Upgrades will also have to be made to the backhaul connectivity to cellular base stations.
Having 5G as the umbrella policy objective will also help the industry and stakeholders think holistically about a variety of objectives. A good example is India’s smart city initiative, launched with much fanfare two years ago but which, in all honesty, has struggled to make significant progress. The reality is that beyond the numerous local regulatory and structural challenges, there has been simply not been enough spectrum or even the right spectrum bands available for the smart city vision to be realized. 5G, with its core focus on massive machine to machine communications, will go a long way in solving these problems if the right spectrum bands with sufficient capacity are made available.
With Government support, 5G can generate a sustained investment boom
India’s National Digital Communications Policy 2018 (NDCP) was years in the making and has taken time to incorporate the varied inputs from all stakeholders across the industry. The NDCP makes a good start by calling for fiber networks to be classified as public utilities, pushing for streamlined licensing and permits for infrastructure development and so on. However, in terms of financial incentives, the policy is still short on specifics. The Government must go further, not only by pushing for 5G as the umbrella policy objective that subsumes other initiatives but also draws up a detailed financial restructuring package that will allow the CoSPs to invest in their networks, thereby generating a sustained investment boom.
The NDCP envisages several ambitious goals and “broadband for all” listed as the first core objective, with 50 Mbps per citizen listed as the target by 2022. To achieve this, India will need to first address the glaring shortcomings in its fixed broadband adoption. In a mobile-first market like India, and indeed in many emerging economies, the costs of laying thousands of kilometers of fiber to drive Fiber to the Home (FTTH) or even to the enterprise can be prohibitive.
To be fair, 4G networks are already having an impact on investments in fiber as service providers take an end to end network approach and connect cell towers with fiber. However, by focusing on 5G as the umbrella policy objective, India can begin to address the imbalance in fixed networks versus wireless. Indeed, the NDCP calls for 50% of India’s households to have fixed line broadband connections available by 2022, as well as gigabit connectivity to all local and village government bodies. While the laying of physical fiber assets right to the home is challenging, either due to topology or issues with rights of way, fixed wireless technologies that use new 5G spectrum bands can also help achieve the target broadband connections.
On the wireless side of the equation, 5G investments in New Radio (NR) access networks, allied with new devices and form factors, will not only enable radically higher broadband connectivity speeds but also help enable new use cases that will reply on faster speeds and lower latencies. These new investments for 5G will cumulatively help drive balanced broadband growth in India.
5G will drive new use cases and efficiency gains for manufacturing and industry verticals
As previously discussed, the immediate benefit of 5G for India will come from enhanced mobile broadband (eMBB), with plenty of demand already present for broadband connectivity using dongles. So this would constitute the primary use case for 5G for the first couple of years after launch. In the next wave, 5G will also drive massive machine-type communications (MMTC) for the Internet of Things and ultra-reliable low latency communications (URLLC), with URLLC being the slowest to get traction.
Both these aspects of 5G will be crucial for enabling new use cases in India, particularly with regard to industrial and other vertical applications. 5G is the answer for apps and services that call for high-capacity, low-latency connectivity at scale. In India, where the government is pushing local manufacturing and industrialization through its “Make in India” program, 5G can help businesses achieve significant efficiencies and productivity increases as they build new factories. This is especially relevant at a time when the relative competitiveness of the Indian manufacturing sector has declined.
It is, of course, a stretch to believe that India will see the rise of “factories of the future”, with all the cutting-edge technologies deployed. The far more likely scenario, based on historical trends, is that many international businesses will seek out India as a lower cost location for light manufacturing and production of lower value goods. However, as global manufacturing companies increasingly use private networks over LTE today but 5G in the future, they will soon want to see the same level of adoption of these technologies and networks in their facilities. India’s manufacturing, even for lower-cost goods, will need to differentiate through higher quality and lower cost of production. As industries deploy millions of sensors and automated production lines, precision timing and real-time processing will become increasingly critical even in India, not only from a cost point of view but also quality. 5G will also benefit existing industries like India’s massive railways and postal services increase efficiencies and drive productivity gains. In the resource-constrained environment that is India, 5G will be crucial for new use cases in industries and vertical applications. Beyond these, use cases like VR/AR, connected cars and other mission-critical services also need 5G, though these are likely years away from adoption in India.
5G will lead to a massive expansion of spectrum resources and efficient utilization
One of the biggest growth bottlenecks for India’s service provider community has been the paucity of spectrum relative to their global peers. With 5G, not only will service providers have access to significantly increased spectral resources, but they can also manage them much more efficiently using new technologies like network slicing, with greater customization and automation allowing for reduced wastage.
The advent of 5G will radically alter this spectrum and resource-constrained environment. This is not only true for India, but for other emerging markets as well. 5G will introduce new spectrum bands, from the mid-band (3-6 GHz) all the way to mmWave bands. India’s government has already identified the 3.4-3.6 GHz, 24 GHz and a small band in 28 GHz as 5G bands. They have also mooted the 57-71 GHz band as unlicensed spectrum and the 71-76/81-86 bands for backhaul purposes. They have also proposed a new configuration for 5G called “Low mobility Large Cell” or LMLC, which would focus on covering large areas, particularly with rural India in mind.
In these new bands, operators can take advantage of much larger channels and better spectrum reuse to dramatically increase the capacity offered to end users. 5G will also introduce access in the unlicensed and lightly licensed bands as well, similar to what is already happening in the 4G space with LAA and MulteFire technologies. These new technologies, as well as innovative models like the Citizens Broadband Radio Service (CBRS) in the US, will allow enterprises, venue owners, government agencies and other private owners to deploy private communication networks using 5G, independent of mobile operators.
India needs 5G, preferably in the near term
In conclusion, a strong case can be made for 5G if framed in the context of pervasive connectivity and the benefits it will afford India’s citizens, both in terms of access to information but also in economic terms. 5G will no doubt drive a surge in broadband speeds but will also enable a new digital ecosystem for industry and vertical applications that utilize machine to machine as well as ultra-low latency applications. While India’s government has already initiated consultations on 5G, it is critical that the timeline for commercial deployment be accelerated in order to realize the vision of Digital India.
This is part of the “5G: Redefining the connectivity paradigm” series sponsored by Intel: