India is almost always too late to join the technology party, missing out on early action when most of the fortunes are being cashed upon. Against the $100 billion that 4G added to the world’s GDP, the 5G spectrum is expected to add more than $550 billion to the world’s GDP over the next five to 10 years. India was late into 3G/4G space in actual commercial deployment.
Can India break into the 5G party at an early stage when applications, or apps, are still on the drawing boards and premium pricing prevails? Here we examine some policy choices before the Narendra Modi government, which can enable and incentivise India’s telecom companies and technology giants to capture premium markets in the 5G space.
If India takes the traditional route of identifying available markets, looking at the demand parameters, and then organising the auction of spectrum to telecom companies, it will be years before we have 5G services on the scale, spread and intensity required for the technology to make any impact on India’s GDP and export markets. We will thus end up as a country with a large userbase of 5G services but a small player in driving the technology and its application space globally.
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For India to become early adopters and early movers in 5G space, we propose that the Modi government, along with the telecom companies, technology industry and other stakeholders consider giving spectrum for free to existing, well-established telecom players like Jio, Airtel, Vodafone, BSNL among others in 20 big cities in proportion to their existing market share in each city. Spectrum for 5G in other cities and towns should be allocated the usual way depending on existing or new players.
The 20 top cities could be identified by the telecom players, technology companies and the Centre. The spectrum initially given away should at least be equal to the existing 4G spectrum in each city. Services to be offered should not be constrained by availability of spectrum. Thereafter, telecom and technology companies should be left free to determine how to exploit the opportunity for India’s benefit and export markets.
The telecom industry today is in doldrums, with huge debts to banks that are barely being serviced. It lacks capital to invest on the scale required in 5G. Left to itself, the telecom industry will take years to come up with the capital required to make the necessary investment to exploit 5G opportunity to the fullest. Giving existing players startup spectrum free of cost will incentivise them to not only make such investments, but also capture an early share of the application space, which is expected to be several times that of the 4G space. We may note here that 5G will have far more industrial applications since various devices are connected to the internet and to each other. So, the apps space will be dominated by the same customers that the existing technology giants have. Early entry into 5G will give them and the telecom companies a welcome boost. It will of course help digitise India and Indian consumers faster as well.
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The Modi government won’t face any real loss by giving away the startup spectrum to telecom companies for free. The money forgone upfront will eventually show up through the profits made by the telecom companies, and the government can capture the required revenue stream by taxing services – certain percentage of sales plus the usual income tax. In a way, the Modi government would merely postpone the revenue collection from upfront to after the telecom players have started generating profits. In the process, this would strengthen the fragile balance sheet of existing players who owe tonnes of money to banks, which in turn don’t have the capital to lend money to the industry. The government, and thereby India, can sidestep this vicious and debilitating debt trap with its free 5G spectrum.
The proposal also meets the test of fairness. The auctions of 3G and 4G spectrums were gamed by players with enormous losses to themselves and the consumers at large. In the process, a lot of bad debt was inflicted on the banking system. So, this proposal is also motivated by the need to reset the entire telecom and technology space, put things back in order, clean up the bad debts, and restore profitability to existing players. No new player should eligible for free startup spectrum either. So, the political mess that characterised 2G auctions will not be repeated. Furthermore, allocation of spectrum within the selected 20 cities should be strictly according to existing market share. This eliminates favouritism.
Lastly, the startup spectrum should be free to use for five years with a bonus provision of extension by another five years, provided the spectrum is fully exploited by the telecom player. This will cut out any incentive in cornering the spectrum and keeping it unused. It will also help ensure that the required investments are made at the earliest to take maximum advantage of the free spectrum. After 10 years, the spectrum should be allocated the usual way.
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It is time to alter our traditional approach to technology as a late stage adopter. This approach not only delays benefits but also prevents full exploitation of assets created due to early obsolescence. In fact, by the time a new technology is fully deployed in India, the world is ready to move on to the next. Early adoption not only helps the consumers, telecom companies and the industry, but also holds possibilities of opening the route to master the innards of 5G technology by India’s technology players. This makes for safer deployment of 5G technology from the security point of view. But more than anything else, it enables our technology giants to enter into the hands-on application space very early, and capture the industrial markets unique to the 5G space. Surely the Modi government can afford to take a few risks, postpone revenue collection for a few years for such overwhelming advantage to India’s technology industry?
It is time to break the old moulds and capture new markets.
Sonali Ranade tweets @sonaliranade. Sheilja Sharma tweets @ArguingIndian. Views are personal.
Very naive. Is this person even an adult? Giving spectrum is not an percentage calculation. Spectrum is given in blocks, not percentages. Such an idiotic idea. Also, so called fair market share can be easily manipulated temporarily by deep pocketed companies (Jio, mere laal.. ) and existing market share is itself a problem which is a result of decades of gaming of spectrum pricing by incumbents via debt. The debt funded spectrum model has to be broken but not thw naive and idiotic manner this so called journalist who seems to be a half-wit has proposed.
Why we want to jump in while premium pricing prevails ? None of the equipment companies are of Indian origin. We are talking about tapping our own domestic market, don’t overestimate the spending ability of the common man with declining GDP growth. Only the IT sector who develops applications (including new ideas and use cases) for 5G are going to get benefit, they will still benefit because the Indian Software Industry cater the needs of global market. So I don’t see a treasure trove here. Now how much we think 5G is earth shattering than 4G , at least on paper? . Still we don’t have proper 4G network in most places in India. I live in Bengaluru and I face channel congestion in 4G not coverage issue for a year now without much improvement. The companies does not need a pan india 5G rollout, they should just move their upgrade work to 5G now rather than spending on 4G or 3G infra at this point of time. I feel sorry for who ever thinks 2G rollout was a fair deal, Including our honourable court.
If Modi does this, then I am sure that this print, Wire, Quint and other soulless, brainless sold journos would be running day and night campaigns on then so called made up 5G scam by Modi.
The treachery is apparent here -_-
Taking into account of the back breaking debts and costs faced by the telecom industry and also to fulfill the need to reach the most remote village, the govt should charge GST @5% for this sector and make the spectrum fees as percentage of their revenue and not as the bulk payment to be made by the companies which have to borrow ultimately. Please note that the spectrum is owned by the Government on behalf of the nation and does not belong to any person or any entity. So there will be spectrum fees to be paid and this can be negotiated.
I totally agree to the proposal of giving 5G spectrum FREE to the existing operators only… The entire process is not a capital intensive but a resource intensive hence the money compromised upfront will eventually be made up by the government through the profits made by the operators and thus collecting higher taxes ,revenues and other levies from the operators. This way it will be easier for our country to catch up quickly, almost immediately with other advanced countries without loosing any time in the long and lengthy process such as,tender, auction and finalizing on the best bids etc.etc.
Well there is a world of difference between the initial allocation off 2G when there was nothing and the proposed allocation of 5G FREE when we have made substantial progress and growth in the telecom Industry. The possibilities of corruptions are much more higher when you have almost nothing and you start up in a total virgin market, but the chances of corruptions are almost minimal when there are well established market…
It nothing but a capitalist approach. Is 5G spectrum a such important factor for development, when govt. banks, post offices and other offices are crashing under pressure of servers non functional and work held up most of the time . The amount of work thus suffered is colossal.
PMO should ask for down time data from these offices if not already doing and find urgent solutions , if digital India is to prosper.
If 5G is going to reduce this server down time then the author of this article may be appreciated.
This is Budget time in North Block. Each cent is precious. Developing a particular technology / industry / the wider economy is not uppermost in anyone’s mind. 2. The telecom industry has been bled of vitality. The government’s share in the revenues, by way of spectrum auctions, licence fees, user charges is too high. Jio has been an enormously disruptive force. The government should sit with the industry and work out a more reasonable arrangement of revenue sharing. Else large borrowings made by the industry will turn into NPAs.
Excellent article. I totally agree that the spectrum for 5G to be given free. 5G implementation is resource intensive, if telecom operators are given free spectrum they will be encouraged to provide a robust infrastructure. government and telecoms can make money by the way of IoT for farming, manufacturing, transportation and other verticals and charge low to consumers and still make good profits.
in turn the IoT will also benefit manufacturers, farmers, transportation providers to reduce costs and better plan.
This will be a win win for all of us , effectively leading to a SMART economy.
What is the difference between A Raja giving spectrum at a low price and this author’s proposal ? There is no justification for trashing the 2 G spectrum allocations , in that case.
Exactly the same lofty goals to develop the telcos were pursued by Raja in 2008. It is BJP who is responsible for making telcos unprofitable by hiking spectrum auction prices to huge levels, without any understanding of business. Let BJP first apologise for making such a fuss over 2G and withdraw the cases against Raja et al. After that they could give 5G spectrum free as desired.