India catches the 5G bug! Finally, and in a good way...
India has previously dragged its heels on kickstarting 5G auctions in the country, making them a laggard when measured to several developed markets and also several low and middle income countries (LMIC) who have launched 5G commercial services or issued spectrum already. The list is long, including in the APAC region.
That said, it's official! India will finally have its 5G spectrum auction on July 27th. It's been well over a year since the original set of recommendations from the country's regulator, the Telecommunications Regulatory Authority of India (TRAI) got embroiled in controversy over the prohibitively high reserve prices that were originally set at INR 492 crores ($65 million) per MHz for the prime 3.5 GHz band.
In its most recent set of recommendations, TRAI lowered the reserve price but only by a little over a third. The new recommended price is $41.7 million per MHz in the 3.5 GHz band, which represents a 39% decrease in the base price. While this is a significant drop, it is far from what the telcos were demanding. Now, the Department of Telecom (DoT) of the Govt of India has confirmed the pricing recommendations given by TRAI.
The bands being put for 5G nominally include the APT 600 MHz bands from 612-703 MHz, C-band spectrum from 3300-3670 MHz and mmWave spectrum from 24.25-28.5 GHz. The APT600 bands are not likely to see any traction in this auction given the lack of network equipment for these frequencies, high device costs, low availability of modules and other reasons.
The major focus of the auction will be on the sub-6 GHz band, namely the 3300-3670 MHz bands which correspond to the 3GPP’s n78 band, which is in line with global momentum and ensures economies of scale and device availability and affordability. The n78 band will also ensure limited disruption to and interference with the satellite broadcast providers who typically operate in the 3800-4200 MHz frequencies.
Successful bidders will have the option to make full payments upfront, or in equal installments over 20 years. They will also have the option to surrender their spectrum after 10 years and "walk away" with no further obligations for the balance of the license period.
Beyond the 39% decrease in the reserve price for sub-6 GHz spectrum, the far bigger concession made to mollify India's incumbent telcos is that there will be no spectrum usage charges (SUC) applied for the winners of this auction, for the duration of this license period. Given that SUC amounted to 3-5% of annual adjusted gross revenues (AGR), this will significantly improve cash flows for the telcos.
mmWave being made available is a positive outcome for this auction cycle. There was heated debate and lobbying against mmWave allocations in the 28 GHz band by the satellite providers but the compromise formula seems to be for India to auction spectrum in the 26 GHz band to minimize overlaps and interference issues. mmWave pricing is not as high as for C-band, with a typical 100 MHz channel priced at INR 700 crores or US$90 million for a license period of 20 years.
Backhaul has also been addressed by the DoT, with new 250 MHz channels of spectrum in the E bands proposed provisionally for backhaul purposes. However, there is also recognition that given India's poor fiber connectivity to cell towers (barely 35%), short term solutions through enhanced microwave will be needed. To this effect, new frequency allocations for microwave will be opened up, with current allocations in the 13, 15, 18 and 21 GHz bands to be doubled.
The most controversial point of this 5G auction revolved around whether the Government would accept TRAI's recommendations to allow Indian enterprises to directly own and access spectrum for the deployment of 5G private networks, as opposed to going through Telcos. In India, private wireless networks (PWNs) are being referred as Captive Networks. This was a matter of much debate and in the end, the Govt has allowed direct access by enterprises. That said, DoT has outlined effectively three ways for PWNs to be deployed:
One, enterprises approach their Telco partners for a managed service that bundles spectrum, equipment and integration services. Spectrum in this scenario can be offered through a network slice or in a local breakout scenario, where the enterprise has a local network built to cover only its specific site.
Two, enterprises approach their system integrator (SI) partners to deploy a network for them. In this case, spectrum can be offered by an SI who "owns" the spectrum or can be leased from a Telco.
Three, enterprises bid for and acquire spectrum for their specific "local" requirements and then deploy a network, using either in-house resources or presumably through SI partners. Pricing for this option is currently not defined and will be referred back to TRAI for recommendations.
There is currently no prospect for a CBRS-like scenario in India, where enterprises have access to unlicensed spectrum. Given that the Indian Govt looks to the telecom sector for significant revenues through the auction route, the subject of unlicensed spectrum in India has been anathema. There is little discussion for the 6GHz band as well, so proponents of WiFi 6 and 7 will need to wait for the foreseeable future.
Opening up spectrum for non-telco players is a blow for India's cash strapped telcos, who were still reeling from the exorbitant reserve prices for #5G. This decision will negatively impact the business case for them and likely force them to re-evaluate CAPEX plans. Lower CAPEX outlays by telcos will mean significant #5G coverage gaps. Enterprises looking at private networks will likely only need "local area" networks in the short term. However, greater mobility use cases will require roaming onto public networks.
With the exception of a few large enterprises that may opt to build private networks "in-house", the vast majority will opt for a managed service model. Besides telcos, expect a big push by global SIs like @Capgemini and the Indian majors like @Wipro, @TCS, @Infosys and others.
Ultimately, India will see 5G commercial services, even if limited in scope, by the end of 2022, with a slow ramp up to operations at scale by 2024. On the subject of private networks, the proposed TRAI consultation for spectrum pricing for direct access by enterprises is likely to take 6 months at the least. This consultation can be expected to be high octane and extremely contentious, with the Cellular Operators Association of India (COAI), the industry organization representing the telcos, already demanding a string of conditions be attached to any prospective grant of spectrum to enterprises. These include spectrum pricing and acquisition process to be the same conditions as imposed on telcos, equipment certification, security compliance, data storage rules and many more.