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March 18, 2021updated 05 Apr 2023 9:24am

India is struggling to take advantage of a $150bn 5G opportunity

India is heavily reliant on mobile networks for internet connectivity but it has yet to begin trials for the next generation.

By Matthew Gooding

India could miss the boat when it comes to 5G, a committee of the country’s parliament has warned, with the next-generation mobile technology yet to begin trials on the sub-continent as other nations roll out fully functioning networks. While India’s size makes it a potentially lucrative market for mobile operators, significant policy and infrastructure changes are needed to make 5G a viable prospect.

Trials of 5G are not expected to begin in India until October this year, even though the deadline for applications to host them passed in January 2020. A limited deployment of the technology could begin early in 2022, but this is not soon enough for the Indian parliament’s standing committee on information technology, which says the country “has not moved beyond the modest beginning stage as compared to other countries in the world”.

two women holding tablet

India’s population is heavily reliant on mobile internet connections. 5G could help (iStock)

In a report published last month, the committee said it is “inclined to conclude that sufficient preparatory work has not been undertaken for launching 5G services in India. It is likely that after missing the 2G, 3G and 4G bus, India is going to miss 5G opportunities, unless time-bound action is taken in core areas where governmental intervention is required”. Indeed, some of India’s neighbours are already much further down the line with 5G deployment; China claims to have installed 700,000 5G base stations, with 180 million 5G devices in circulation, and smaller countries such as Thailand, Singapore and the Philippines already have networks providing services to businesses and consumers.

GSMA, the trade body for mobile telcos, says that 5G could create an additional $150bn in GDP for India between 2025 and 2040. So why is it struggling to progress?

The pandemic has been a factor, but spectrum prices also appear to be putting mobile network operators off. A spectrum auction earlier this month raised INR187bn (rupees) ($2.5bn), but the 700mhz band, which is suitable for 5G did not attract any bidders. Bharti Airtel, which operates the country’s second-largest network, is reported to have said the band “did not get any bids from the operators as it made no economic sense for them based on the high reserve price”.

The reluctance of the mobile operators to cough up these steep licence fees arguably results from the success of the last generation of mobile networks in the country.

India: a 4G success story

India’s population is heavily reliant on mobile phones for internet access. Fixed broadband subscriptions are few and far between, with only 1.4 per hundred of the population in 2019, compared with 31.3 in China.

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Mobile networks provide connectivity for many Indians. Though the country is still lagging behind most of its neighbours when it comes to network penetration, with 84 mobile and 47 mobile broadband subscriptions per 100 residents, the situation has been improving since the deployment of 4G networks in 2016. India is now the largest consumer of mobile data in the world, with average monthly usage per customer last year of 15.7GB.

“We’ve seen a massive increase in penetration rates and the adoption of smartphones, and 4G has been key to that,” says David George, director of services, thematic research at GlobalData. “By 2020, 60% of phones in India were able to connect to 4G, and by 2023 we expect that to be nearly 80%, so in that respect, India is becoming a mobile-first economy.”

Low mobile data costs, driven by the ultra-aggressive pricing strategy deployed by market-leading operator Reliance Jio, have helped fuel 4G’s popularity, with consumers and businesses in India paying far less for their data than counterparts in neighbouring countries.

This is good for users but bad for operators, George says. “Jio has been able to massively disrupt the market because it has a parent company [the Reliance group] that has been able to support it in terms of a retail presence, distribution, and cash,” he says. “There are question marks about how sustainable this is, and other operators have struggled to keep up.”

This situation is compounded by the high tax rates paid by the telecoms sector in India. “The percentage of operator revenues that go out in taxes is among the highest in the world,” George says. “Combine that with low prices, and you don’t need to be a rocket scientist to work out that it’s not a great situation.” Facing such difficult market conditions, it is no surprise the operators are hesitant to make the significant investment required to make 5G a reality.

5G in India: is it needed and which industries could benefit?

Nevertheless, the fact that the vast majority of India’s connectivity comes through wireless access means 5G could play a key role in enabling future growth. “The importance of mobile broadband in India cannot be underestimated,” says Jeanette Whyte, head of public policy for the APAC region at GSMA. She believes fixed wireless access 5G, which utilises the lower bands of the spectrum, could prove a good way to increase the reach of mobile networks in India, and adds “with median age in the country hovering circa 27 and India’s target of becoming a $5trn economy by 2025, clearly, there is an opportunity to increase mobile broadband penetration”.

If strong 5G networks are established in India, industries that could reap the rewards include manufacturing, retail and agriculture, the GSMA’s 5G in India report says. Healthcare could also receive a timely boost. “Seventy per cent of healthcare in India is provided by the private sector,” says Meghna Misra-Elder, associate director at the UK India Business Council. “The population is such that the sector faces a big challenge, and tech has got to be part of the solution. 4G connections are fine for basic telemedicine, but we need 5G to be able to go beyond that and take advantage of artificial intelligence and IoT devices.”

How to make 5G in India a reality

When trials do begin later this year, Misra-Elder believes the regulatory framework around 5G will need further consideration to convince businesses to make the investment required to drive widespread adoption of the technology. “5G isn’t just about the connectivity,” she says. “It’s about data, where that data sits and how it can move between systems. In India we don’t have a very robust cybersecurity policy, we’re working on our data regulations and a data protection act, but establishing that framework is difficult at the moment.”

For mobile operators, the cost of spectrum will need to come down to ensure that future auctions don’t end with unsold 5G rights. “Spectrum pricing is one of the most important factors for a timely roll-out and a high-quality network,” explains GSMA’s Whyte. “Between 2010 and 2017, final spectrum prices in developing countries were on average more than three times those in developed countries, normalised by income, while reserve prices were found to be five times more.”

As well as looking at lowering spectrum prices, the government could also step in to share the burden on operators when it comes to new infrastructure. “There is a large-scale investment requirement of mobile network operators in India to make 5G a reality – partially due to the need for additional base stations,” Whyte says. “Other policies could support this need, such as lowering taxes, making public infrastructure available and encouraging sharing among mobile network operators.”

GlobalData’s George says India needs to be realistic about the role 5G will play in its economy in the short term, as the roll-out of the technology will inevitably take time in a country where average income remains low. “Putting any hubris or nationalism aside, India is still an extraordinarily poor country,” he says. “What we’re seeing globally is a huge shift to 5G in developed markets. Clearly, this will happen in emerging markets too, but it’s still at an early stage.”

Read more: India’s semiconductor ambitions are grand. Fulfilling them will take a lot of work

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