telcos: 5G spectrum decoded: Setback for telcos, big win for tech companies?

The Cabinet’s decision to allow direct spectrum allotments to independent companies for setting up captive private 5G networks is likely to lead to business uncertainty for telcos on enterprise service revenue streams, hit the overall 5G business case and limit their appetite for airwaves in the upcoming auction, top industry executives and analysts said.

Enterprise services are seen as the prime 5G cash engine for the likes of

Jio, and (Vi), estimated to generate around 40% of overall 5G revenue for telcos, said experts.

But the move is seen as a major win for tech companies.

“The option of obtaining spectrum directly from DoT, provides enterprises the much-required right to develop their private 5G networks based on specialised requirements for their distinctive captive use,” the Broadband India Forum (BIF) said.

Telecom executives flag risks?

BIF counts (), Cisco, Amazon, Google, Microsoft, Facebook-owner Meta, Qualcomm and Intel among its key members.

But telco executives bemoaned the Cabinet decision, saying it could also lead to carriers losing out to tech players in grabbing lucrative smart factory/captive 5G network execution contracts. This, since telcos after buying expensive 5G airwaves in an auction might not be in a position to match tech companies on price on enterprise networks deals as the latter are set to gain the coveted airwaves at a nominal fee from the government.

“Telcos need to rethink if there’s any business case left to invest top dollars in expensive 5G spectrum in 3.3-3.67 GHz band or develop/test 5G enterprise solutions since the crucial enterprise service revenues won’t come if private tech companies enter the same business and offer better rates on the strength of virtually free spectrum,” a top telco executive of one of India’s biggest telcos told ET.

At press time, Airtel, Jio, Vodafone Idea did not respond to ET’s queries. Queries to industry body COAI also went unanswered.

Jeanette Whyte, head of public policy (APAC) at the London-based telecom industry body GSMA, said, “Spectrum set-aside exclusively for enterprises in core mobile bands risks being underused and also adversely impacting spectrum availability and affordability for public 5G services.”

“It’s important that spectrum requirements for public networks for the citizens of India are not undermined,” she said, adding, “There is no firm evidence that private networks can be more effectively supported by spectrum set-asides.” The GSMA represents global mobile operators worldwide.

In the runup to the 5G spectrum sale in late-July, telcos have been testing 5G industrial use cases. But they now feel these investments could become unviable as direct spectrum allotments to enterprises for captive networks would degrade their 5G business case.

The Notice Inviting Applications—the main document containing all auction rules—says “enterprises setting up captive non-public networks (CNPNs) may obtain spectrum directly from DoT and establish their own isolated network”.

This effectively means non-licensed companies may be able to directly acquire 5G spectrum from the government without having to buy it in an auction. But since the government has also said that DoT will seek the telecom regulator’s views on terms of such direct assignments, these direct airwave allotments to independent enterprises won’t happen immediately but possibly over a year-or-two.

A DoT official said a decision on whether to auction or allocate bandwidth identified for private captive networks would be taken after the department gets the regulator’s views. “After identifying spectrum, which could be given and unlocking it, DoT will send a reference to Trai to finalise modalities such as auctioning or allocating the bandwidth,” the official said. He added that the exercise is likely to take time and didn’t specify if it would happen by the year-end.

Till then, enterprises who want to set up their captive 5G networks on their own would need to obtain spectrum on lease from operators or get the telcos to set up such networks for them.

Tech companies, though, termed the Cabinet decision as “forward-looking”. The decision “would further provide an additional source of revenue for the government, through the licence fees and administrative costs paid for the spectrum allocated to them,” BIF president TV Ramachandran said.

Ashwinder Sethi, principal, Analysys Mason, said the decision “allows market forces to decide whether enterprises will deploy their private networks themselves or rely on telecom operators”.

Industry executives and analysts said the Cabinet decision might soon enable tech companies to acquire 5G spectrum at a nominal fee, build captive 5G networks —either themselves or through partners — and boost operational efficiencies. Such a scenario would sharply reduce their dependence on telcos for 5G enterprise services and enable them to hasten their IoT (internet of things) and digitalisation agenda and give them greater control over their own data.

Ashutosh Sharma, VP & research director at Forrester, said “this positive development will enable enterprises to implement use cases in campus 5G deployments like massive machine type communications for Industry 4.0, ultra-reliable low latency communications for transportation use cases and enhanced mobile broadband for AR/VR use cases”.