Fix the basics: More than 5G, consumers need telecom infrastructure

Telecom technology is set to enter a new era. The standards are now being fixed for 5G technology and manufacturers, service providers, and regulators are getting set to roll out the new networks. A large delegation went to the Mobile World Congress in Barcelona to demonstrate India’s eagerness to take the lead in developing and rolling out 5G. This is consistent with the Budget statement when Finance Minister Arun Jaitley committed support to a 5G “test bed” at the Indian Institute of Technology, Madras. Indian operators are also ramping up, with Airtel testing 5G readiness in Kolkata and Bengaluru, while Reliance Jio claims that its entire network is 5G-ready. The new technology is indeed promising and a pro-active attitude towards 5G adoption behoves well. But the fact remains that commercial 5G will not roll out anywhere in the world, on any real scale, until mid-2019, and the most optimistic timelines do not envisage 5G rollouts in India until 2020. As such, while India’s policymakers are attempting to position the country at the forefront in terms of adopting new technology, they may be ignoring the problems besetting the telecom sector at this instant.

India’s telecom industry has been sliding towards financial insolvency over the past few years, due to a combination of very high spectrum charges, intense competition and complicated regulations that make mergers and spectrum transfers difficult. There has been a shakeout since Reliance Jio launched services in September 2016 and was allowed to offer free services for six months. That sparked a price war. When Jio launched, there were over a dozen private service providers, and the industry directly or indirectly employed 4 million people and enabled a dozen other tech-driven industries. When Aircel, with 85 million subscribers, filed for bankruptcy this week, just four private players were left. Only one, Bharti Airtel, made profits in the last quarter. Collectively, the industry now owes nearly Rs 8 trillion in debt and outstanding spectrum fees. Along with lenders, the Reserve Bank of India and the Economic Survey have expressed concerns about the sector’s debt-servicing capacity and the consolidation has also meant workforce downsizing.

The cash crunch has meant minimal investments in infrastructure. This, in turn, has led to the slowest 4G data-transfer speeds in the world and poor quality of service in general, with a large number of dropped calls and fadeouts. Indeed, “Network busy” has become an ironic phrase. What is more, even though India is the world’s largest data market by volume, the majority of subscribers are still using 20-year-old 2G technology and handsets. Just improving the current infrastructure to acceptable standards and persuading subscribers to migrate to 4G will require more resources than the industry possesses. Moreover, a move to 5G requires spectrum auctions in the relevant bandwidths (the standards have not yet been fixed). Commercial viability will depend on developing an ecosystem of compatible equipment, including handsets. All of this will require huge investments and it can only happen two or three years down the line. In the meantime, it is imperative to fix the current infrastructure, to review the financial situation and to alleviate financial stress where necessary, and to set policy norms that ensure that the industry does not become a quasi-monopoly. The New Telecom Policy will have to tackle these challenges.