Is 5G-enabled FWA the answer to the monetisation prayers of Jio and Airtel?

The two dominant telecom service providers in the country, Reliance Jio and Airtel, have refrained from increasing tariffs for more than 20 months. A tariff increase may have come in the way of adding more subscribers to their networks as well as nudging existing users to upgrade from 4G to 5G.

The non-increase has helped in increasing the number of 5G subscribers to 170 million. However, analysts say the time has come when the two telcos can no longer put off tariff increases. In fact, tariffs can go up any time now, which will shore up the key metric of ARPU, or average revenue per user per month.

Considering the combined investments of more than $30 billion ploughed by Jio and Airtel into 5G networks, the pressure of monetisation would be understandable.

At present, ARPUs hover between Rs 180 and Rs 208. Telcos say a mere 15 per cent increase in the base tariffs will push up ARPUs by 20 per cent. If this increase comes along with a decision to start charging for 5G data — it is now free — ARPUs could go up by 23 per cent.

The key is to find a compelling use-case for 5G data, something users will happily pay for. That will be a welcome push for ARPUs, because increasing the base tariffs is usually an unpopular move with consumers and government alike.

That is where 5G-enabled fixed wireless access, or FWA, comes in. It has helped telcos around the world push up their revenues and ARPUs.

Last mile benefit

Broadband is delivered to homes in various ways, one of which is fibre to the home (FTTH). FWA does the same thing, but replaces the last mile fibre connectivity with 5G airwaves. That makes it faster and easier to roll out by doing away with the digging and laying of fibre, which is cumbersome, expensive, and requires permission from local governments for “right of way”.

Jio Fiber, launched last September, is already available in 5,900 towns. With the company offering bundled content in its FWA package, per capita monthly usage has hit a record 400 GB — 10 times more than the average consumption on a mobile phone.

Jio’s aim is to reach 100 million homes, a 10-fold increase from its current number, with a combination of FTTH and FWA.

Airtel, after its initial concerns on the high cost of equipment needed on customers’ premises for FWA, has raised its game. It is expected to soon announce a pan India launch of its FWA, taking Jio head-on.

Sunil Mittal, Chairman of Bharti Airtel, has publicly said he wants the ARPU to touch Rs 300 in a few years.

So, what makes FWA so attractive?

Global rise

Apart from faster rollouts, ARPUs of subscribers using FWA at an average are three to four times higher than that of mobile, ranging from Rs 700 to Rs 900, bundled with apps and some digital channels. It can be as high as Rs 3,999, as seen for Jio, if the consumer wants 550-odd digital channels.

The global trend shows FWA has worked well in shoring up revenues. Data from spectrumfutures.org shows that ARPU from 4G to 5G till February 2024 has increased 12 per cent in the United States (AT&T) and 25 per cent in Germany (Deutsche Telecom).

According to an Ericsson report, as of November 2023, 50 out of the 121 service providers offering 5G FWA are in the emerging markets, with India’s tally at two. The expectation is that by 2029 there will be 276 million 5G FWA connections in the world, up from 59 million in 2024. India, according to some experts, could grab a large part of that surge in the market. After all, the country has 217 million TV homes, and growing.

Yet, Indian telcos are also clear that pushing FWA does not mean dumping FTTH.

Spectrum guzzler

An Airtel insider says the stability and speed on fibre is far superior to FWA, and both are being offered at the same price.

“So, the strategy is simple. We will not offer FWA in areas which are already under FTTH. FWA is for quicker roll out, but whenever we expand FTTH in those areas also we will shift from FWA,” says this person.

Sure, rolling out FWA is essential for shoring up ARPUs, but it comes with challenges, one of which is the high cost of equipment needed on the customer’s premises. At present, this cost ranges from $130 to $150. Someone must subsidise it.

The good thing is that these equipment are now being designed and manufactured in India. But making in India has not brought prices down. Prices will come down only when volumes increase, for which more subscribers must come in.

Secondly, FWA is a guzzler of 3.5 GHz spectrum, on which ride 5G mobile services. With FWA consuming 10 times more spectrum than 5G mobile, telcos will be forced to buy more spectrum if they do not want their networks to get clogged.

Thirdly, the cost of delivering so much bandwidth is expensive.

One way out is for FWA services in areas of big demand to shift to the millimetre bands, where the two players have bought large quantities of spectrum that enables high speeds over a short range. That would entail installing smaller towers.

Experts say the cost of more towers is more than neutralised by the low price the telcos paid for the spectrum. Spectrum used currently for FWA is 43 times more expensive than the millimetre band.

Some experts say Jio has an edge because it has installed a standalone 5G network, whereas Airtel’s core is still 4G. The standalone 5G network enables Jio to slice the spectrum and simply have a dedicated channel for FWA.

Airtel, too, plans to move in the same direction, once volumes go up.

So, are we looking at another edition of Jio vs Airtel?

GLOBAL PUSH

-      50 of the 121 5G FWA providers are from emerging markets

-      Two of them are in India

-      By 2029, there may be 276 million 5G FWA subscribers in the world, from 59 million in 2024

Source: Ericsson report on “FWA Access outlook” November 2023.

INDIA STORY

-      3 in 5 of interested households in India willing to increase their monthly connectivity payment to get 5G FWA

-      25-30% ready to increase monthly connectivity payments by 10%

-      10-13% households ready to increase monthly payment by 25% to get 5G FWA

-      Revenue from fixed communications services to rise to $13.2 billion by 2028 from $11.5 billion in 2023

Source: Ericsson report, titled “Capturing the 5G FWA opportunity: A household view”, company announcements, industry reports