5G: Band Aid over bullet wound?
The Indian Telecom sector has bled enough. It is now time to heal these wounds by thinking beyond 5G and taking notes from innovators in the tech industry, coupled with higher support from the government.
On 5th September 2016, the Indian telecom industry was thrown into chaos when Reliance Industries Limited (RIL) entered the space with Jio, its 4G-enabled VoLTE offering. Backed by the bottomless pockets of RIL – the then 2nd largest company by market capitalisation in India – Jio offered voice and data for free at the outset, thoroughly disrupting the existing players’ fixed revenue structures which had exploited the high growth rates in the telecom subscriber base in India for years.
It soon became clear that while the consumers were set to benefit immensely, the existing operators needed to change their strategy to keep their subscriber base from defecting to Jio. By April 2017, roaming charges, which had until then been a major source of revenue, were abolished for all operators. Significant costs were being incurred to lure customers from rival telecom operators. As the industry consolidated, smaller players started exiting the market, leaving only Jio, Bharti Airtel, Idea Cellular Limited and Vodafone India as the major private players in the market along with the state owned BSNL and MTNL. following the merger of Vodafone and Idea to create Vodafone Idea Limited on 31st August 2018, some stability was injected in the industry, with ratings and research agency CRISIL predicting a robust 7% growth of the industry in the 2020 fiscal.
As it stands today, Jio, Airtel and Vodafone Idea command almost equal market shares, with Jio only marginally ahead of its competitors. As telecom operators dust off the uncertainty of the past three years and look toward the future, can the industry effectively manage the introduction of 5G technology? Can the industry stand back up on its legs to face what could be the next disruptor in the market?
But the state government’s Right-of-Way (RoW) laws are hampering growth. The clearance process for laying down optical fibres is long, cumbersome and expensive. The government had also launched a National Optical Fibre Network in 2011 to ensure that internet connectivity is available in every part of India, but due to regulatory obstacles, it is severely delayed. The deployment of such a network is a prerequisite for introducing 5G Network throughout India. Another roadblock is the increase in import duties on telecom equipment since 2018. The customs duties on telecom products like Optical Transport Network (OTN) increased to 20% from 10% and some products which had zero duty are at 10% (“Customs duty raised on telecom equipment”, 2018). The telecom industry in India is in dire need of government support if it is to recover from the slump it has recently fallen into and upgrade to future technologies.
Although, relying on only government policies has never worked out well for any industry. The telecom industry must thus take a look at the tech industry in general, which has been awash with buzzwords like IoT, AI/ML, VR – to name a few. But what does it have to do with telecom in particular? Basic connectivity has been, for long, a forte for these players – playing on voice packs rather than data packs. Starting from the Jio disruption, data is in focus along with the advantages it has to offer. 5G will enable telecom to massively improve connectivity speed, carry more traffic and therefore lower the cost per terabyte. Moreover, the accelerated pace of IoT adoption in the country will make sectors like industrial manufacturing, energy, agriculture, utilities, transport, and logistics lead the market, per the same report.
Telecom should look to moving on from focusing on just the product, to establishing themselves with a software background too, while also contributing to the infrastructure sector. This should drive substantial revenue of the company’s top and bottom lines, improve Operational Excellence (OpEx), reduce redundancies and pump up efficiency.
For example, let’s take a look at Amazon. They make their own technology stack. This takes substantial initial investment in the sector but bears fruit later on. You can control the entire life cycle of the product, and this investment will help you manage aspects of your product. This includes rolling out updates, giving importance to various sub-components, cost-cutting, customization, etc. The way this can be achieved in telecom is software-defined networking. One should be in the business of routers, firewalls, switches, carriers, etc. and integrate them into a standard stack. The negotiations with the third party also don’t come into the picture, and the pricing can be optmized taking into account inventory and other costs also as one has a greater degree of control.
Another learning from this is the creation of new avenues of monetization, like taking a percentage cost from all the transactions happening over the network, charging a bit from the OS, etc. More innovation in this direction can open a plethora of opportunities to explore.
These should be coupled with practices of version control, test and deployment automation, and continuous integration. This can be achieved by an end to end service validation including a complete network service chain consisting of a number of virtual network functions. This helps in separating the network functions with the underlying hardware to create a network to run on commodity hardware, making the system more cost-effective.
Another aspect which can be very useful is the Digital Learning industry. We can leverage Machine Learning to get a lot of things done in a better way. It can help in identifying potential failures in the towers and SLA breaches in advance to take action accordingly. This can also help in identifying customer behaviour and making the services more personalised so as to improve customer satisfaction.
The arrival of technologies is imminent and to repay fresh investment in 5G technology, companies have to look beyond the traditional renting technique on voice and messages. Along with moving to bundling of services with data, they must develop capabilities to leverage the greenfield IoT space. To facilitate movement in the industry, the government should do away with heavy tariffs on telecom equipment and strengthen the Optical Fibre program. At the same time, it should allow sharing & trading of spectrums to make the telecom industry more market friendly, attractive to investment and efficient.
References:
- D., Khan, & T., Gurnaney. (2017, August 7). Right of Way rules: The effects of implementation delay on India's telecom industry. Economic Times. Retrieved from https://telecom.economictimes.indiatimes.com/news/right-of-way-rules-the-effects-of-implementation-delay-on-india-telecom-industry/59855964
- E. (2018, October 12). Customs duty raised on telecom equipment. Economic Times. Retrieved from https://economictimes.indiatimes.com/news/economy/policy/customs-duty-raised-on-telecom-equipment/articleshow/66173069.cms?from=mdr
- Council Post: Lessons The Telecom Industry Can Learn From The Infrastructure-As-A-Service Market. (2019). Retrieved 31 July 2019, from https://www.forbes.com/sites/forbestechcouncil/2018/06/06/lessons-the-telecom-industry-can-learn-from-the-infrastructure-as-a-service-market/#2f9e3fb1e0d4
- Friman, M. (2019). 4 Lessons the Telecom Industry Should Learn From the Enterprise. Retrieved 31 July 2019, from https://www.sdxcentral.com/articles/contributed/telecom-industry-enterprise-lessons-marcus-friman/2016/04/
- Here's what Machine learning can do for the telecom industry. (2019). Retrieved 1 August 2019, from https://www.allerin.com/blog/heres-what-machine-learning-can-do-for-the-telecom-industry