Reliance Jio calls out “grossly inflated” 5G spectrum price

A 5G base station from Ericsson

Displaying a united front against high 5G spectrum prices, India’s top wireless operator Reliance Jio has become the latest to came out strongly against government’s proposed 5G spectrum prices.

Vishakha Saigal, vice president and head of strategic initiatives, regulatory policy and research at the Mukesh Ambani-led company, said spectrum prices have to be made affordable.

“Currently, the prescribed reserve prices are grossly inflated and can seriously impair the ability of the industry and telecom providers to invest in much needed infrastructure,” she said, participating in this year’s Indian Mobile Congress held virtually.

The strong and unambiguous stand taken by Reliance Jio is likely to come as major relief to competitors Bharti Airtel and Vodafone Idea, both of which have clearly said they cannot afford to buy 5G spectrum at the prices currently approved by the government.

Moreover, a unified front is likely to produce a greater impact on the government as far as the reserve price of 5G spectrum is concerned.

5G spectrum auctions are expected to take place around September of next year.

If the government refuses to budge and operators decide to boycott the auction due to high prices, it can have severe impact on India’s economic growth and competitiveness.

Many evolving technologies are increasingly dependent on the availability of low-latency wireless data, such as driver-less cars, remote patient monitoring and so on.

Perhaps more importantly, delays in 5G deployments will also crimp the growth of India’s residential broadband market — — one of the most under-penetrated in the world.

Less than 5% Indian homes are currently estimated to be connected with residential-grade, high-speed broadband at present, compared to about 72% for the US.

While attempts are on to increase the penetration of residential broadband via fiber-to-the-home technology, such efforts are likely to take at least another 10 years to reach even 40-50% of the households in the country.

However, with 5G, this can be achieved in as little as four years.

HIGH SPECTRUM PRICES

However, the current pricing suggested by Telecom Regulatory Authority of India, and approved by Department of Telecom, is widely considered to be unaffordable and counterproductive for the growth of the sector.

For example, the reserve price for a slot of pan-India 3G spectrum was priced at Rs 3,500 in 2010, which works out to about about Rs 6,500 cr in today’s currency.

While 3G required only 10 MHz of spectrum, 5G will require an operator to buy 80 MHz or so in the 3.5 GHz (mid) band, and another 100-150 MHz in an upper band — also known as millimetre band.

According to the proposed pricing, the first block of mid-band spectrum itself will cost Rs 40,000 cr.

Assuming that the millimetre wave band also costs the same, the total price of a decent 5G spectrum block itself comes to around Rs 80,000 cr. This is 12 times the reserve price fixed for the 3G auction, even after adjusting for the depreciation in the value of the rupee.

Even if one assumes that the starting point for the 5G auction should be the winning price — rather than the starting price — of the 3G auction, the current prices suggested by TRAI and approved by DoT appear exhorbitant: The winning price of the 3G auction — after marathon bidding lasting for several days — was around Rs 17,000 cr — or Rs 31,500 cr in today’s currency.

Even if this is taken as the starting point, the current reserve price is 2.5 times of what it should be.

IMPACT ON CONSUMERS

The biggest drawback of forcing operators to shell out such a huge amount of money in the name of 5G spectrum is that it will increase end-user prices and severely affect its affordability and popularity.

To serve as a vehicle for increasing the penetration of residential broadband in India, 5G must be able to deliver at least 500 GB of high-speed data at around Rs 424 (or Rs 500 including tax) per month.

This is within the realm of possibility if an operator gets 80+150 MHz of spectrum for around Rs 30,000-35,000 cr.

However, if the price of the spectrum increases to Rs 80,000-100,000 cr, the telecom operator will have to hike his monthly charge to Rs 1,000.

This will, in turn, affect the affordability of the service as far as most Indian households are concerned.

A 500-rupee-per-month service may be affordable for 50-70% of the households in India, but at Rs 1,000 per month, only around 20-25% of the households in India will be able to afford it.

Thus, high spectrum prices will defeat the very purpose of trying to take high-speed residential broadband to all corners of the country through 5G.

Instead of serving as a conduit for high-speed residential internet across the length and breadth of the country, 5G will end up as a niche technology with limited take-up among well-heeled mobile users and enterprises.

This will not only deny high-speed broadband to millions of Indians, but also rob the government of potential tax revenue that such a service would have generated, and rob India of much needed economic growth.

QUANTITY OF SPECTRUM

Besides cautioning against unrealistic spectrum pricing, Jio VP Vishakha Saigal also warned against providing inadequate amounts of spectrum for 5G.

She pointed out that not only was it important to provide 80-100 MHz of spectrum per operator in the 3.5 GHz (mid) band, but government must also be ready with the so-called capacity spectrum in higher bands. Such capacity spectrum is used to cater to heavy demand, especially by residential users and in cities and towns.

Meanwhile, the government has in the past indicated that is working towards freeing up spectrum in higher bands, but has so far not given any time line for the same.

“We need a mix of bands [to balance capacity and coverage], whether it’s the mid-band, low-band or high-speed millimetre wave band,” Saigal said at the final day of Indian Mobile Congress held online this week. “..smaller fragmented blocks of spectrum is not going to help.”

“The prime mid-band, which the government has identified is very very less, and we need at least 80-100 MHz of contiguous spectrum per operator for a successful roll out of 5G, and similar higher quantum of spectrum from other bands as well,” she added.

To help companies plan out their investment, the government should come up with a ‘road map’ for the next four to five years, giving the details of what amount of spectrum is likely to become available over this period for auction.

“It’s imperative to have a transparent and unambiguous spectrum policy with a clearly defined roadmap of available spectrum,” she pointed out.

Saigal also urged the government to urgently release spectrum to telecom operators so that they can conduct trials to fine-tune their technology and plans.

“5G adoption speed will determine growth in all sectors, whether it is healthcare, agriculture, education, retail and so on. The sooner we come up with the right policy road map and address the impediment, the better will be the gains for the nation,” she added.