A proposal by the telecom regulator to allow companies to set up 5G captive private networks has irked India’s telecom carriers who warn that such a move would destroy the business case for them after spending billions of dollars on spectrum and network rollouts.
With the pandemic accelerating the digital transformation of businesses, the enterprise segment, which already contributes as much as 30-40% of phone carriers’ revenue, has become even more appealing to them.
“Telecom operators can now give spectrum to enterprises on lease to set up their own network or they can do it as a System Integrator (SI). By this way, a telco will be able to lease out airwaves for further monetisation,” Trai Secretary V Raghunandan said.
Following examples from international markets such as Germany, Finland, UK, France, Sweden, Australia, and Japan, telecom regulator Trai has recommended allowing private enterprises to set up 5G captive private networks with obtaining spectrum directly from the government.
Private companies can either lease spectrum from telcos or get it directly from the government to set up private 5G networks. Leasing out spectrum or taking spectrum on their own from the government would allow them better control over networks and flexibility to design solutions as per changing requirements, according to experts.
A private network is a local area network that uses cellular technologies to create a dedicated network with unified connectivity with a specific geographic area. It is intended for non-public use—especially for large manufacturing complexes, enterprises etc.
There are many distinct benefits of private LTE and 5G networks over the use of public networks, especially for business and security-critical applications which is why private networks are gaining importance across the world.
Some of the advantages include improved control and management of connectivity with better reliability, resiliency, and predictability, full control over the enterprise’s own operating processes, enhanced data security as data is segregated and processed locally and separately from public 5G networks and controlled latency enables near real-time communication, a crucial factor in applications such as public safety or robotic motion control.
According to a report from GSA, there are about 55 countries/territories with private network deployments based on LTE/5G or where 5G-suitable private network spectrum licenses have been assigned. In addition, there are private mobile network installations in various offshore locations serving the oil and gas industries, as well as on ships.
Germany has reserved 100MHz in 3.7-3.8 GHz band for private companies and also opened up 26 GHz band last year. Until mid-March 2022, the German regulator BNetza has awarded 201 spectrum licenses for private 5G networks in 3.7-3.8GHz band and 10 in the 26GHz band. Spain has approved the plan to set aside 20MHz in 2300-2400 MHz range for enterprise private networks. Similarly, there are several other markets that have set aside spectrum for private licensing. There are hundreds of enterprises from manufacturing, mining, ports, education, public sector and various other verticals that have deployed or are testing private networks.
The cumulative revenue for private LTE/5G networks globally will grow to USD9 billion between 2020 and 2025, excluding spending on spectrum, devices, and applications. The number of private LTE/5G networks will grow from around 500 in 2020 to 14,000 in 2025, according to a report by Analysys Mason.
India — Private 5G networks
In India, Trai has recently recommended assigning spectrum for use of captive private networks. It allowed private companies to either lease our spectrum from telcos or get directly from the government to set up private 5G networks. The recommendations will have to be approved by the Department of Telecommunications.
Experts say private 5G will enable new, innovative use cases that will bring great value to enterprises across different industries such as manufacturing, mining, logistics, transport, healthcare, agriculture, education, entertainment etc.
The private 5G networks will offer a new alternative to Wi-Fi or Private LTE for businesses looking at wireless networking solutions. Each form of connectivity, whether that be Wi-Fi or industrial ethernet, or private 5G, has its own capabilities that are suited to support different types of use cases.
Currently, since India does not allow private networks, Nokia had to partner with BSNL and Airtel to build a private wireless network at its Chennai factory. However, Nokia is setting up its own LTE private network at its factory in Oulu.
Of late, the private 5G segment in India has started to see action. Airtel partnered with Nokia to offer LTE private networks to enterprises in 2020. Airtel and Tech Mahindra have also announced a strategic partnership to jointly develop and market enterprise-grade digital solutions across 5G, private networks, and Cloud.
Vodafone Idea partnered with Athonet, a private LTE and 5G solutions provider. L&T Smart World & Communication and Vodafone Idea have also created a use case for a private 5G enterprise network in India.
Global firms Verizon and Capgemini are quite optimistic about 5G private networks in India.
Verizon recently said it allows flexibility to enterprises to deploy their own private 5G network or outsource it to a telecom service operator while deploying it affordability for small businesses are on the horizon.In October 2020, Verizon launched a private 5G platform for enterprises located in Europe and the Asia-Pacific region, and partnered with Finnish gear maker Nokia to offer a 5G private wireless network solution, enabling robust connectivity for enterprise assets over wireless networks.
Capgemini also said that enterprises owning 5G spectrum will give them better control over their plans, thereby reducing dependency. It, however, added that telecom operators will have a role to play for private enterprise networks as managing networks aren’t core competencies of enterprises.
BONE OF CONTENTION
The enterprise segment is set to become a new fighting ground for telecom players in a 5G era.
The telecom industry has strongly opposed this saying TRAI is dramatically altering the industry dynamics and hurting the financial health of the industry rather than improving it.
“This will kill the 5G business case in India. Telecom Service Providers have, and going forward, will invest lakhs of crore rupees in network rollouts. Enterprise services constitute 30-40% of the industry’s overall revenues. Private networks once again disincentivizes the telecom industry to invest in networks and continue paying high levies and taxes,” SP Kochhar, Director General, Cellular Operator Association of India (COAI) said. It represents all the three private telcos — Reliance Jio, Bharti Airtel and Vodafone Idea.
Trai Secretary V Raghunandan countered. “By allowing private networks, enterprises or factories can deploy access points, similar to Wi-Fi networks, and have already been told that the enterprises should not radiate outside. These recommendations allow captive networks to be set up which are already existing all over the world including India. This is no new thing. Enterprises can set up IoT devices and cameras and instead of wireline, can now connect wirelessly.”
Telcos are already doing this for their enterprise business customers and the regulator has allowed leasing of spectrum which so far was not allowed, he said.
Experts expect the enterprise business segment to grow once 5G is launched. “India’s enterprise sector is now maturing and the pandemic has accelerated the digital transformation of businesses. There are some broad enterprise needs and innovative use-cases that demand advanced connectivity of 5G. In the long run, we expect the enterprise segment to emerge as a new fighting ground for telcos in the 5G era,” says Charu Paliwal, Research Analyst at Counterpoint Research.
Different enterprises will have different needs and priorities depending on their business and company size. Small companies are more likely to rely on a public network operator while some of the largest enterprises are likely to own and manage the whole solution themselves, particularly if they have access to spectrum, Paliwal explained.
TV Ramachandran, President, Broadband India Forum (BIF) favored Trai’s suggestions, “Trai’s recommendations are balanced and practical, and address the interests of the TSPs, the enterprises, as well as the public, since more private networks would lead to more employment opportunities and business, and in turn, translate into greater economic output and benefits.”
Telcos’ claims that this move will impact their enterprise revenues by up to 40% have been dismissed by many.
Ramachandran says this number is an exaggeration and it is the need of the hour to allow enterprises to set up private networks following other countries.
“As the need for automation and remote operations accelerate, enterprises are expected to invest in private networks. MNOs are realizing that enterprise services represent a better revenue generation opportunity than consumer enhanced mobile broadband services. It will enable them to monetize their new 5G assets, particularly in the short term, “Paliwal said.
The industry needs to design 5G use-cases and applications relevant to Indian market conditions as what works in the western market may not necessarily work here. Adapting to regional conditions will help in faster adoption of 5G services.
“We can ill-afford to stay behind the rest of the world, and this is an opportunity for India to catch up on 5G through private networks,” Ramachandran said.