5G Aspirations and Realities

What the government can do for 5G and Digital India with a Systems Approach.

Shyam Ponappa    |    June 6, 2019

Ah, 5G! The very thought seems to excite so many. What is it? It is a mix of telecom technologies¹ delivering much higher data speeds on more extensive connectivity, using much lower power, with extended battery life, and emitting less radiation, for ways to connect and operate most of the conveniences people use regularly. From smartphones and computers for communications, study, work, research, entertainment, to other devices and machines, such as for managing utilities (electricity and water) at home and the workplace, refrigerators and cooking devices, industrial equipment, transport, and more, so that daily activities are eased considerably. The catch is that 5G is at an early stage in a long process — perhaps a couple of years to manifest in large trials in India, and several more years to be widely available, needing huge investment ($100 billion in India).

Yet, there are compelling reasons for developing India’s capabilities. There is the sheer necessity for India to partially meet its requirements, instead of relying entirely on imports. The big draw is the size of the Indian market and prospective demand, the global market, and the possibility of innovation at this early stage. Domestic capabilities are a prerequisite to afford deployment at a level that would otherwise exceed petroleum imports, with unsustainable effects on our balance of payments. Without domestic capacity, energy imports would limit electronics imports. (This highlights India’s need for solar power development, a separate and equally high priority.)

However, the sobering financial condition of India’s communications industry gives pause. Financial capacity — revenue generation and access to capital, both equity and debt at favourable terms — is required to develop capabilities. After the telecom price wars, even Reliance Jio is reportedly cutting staff. Airtel, meanwhile, having invested heavily in 4G infrastructure, has stated its unwillingness to bid for 5G pectrum unless prices are lower.

The government set up a committee for 5G in September 2017 with a steering group chaired by emeritus professor at Stanford Arogyaswami Paulraj, a pioneer in wireless communications. This committee recommended network deployment as the immediate priority, i.e., rolling out early, efficient and pervasive 5G networks. Technology design and manufacturing capacity were recommended for later phases.

Network deployment needs policy support driven by a Systems Approach, especially for a debt-encumbered sector faced with declining revenues per user, and unused, inaccessible spectrum, even as other countries enhance their lead. This is ironic, because India has real strengths in this sector and a large market, with the potential to catapult productivity and prospects. Yet, government policies have not succeeded in coordinating our reservoir of human resources and potential.

India lags in 5G despite the government’s stated interest in establishing a lead. Spectrum allocation and large trials were scheduled towards the end of 2019, and auctions in 2020. However, government statements this week target 5G trials by September, and auctions by the end of 2019. As spectrum band choices and allocations for trials have yet to be made, this appears overambitious without radical improvement in resolving many such issues.

Also, India’s reserve price for spectrum is seven times Korea’s. As sectoral cash flows are weak, there may be takers only at very low prices unless funding is from external sources as for Reliance. A monopolistic outcome would be undesirable in the public interest. Therefore, shared access with Wireless Resource Virtualisation and Network Function Virtualisation may be a much better solution for network deployment and market development.

Inexplicably, government and the public still view communications as a “government cash-cow” instead of as critical infrastructure, while complaining bitterly about poor delivery from low investment. It is obvious that exorbitant government charges (29-32 per cent of revenues plus corporate tax) crowd out investment. The government can change this, or give up on establishing a lead in communications and 5G. Worse, India will continue to lose out on leveraging communications for development.

Initiate a breakthrough - Apply Systems Thinking

The government can catalyse a breakthrough by doing the following:

a) Reduce borrowing costs and taxes for communications as infrastructure. This aim of the National Telecom Policy 2012 (NTP-2012) has been ignored.

b) Provide adequate spectrum aligned with global allocations. Given India’s low fibre penetration and need for digital technology, allow shared access to all spectrum and infrastructure, with charges for usage based on revenue sharing.

c) Clear administrative impasses through coordination and due process without delay. For example, allocate spectrum immediately for 12 months for trials.

Many countries have completed 5G spectrum assignments and are already deploying 5G. These include Korea, Switzerland, Finland, UK, USA, Canada, Australia, Germany, Russia, Italy, and Japan.²

There are nearly 300 5G deployments, as shown on an interactive map on Ookla’s site (Chart 1).

Chart 1: 5G Map – June 4, 2019

Source: https://www.speedtest.net/ookla-5g-map

In this context, Huawei’s role in India is contentious. One issue is of non-discriminatory trading terms, or fairness in competition.  If an entity such as Huawei achieves global dominance through government support, it competes on terms that cannot be matched because of cost of funds and scale advantages. Such entities can establish dominance in any country against competitors who do not enjoy similar support. Second, while Huawei may be doing nothing different from Nokia or Ericsson, the fact that it is supported by a neighbour with apparently hegemonic behaviour, China, suggests that dependence or entanglement are inadvisable.

To succeed with Digital India and 5G, government can begin by classifying communications as infrastructure, and adopting the approach taken for 5 GHz Wi-Fi.  Take pointers from the US FCC, ETSI, and so on; use spectrum and network sharing to leverage equipment and spectrum fully; support local technology champions such as a fabless chip design unit and a network equipment manufacturer in Bangalore, and a wireless equipment manufacturer in Delhi; and focus only on delivery with sustainable revenue generation.

---

Shyam dot Ponappa at gmail dot com

---

1: 5G technologies include Multi-User – MIMO (MU-MIMO) to improve reception, small cells for better performance and reduced radiation, WiGig and other high-speed wireless technologies, Software Defined Networks with Network Function Virtualisation, Wireless Resource Virtualisation, and a fibre backbone.

---

2: Page 8: https://img.lightreading.com/5g/downloads/webinar-breaking-the-wireless-barriers-to-mobilize-5g-nr-mmwave.pdf

Revamp Telecom Sector & Revive The Economy

Share infrastructure and spectrum, and adopt revenue-sharing for growth.

Shyam Ponappa   |   September 7, 2017

There’s little doubt our economy is facing a slough of problems, including misdirection and loss of momentum. Apart from the present government’s doings or omissions, other legacies have also contributed to this, such as the complacency of previous governments, the scams, the obduracy of the then Opposition, resulting in the attrition of parliamentary processes, and so on. This, followed by the persistently divisive approach of the incumbent government has effectively scuppered any possibility of convergent societal efforts. There’s no point attributing blame for the purposes of redeeming the situation. Instead, we must try to pick up the pieces.

Some things need doing, and urgently, but we (and especially our governments) seem to be avoiding them. Basic infrastructure is our most urgent need, apart from unifying leadership and social institutions. Certain systemic bases simply must be built and made available to organise and channel energies into constructive, productive activities and well-being, although it will be time-consuming and far from easy on our continental scale.  

In infrastructure, broadband can yield the quickest and highest rewards (e.g., http://organizing-india.blogspot.in/2010/10/broadband-for-education-training.html) by adopting policies that enable responsible access to existing resources, instead of continuing with self-imposed administrative restrictions. Everything else — energy, water and sewerage, and transportation — is more complex, and needs far more capital investment and organisation. What’s more, with good communications support, other infrastructure becomes easier to build and manage. On the face of it, the government seems to be addressing this. For example, an Inter-Ministerial Group (IMG) was formed three months ago to recommend solutions for the debt-laden telecom sector. Interim reports did not augur well, though, suggesting there was no need for major policy changes because of signs of recovery. Unfortunately, the IMG’s final recommendations are on the same lines: Deferring spectrum and licence fee payments from 10 years to 16 years, and reducing interest charges by about 2 per cent. However, there is no reduction in licence fees or spectrum charges nor easing of spectrum limits on consolidation; interconnection charges will be decided by the Telecom Regulatory Authority of India, and spectrum auctions will be after April 2018. But for an overleveraged, hypercompetitive sector, deferring the massive capital requirements for auctions by some months and other proposed measures doesn’t really change the game.  

Will this enable the telecom sector to recover? Many operators and observers think not, including yours truly. The reasons below leave one wondering whether the IMG made their recommendations with full knowledge, or were not fully cognizant of the realities.  

Why major changes are necessary  

There are compelling reasons for radical policy interventions. A report by Strategy& (formerly Booz and Company, now part of PwC) suggests that telecom operators in developing countries have negative margins on data services (see chart).

Source: https://www.strategyand.pwc.com/reports/connecting-the-world-media-report

This is significant for India (a) because we need considerable growth in networks and delivery, (b) that is affordable, (c) yet sustainable, i.e., generates positive cash flows.  

The reality is that the already troubled sector’s revenues fell steeply after Reliance Jio’s entry in 2016, and so did government revenues from licence and spectrum charges. Yet, having upended the sector’s finances, Jio paid only Rs 47.81 crore as licence fees and spectrum charges for the six months ending June 2017, or less than 1 per cent of total operator payments, since it had minimal revenues. By contrast, Bharti Airtel paid Rs 2,902.75 crore, Vodafone Rs 2,005.25 crore, and Idea Cellular Rs 1,677.67 crore. The sector is being severely weakened by this strategy as revenues and government collections collapse, resulting in deficient infrastructure.

While high government revenues alone are the wrong criterion for telecom policies, this shows how the sector’s finances were gutted, and the likely reality going forward. A recent report by Standard & Poor’s (S&P) expects revenues to fall up to 10 per cent for the year, with the sector settling down over 12-24 months. But that is merely one surmise; the certainty is of continuing damage to the market’s ability to sustain itself, as well as the reality of reduced operating revenues and government collections.  

These disruptive practices are hollowing out industry capacity, whereas the country’s need is for more capacity to be built for broader and better access, given under 300 million data subscribers. Adequate network access needs to be built up in underserved areas, and appropriate content and linkages have to be built for the full range of user needs covering education, health, and entertainment through government and commercial services.  

Only the government can develop appropriate policies and regulations, including levying no more than reasonable charges (high government charges have constrained India’s communications development). After the sector stalled in 1997-98, there was a partial remedy by the National Democratic Alliance through NTP-99, substituting a revenue-sharing arrangement for fees owed through auctions. The government’s share was initially too high, but as it was gradually reduced and as competition increased, mobile telephony grew explosively, as did government revenues (see: http://organizing-india.blogspot.in/2017/04/facts-not-beliefs-should-drive-policies.html).  

For a similar explosive surge in broadband economic revival, we need policy decisions urgently that:  

a) Adopt infrastructure sharing fully to reduce costs. Do this through two or three consortiums to have competition, with government entities anchoring each. For instance, 70 per cent of Sweden is covered by a shared network between Telenor and Hi3G, which is shared outside the major cities. For shared networks, equipment is readily available to support multiple operators; we need the enabling policies.  

b) Approach spectrum as a shared public resource. For assigned spectrum, allow licensed operators and manufacturers/developers secondary access (primary holder retains priority), at reasonable revenue-sharing charges, without up-front fees. Start with unused or under-used frequencies such as TV White Space. 

c) Allocate spectrum for Wi-Fi conforming to global standards to benefit from ecosystems, e.g., 5 GHz and 60 GHz.  

This will enable maximum utilisation of spectrum and networks for the common good, instead of artificially restricting access as is the practice today. We will all benefit greatly from better networks and services, and government revenues will exceed any conceivable auction fees.

---

Shyam (no-space) Ponappa at gmail dot com

A New Telecom Policy That Works

A sound NTP-2018 requires sustainable, integrated policies that address our realities.

  Shyam Ponappa   |  August 3, 2017

The government finally announced in July that a new telecom policy (NTP-2018) in consultation with stakeholders would be in place by March 2018.  There’s been some jockeying for one-up statements thereafter, suggesting the risk of being sidetracked. The need for competent, supportive policies in the public interest must be focussed and driven, and not be allowed to fall prey to being hijacked by bluster, nor be diverted towards maximising government revenues, crony interests, or electioneering tub-thumping.

A quick review of the sector and potential demand indicates what’s needed to fulfil our requirements. Telecom operators are saddled with Rs 4.6 lakh crore of high-interest debt. This has resulted from aggressive bids spurred on by spectrum auctions, aggravated by shrinking revenues and price wars. Meanwhile, urgent concurrent needs for network investment for greater reach and delivery, and for realising more of the potential for extensive and intensive usage, languish — for want of capital, enabling policies, and orderly markets. This has resulted in a crisis in what could have become the most successful communications market in the world. Instead, India’s communications sector is partly on the brink of collapse because of retrogressive policies and practices, unsustainable financial models, the fallout of scandal, and disruptive competition.

The best way forward is for all government agencies, not just the Department of Telecommunications, to define objectives jointly, and devise policies through consultations to enable an effective and robust sector. Here are suggestions for what to aim for and what to avoid in developing NTP-2018.

Objectives for NTP-2018

1. Networks: maximise capacity utilisation/throughput

Maximise the utilisation of networks by increasing throughput. This requires exploring alternative forms of organisation and management to exploit invested capital for public interest objectives, e.g., through consortiums, perhaps with government participation to ensure national security and the common good.  Orderly markets are essential in communications (as in all infrastructure), and competition, while essential, is not constructive beyond a point, unlike in fast-moving consumer goods or non-capital intensive sectors.

2. Spectrum allocation and management: Maximise throughput

Maximise wireless throughput to facilitate connectivity, by: a) Making more spectrum available, (b) In large, contiguous bands, (c) At less cost. Explore pooled usage and secondary sharing of spectrum by operators/consortiums as appropriate (consult with operators and experts).

3. Financial approach: Use revenue sharing

Use revenue sharing to compensate for spectrum and network rights, usage, and all government charges, as was done with licence fees in NTP-99.

Pitfalls to avoid

1. Palliative “default solutions”

It is easier to tinker with policies as they are than to undertake major systemic change. An easy way out would be to fall back on the received wisdom of competition and free markets, hoping to muddle through. For instance, the government set up an inter-ministerial group (IMG) to reduce financial stress in telecom. This group has apparently recommended extending payment schedules from 10 to 16 years, and cutting interest rates from 12 to 8 per cent.1 These sops could become the basis of NTP-2018, leaving the market to shake out, hoping consolidation will remedy inadequate coverage and delivery.2 This will merely reschedule operators’ payments over a longer period. The structural problems will remain, with insufficient network coverage, barriers to technology, less likely benefits from innovation such as “wireless fibre” and small cells with lower radiation, with hyper-competitiveness still a drag.

2.  Rely on consultations and avoid preconceived ideas

Statements such as that NTP-2018 will be app-directed and not connectivity-directed appear inappropriate or misinformed. This is because connectivity remains our most critical need for more effective delivery of services. Connectivity is deficient not only in rural and semi-urban areas, but even in dense urban areas. In fact, ignoring connectivity is typical of India’s approach to and failure in building networks and infrastructure (incomplete systems because of gaps, or with stranded assets, or that fail in end-to-end delivery). Simply put, our requirement is for more user-access and backhaul/networks to enable higher, more widely available access and throughput. This is India’s communications infrastructure need, whether it is broadband or Narrow Band Internet of Things (NB-IoT). Everything else follows.  Otherwise, it’s like trying to deliver more water without a network of pipelines, or more electricity without adequate distribution networks.

3. Anti-competitive disruption

While disruption is a reality in our communications sector, its jurisdiction has become contentious between the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI). The CCI reportedly asserted that the Competition Act of 2002 defines “predatory price”, “dominant position”, and “relevant markets”, which fall in its domain, and that it has applied this framework over the last eight years across sectors including telecom.3

Turf issues are not unique to India, and have been resolved in many countries.  Secretary General Pradeep Mehta of Consumer Unity & Trust Society (CUTS) points out that in 2011, a committee recommended amending the Competition Act to include mandatory consultation between the CCI and sector regulators where necessary.

A puzzling question if the telecom sector was in fact being monitored: Why was such disruption permitted? From press reports, it’s unclear whether there are no appropriate regulations, or whether the CCI’s and/or TRAI’s assessments of dominance and predatory pricing rely on precedents from developed economies without appropriate changes for our circumstances. To illustrate, consider the notion that market share is a key criterion for dominance, or Significant Market Power (European Commission).  However, in a developing economy, a large conglomerate investing in a new sector could have SMP even with zero market share, simply because of its size and resources, and economic power (attributes in Section 19(4) of The Competition Act). The European Commission also mentions privileged access to financial resources, economies of scale and scope, and barriers to entry. 

A sound NTP-2018 requires sustainable and integrated end-to-end policies for our realities, not academic or silo-based orthodoxies.

---

Shyam (no space) Ponappa at gmail dot com

1: “Govt panel for sops to ease financial stress in telecom sector”, BS, July 25, 2017:

http://www.business-standard.com/article/economy-policy/img-readies-sops-to-ease-telecom-stress-117072401632_1.html

2: “Short-term turbulence”, BS, July 29, 2017:

http://www.business-standard.com/article/economy-policy/short-term-turbulence-in-telecom-sector-117072900022_1.html

3. "CCI tells Trai to consult it on predatory pricing, market dominance issues", BS, July 28, 2017: 

http://www.business-standard.com/article/companies/pricing-market-dominance-its-remit-cci-tells-trai-117072800069_1.html

Cashlessness Needs Connectivity

... And connectivity needs political and administrative convergence.

Shyam Ponappa    |   January 5, 2017

This new year brings with it uncertainties amidst the push for cashlessness. Without going into the demerits or otherwise, some clarity on a road map to go forward from where we are might help with realistic planning to manage our way out of this situation.

Cashless transactions need ubiquitous connectivity, which we don’t have.  Without it, the goal is simply unfeasible. Better to recognise this now, rather than act out elaborate charades, resulting in avoidable economic hardship and social ructions.  Connectivity needs effective, efficient communication links at a reasonable cost. These call for realistic objectives and solid implementation, not bluster and unrealistic goals or plans, such as fibre-optic networks everywhere, payment systems on a hastily assembled database riddled with imposters, or insufficient security and privacy.

What’s required?

 

The need is for internet connectivity using fibre backbones, extending to users through aggregation networks that are mostly wireless. The chances of establishing these networks increase if political parties and government agencies take concerted action on how to do so. This is necessary for two reasons. One is that our present network development and spectrum policies do not facilitate achieving universal broadband, especially in areas with lower commercial potential than prosperous urban clusters. The second is the legacy of network development with entrenched rivalries and perceived ways of managing spectrum, and the aftermath of the spectrum scam.  These constrain society’s collective ability to configure solutions for connectivity, as opposed to the biased or limited perceptions of stakeholder groups such as the government, the judiciary, the citizenry, and industry (comprising service providers and equipment suppliers). Government agencies also have divergent agenda, e.g., the Telecom Regulatory Authority of India (Trai) is responsible for recommending spectrum use, the Department of Telecommunications/Ministry of Communications has licensing authority and runs the state-owned operators, the Ministry of Information and Broadcasting holds certain spectrum bands, the Ministry of Defence and government agencies hold other bands, and the Ministry of Electronics and Information Technology is responsible (without the authority) for providing broadband. Hence, the need for a convergent approach, as effected partially for electricity supply, from coal mining through transportation to distribution (although other sectors – hydel, hydrocarbons and nuclear – are yet to be similarly linked).

What needs doing
 

Radical changes such as pooling and sharing network infrastructure have to be considered for widespread connectivity. Such changes can’t happen with confrontation and mistrust, but only with trust and cooperation. This may seem naïve, but the ruling party leadership sets the tone for cooperation, as does the administrative leadership. Their pitch has to be sufficiently persuasive to induce diverse stakeholders – other political leaders, the judiciary, the citizenry who want industry to pay their pound of flesh while getting good services that are priced very low, and the operators, who have huge investments in networks and spectrum rights – to consider sharing equipment, and to work out worthwhile terms for everyone. 

Currently, contending political parties pursuing selfish objectives as antagonists settle at the lowest achievable equilibrium. To understand why, consider two parties, A and B, with objectives along the horizontal X axis for A and the vertical Y axis for B in the chart. 

When parties pursue conflicting interests confrontationally, they end up at N or Nash Equilibrium, where neither can improve their position without the other’s concurrence.  Assume A has the objective of maximising a majoritarian agenda, while B seeks to maximise dynastic control of its leadership positions. This holds for any objectives that are unrelated (orthogonal). If their objectives are along the same dimension — say, control of the Centre or of the same states, there can be no accommodation: one wins what the other loses. This has happened so far, as parties are periodically voted in and then out by a disenchanted electorate. But if they accommodate, their equilibrium could move up to S, the “Best Feasible Equilibrium” point, where the acceptable limits of their respective objectives meet. (For more details, see: “Tata’s Corus Buy: A Game Theory Analysis”, organizing-india.blogspot.in, November 2, 2006, and "India’s Access To Nuclear Fuel & Technology", April 3, ) 

2008.)

Imagine waking up to find that instead of the usual confrontation and vitriol, a different and gracious protocol awaits you. One of harmonious interaction marked by accommodation and courtesy, despite nature being red in tooth and claw. Utopian?  Perhaps. But not if the powers that be realise that the way out of the cashless crisis is to seek benefits for everyone, instead of self-destructing by chasing chimera such as pure cashlessness or other unrealistic goals.  Instead, they could give people what they need but don’t have: ubiquitous communications  infrastructure that facilitates all activities (not just cashless transactions), and a more secure, well-ordered environment for pursuing their livelihoods and well-being. Policy decisions to share network infrastructure would be the start of this journey.

We can then break out of the impasse created by legacy communications policies and posturing, e.g., which party was responsible for what scam, the popular obsession with high auction prices for spectrum while wanting cheaper services, and operators committed to cornering spectrum.

Once the leadership collaborates, they’ll find that communications services delivery will be much improved by sharing capacity and coordination. This would enable other stakeholders – private sector operators, the citizenry, the judiciary – to accept that everyone gains from cooperative access to and delivery of communications services, provided adequate profits are generated and shared equitably. This will help in accepting a more rational, pay-for-use policy on the lines of highways, metro rail, or oil pipeline usage, and recognise the financial infeasibility of having auctions as well as funds for investments in networks for countrywide broadband access.

Government and stakeholders can then work together to develop solutions that are fair and practical. For instance, one or more consortium/s of operators with the government as a co-investor in each (on the lines of Singapore’s OpenNet) can co-own the network and coordinate for most effective and efficient service delivery.  Earnings from spectrum usage can be collected by the government once the networks are commercially viable, as for developing any other infrastructure. Such collections are likely to exceed the auction fees foregone, as with revenue sharing from licence fees.

---

                                                               Shyam Ponappa at gmail dot com

Digital India Needs These Policy Changes

Appropriate policies will increase connectivity much more than spectrum auctions.

Shyam Ponappa    |    September 1, 2016

There's a "List of 10 Things" for realising India's potential that Prime Minister Narendra Modi received as the chief minister of Gujarat from Jim O'Neill, the originator of the "BRIC" concept. Many items on that list are greatly facilitated by information and communications technology (ICT): effective governance; primary, secondary, and tertiary education; improved infrastructure; and sustainable approaches that minimise negative environmental impact. While there's agreement on ICT's importance for India, there's difficulty getting it in place to best effect. This is because policy changes are needed to make Digital India a reality. These are the kinds of decisions that will turn the rhetoric about connectivity into reality.

Some changes are relatively easy, such as enabling 60 GHz Wi-Fi, while others require more effort, as explained below. These include better terms for satellite communications, enabling broadband on the 500-600 MHz bands, and spectrum and network sharing.

In our land of such range and contradictions, so much needs improvement that everything clamours for immediate attention. Attempts to address them all together are misplaced, however, because achieving results requires goal orientation, prioritisation and systematic action, to direct a convergent investment of time, effort and capital. Also, projects must be done with the realisation that the acid test is end-to-end delivery, even if it is initially to a small segment of the market. Only then can the rest of the iceberg be addressed: consistent, ongoing operation and maintenance, and scaling up. Think of the years of effort, capital and human resources invested without that first delivery in the National Optic Fibre Network. While defining objectives appropriately and setting priorities are difficult, both are imperative.

A recent report on The Networked Society City Index for 2016 by Ericsson reaffirms ICT's critical role in productivity and living standards.1 The report also shows that better-developed cities are on more sustainable paths to the goal of the desirable triple bottom line (TBL) of social, economic and environmental betterment. ICT facilitates not only sustainable development of cities and often their surroundings, but extends through the networked society far beyond their geographical environs. Even our metros need attention, with Mumbai and Delhi ranking at 36 and 38 out of 41.

The Wireless Imperative

Efforts at setting up Digital India have to contend with the reality that most non-urban communications have to be wireless, as does a significant proportion of urban access. This is because the cost and practical difficulties in laying and maintaining fibre everywhere is far greater than building wireless networks. The accompanying chart, showing the spread of broadband in India at the end of March 2016, illustrates this point.




The clusters are around major cities, with broadband penetration in Delhi/NCR highest at 58.2 per cent. Except along their major connecting links, the spaces between clusters are more difficult to connect and aggregate, as habitations are not densely clustered. Also, potential revenues are generally lower in less dense areas. Such areas urgently need lower-cost wireless coverage.
 
Policy Changes Required - from Easy to Difficult

Of the many constraints to building more accessible ICT in India, a major set lies within the control of government and stakeholders, provided they act together and are not adversarial about policies governing access technologies:

• There are unused frequencies in the 60 GHz band for which inexpensive equipment is available abroad with a capacity of several gigabits. Press reports years ago mentioned the de-licensing of this band in India. Last November, the Telecom Regulatory Authority of India (TRAI) recommended de-licensing Wi-Fi use, and light licensing backhaul with minimal charges. Yet, this asset is wasted because there's no policy permitting its use. It costs nothing to de-license in line with global norms. Apart from additional Wi-Fi capacity, service providers could use it for backhaul from small cells. Revenues are likely to rise, and the government would collect increased taxes. Domestic manufacturers could possibly develop products for what should be a huge market.
   
• Another proven technology is satellite communications. This is priced too high in India, as explained in "Satellite communications can drive the broadband revolution", Business Standard, 23 April 2016.2 Satcom tariffs are apparently nearly 300 times higher than in the US, while private sector applications for manufacturing satellites are languishing. Also, there is considerable potential for manufacturing associated equipment, such as VSATs, end-user terminals, and so on.
   
• A third area is unused or underutilised government spectrum. The most-useful and least-controversial, except for turf considerations, is unused broadcast spectrum in the sub-700 MHz bands. Government departments, namely, the Department of Telecommunications (DoT), the Ministry of Information and Broadcasting (I&B), the Department of Electronics and Information Technology (DeitY, now the Ministry of ... or MeitY), and the TRAI, could coordinate their approach, so that I&B and Doordarshan retain the spectrum, while allowing common access to shared spectrum and infrastructure for paid use by service providers. Doordarshan could increase its reach by providing programming and content over these links.
  These frequencies would be most effective in extending rural broadband, because of the distances that could be covered inexpensively. There is an issue with equipment, as there are no large, established markets anywhere yet for TV White Space devices, and there is insufficient support for local manufacturing even with Indian intellectual property rights. In fact, we have a Catch-22 situation here: such devices are likely to have massive deployment in India, but we don't have policies that allow these frequencies for broadband. The irony is that developers who manufacture prototypes in India have no access to spectrum even for testing their products, and will have to rely on markets abroad for testing as well as sales.
  
  
  Other Frequencies

•          Rules restricting usage of other frequencies could also be amended through a coordinated process.  The result could be policies that treat spectrum usage as part of a shared infrastructure solution for Digital India.  Using a shared access for payment approach with secondary sharing, primary holders of spectrum can retain usage rights, while government revenues accrue from swathes of spectrum that now remain unused, and holders of spectrum earn from common access.

---

Shyam (no space) Ponappa at gmail dot com


1. "Networked Society City Index 2016", www.ericsson.com
2. T V Ramachandran. "Satellite communication can drive the broadband revolution", Business Standard, 23 April 2016

More On Those Dropped Calls

A basic problem is that the cost of spectrum and licences relative to earnings is too high, structurally.

Shyam Ponappa   |  September 3, 2015

Will the government's variant of "speak softly and carry a big stick" deliver Digital India in a hurry? Unlikely, because the problem is an overloaded system with a too-spare design, and insufficient cash flows. Increasing call drops are a symptom of inadequate carrying capacity for the demands of traffic, from voice to data in 3G and 4G. These are structural problems, because the system doesn't generate sufficient investible funds; nor are conditions right to develop such investment capacity; nor are the prospects demonstrably healthy. The situation requires the policy changes outlined below, which only the government can bring about, as it has in the past.

A fundamental aspect of the problem is low spectrum availability. India's operators have 12-15 MHz, compared with a global average of 45-50 MHz. Leading countries have even more; for instance, operators in Seoul reportedly have 10 times more spectrum than operators in India. Limiting the spectrum available to operators compels them to invest more to deliver a given level of traffic and quality than if more spectrum were available.

There are other aspects as well:

• high charges for licences and for spectrum, 8+4 per cent of (adjusted) revenues in addition to auction payments,
   
• imported equipment paid for with a weak stream of local-currency revenues,
   
• changes in spectrum holdings that require adjustment in equipment after older spectrum assignments lapse and new spectrum has been acquired, and
   
• the burgeoning need for new investments for 3G and 4G services. Embedded in the latter is the additional overload caused by tower shut-downs and the difficulties in getting additional sites, apart from the need for more capital.

Add regulations that hinder spectrum trading and sharing, and we have a sector that is structurally weak and restricted in scope.

As for call drops, operators in developed markets experienced similar capacity pressures when there was very rapid growth in data usage, for instance AT&T in the US and O2 in the UK some years ago. The difference is that they were able to invest rapidly to shore up their networks. By contrast, Indian operators had to invest disproportionately in acquiring spectrum, leaving less capacity for investment in networks. For example, in 2014 operators in China reportedly invested $35 billion in 4G equipment, whereas in India, only $3 billion went into equipment. Most of its $32-billion investment - $29 billion, over 90 per cent - was for spectrum. There has also been the diversionary effect because difficult business conditions in the sector led to profits being invested elsewhere, instead of back into communications infrastructure. The difference in approach and functional capacity is stark: China is moving ahead with building high-speed data capability, while the struggle in India is with dropped calls and simply keeping users connected. The government, therefore, needs to facilitate conditions whereby operators invest substantial amounts every year.

For this to happen, the structure of high charges for spectrum and licences relative to earnings has to change, as do restrictive regulations. The monthly average revenue per user in India at the end of 2014 was of the order of Rs 110-120. Capital expenditure ranged from 13 to 15 per cent of revenues in 2014, rising to 20 per cent in 2015. The latter exceeds the percentage invested in the US - but the revenue in India is about 25 times less than the $50 revenue in America, and the US has had well-developed networks for decades. Meanwhile, the recent spectrum-sharing guidelines that restrict more than enable effective sharing epitomise our dysfunctional regulations.1  It is baffling why the government would issue such retrograde regulation if the goal is digital development, because these guidelines do exactly the opposite of what is needed.

Government versus Private Sector

Meanwhile, there has been an escalating war of words between the government and service providers. The latter are trapped in a vicious circle of heavy investment requirement with low revenue-generation capacity, as explained above. Breaking out of this trap is possible only if the government develops conducive policies, as it did with the path-breaking changes associated with the 1999 New Telecom Policy (NTP-99). The change at that time was from up-front licence fees to revenue-sharing. It fell short because the government's share was too high, and began to work only after 2003, when government charges were reduced. In like manner, the government needs to frame policies applying similar principles to spectrum, and ultimately to network infrastructure, so spectrum and networks become more productive.

Our problems arise from three sources: regulations and government charges, operator behaviour and responses, and public opinion and the perceptions and actions of the judiciary. The government can take the initiative through creating policies that facilitate investment and service delivery. Many changes are purely administrative, such as permitting unrestricted spectrum sharing without additional "conversion" charges, or reducing licence and spectrum charges. Surely the department of telecommunications, the finance ministry, and the prime minister's office understand the logic of higher net present values that accrue from incremental revenues to operators. Conversely, any restriction of revenues or opportunity loss reduces the government's share, resulting in lower net present values. For example, restricting 3G roaming or insisting on payments to convert administered spectrum before it can be shared limit revenues, resulting in opportunity losses.

The government needs to be persuasive while acting decisively, to influence operators and public opinion through well-formulated systematic initiatives. Tighter monitoring of quality, including dropped calls, and related penalties are needed - but balanced with constructive policies. These could cover enabling regulations such as for roaming and secondary spectrum sharing with the government, and in developing a consortium approach for active network sharing initiated by the government with broad private participation, led by a private-sector partner. Other potential areas include enabling, organising, and facilitating broadband through cable networks, and inducting technologies such as TV White Space and satellites.

This is where the rhetoric of leading Team India has to be walked and not just talked, to persuade and lead the sector to collaborate and not undercut institutional development.

---

Shyam no-space Ponappa at gmail dot com

1 E.g., see https://www.linkedin.com/pulse/sharing-spectrum-operators-steeplechase-parag-kar

Comments

JAHAR

The huge bids while acquiring spectrum at the auctions held recently were bound to impact operator's short run cash flow and investment capability. This in turn impacts network management and up-gradation at least in the short run. No amount of dictats will change this

ASHOK

Would it be over dramartic to say that call drops are the gasps of an industry that is drowning in something other than windfall profits ! Indian businessmen are not saints, true, but they need a more sympathetic hearing in the government's court. If the Savile Row types are in distress, what will happen to the rest of us ?

MANOJ

Nice article, and good points about institutionalizing, not just doing jugaad. However, the point about equipment is not valid, falling capacity costs are the main reason telecoms are able to deliver such good service in India. (not customer support). Call drops are far lower in India than many far richer countries in the world. Some leading operators in UK & US both have much higher incidences of call drops. Instead of absolutism, the government should link the maximum charges leviable by the operator to Quality of Service, and let the operators decide how they are going to distribute their services.