NEW DELHI: As telcos went to work with the government to prevent the entry of technology companies, the Adani Group shocked everyone by announcing its participation in the auctions with a focus on acquiring 5G spectrum for private networks.
5G private networks could be the next disruption in Indian telecom industry after entering Trust Jio in 2016, reducing the sector to just three private players.
With the 5G spectrum auction starting from Tuesday, corporate networks will be of major importance to the telecom industry once 5G services are rolled out.
Private networks have the potential to unleash the potential for operational transformation, automation and efficiency for enterprises. And if companies set up their own infrastructure for captive 5G networksthey can control much of the cost beyond adapting their networks to changing needs, according to experts.
A private network is a local area network that uses mobile technologies to create a dedicated network with unified connectivity to a specific geographic area. It is intended for non-public use, especially for large production complexes, enterprises, etc.
“In the first three years of 5G, it (private networks) will not have a major impact on telcos’ business revenues, as 5G itself needs to be stabilized. You need use cases on 5G to be operational. Telcos need to partner with enterprises to make some of these practices truly compelling and recoup their investment,” said Purushothaman KG, Partner, KPMG India.
However, the problem has led to a clash of titans with telecom players who are fighting hard to defend their territory against the arrival of major tech players. While the government has allowed companies to acquire spectrum for internal use, talks from both sides are still ongoing.
INDIA—PRIVATE 5G NETWORKS
India follows global practices in this area by allowing companies to acquire spectrum for a nominal fee to set up their own captive 5G networks. The Department of Telecom (DoT) has already allowed this and process and pricing guidelines will be introduced soon.
It can take anywhere from 12-24 months to generate ROI after the use cases are implemented. “It will take at least three years to even see the impact of all this on the bottom line. It is a superior technology, more and more compelling use case examples will be implemented in every industry. At the macro level, some of these will definitely have a positive impact,” said Purushothaman.
Airtel recently announced the successful trial of India’s first 5G private network at its Bosch Automotive Electronics India (RBAI) facility in Bengaluru. Airtel’s on-premise 5G Captive Private Network is built over the pilot 5G spectrum allocated by the Department of Telecom (DoT).
Charu Paliwal, Research Analyst, Counterpoint Research says the business segment will emerge as a new battleground for telcos in the 5G world. “Operators need to create 5G business use cases and will likely master that layer with network-as-a-service through turnkey solutions.”
According to a report by Acumen Research and Consulting, the size of the global private 5G network market is estimated to grow at a CAGR of more than 42.4% over the forecast period and reach a market value of approximately $31,589 million by 2030. the internet of things (IoT) and connected assets is driving an increasing number of companies to explore the opportunities that private 5G networks can offer.
Enterprises contribute about 40% of the industry’s revenue, according to telcos claims, and allow private network space companies to compromise their business potential, for which they will invest huge sums in setting up networks.
But tech companies say private 5G networks will lead to increased productivity for enterprises and better revenues for telecom service providers, dismissing speculation that it will lead to loss of revenue for operators.
The Adani Group, which will participate in the 5G spectrum auction, has emphasized that it does not intend to enter the consumer mobility space, but only to focus on 5G private networks. “As we build our own digital platform encompassing super apps, edge data centers and industrial command and control centers, we need ultra-high quality data streaming capabilities over a high-frequency, low-latency 5G network,” the Group had said.
As telcos through Cellular Operators Association of India (COAI) fight against tech companies entering this space, they praised Adani Group’s move to participate in the auction, saying the right way is for companies to participate and acquire spectrum. in the auction. “The spectrum should not be offered on an administrative basis, as this does not provide a business case for the roll-out of 5G networks in the country. If the independent entities set up private captive networks with direct allocation of 5G spectrum by DoT, it will reduce revenues so much that there will be no viable business case for the telecom service providers (TSPs) and there will be no need for 5G rollouts. of networks by TSPs,” COAI had said.
TV Ramachandran, president of Broadband India Forum (BIF), says the level of digitization and automation enabled by a captive 5G network best suited to the enterprise environment would best enable India to utilize the available geopolitical take advantage.
Globally, there are approximately 55 countries/territories with private network deployments based on LTE/5G or where 5G-enabled private network spectrum licenses have been assigned. In addition, there are private mobile network installations in several offshore locations serving the oil and gas industry, as well as on ships, according to a report from GSA.
GLOBAL 5G PRIVATE NETWORKS
German firms such as Bosch, Volkswagen, KUKA, Lufthansa Technik etc. have set up their own private networks by acquiring licenses directly from the regulator and without any auction.
In the Netherlands, ports are already privately using the 3.7GHz spectrum band for LTE networks to control cranes and AGVs, as well as low-level LTE-based tracking, according to information from Counterpoint Research.
In the US, 150 MHz of Citizens Broadband Radio Service (CBRS) spectrum in the 3.5 GHz band was auctioned in the year 2020. Previously, there was relatively little traction around 5G demand from the industries and business segments, but we see CBRS as a catalyst for private networks in the US market. Organizations such as Utah Inland Port Authority (UIPA), Chicago O’Hare International Airport (ORD) etc. have deployed private networks using the CBRS spectrum, and several network trials of CBRS are underway.
Worldwide, Germany has reserved 100 MHz in the 3.7-3.8 GHz band for private companies and opened the 26 GHz band last year. Until mid-March 2022, the German regulator BNetza has awarded 201 spectrum licenses for private 5G networks in the 3.7-3.8 GHz band and 10 in the 26 GHz band. Spain has approved the plan to reserve 20 MHz in the 2300-2400MHz range for private corporate networks.
Likewise, there are several other markets to set aside spectrum for private licenses. According to information from Counterpoint Research, there are hundreds of companies in manufacturing, mining, ports, education, the public sector and several other verticals that have implemented or tested private networks.
ADVANTAGE COSTS FOR TECH COS
Deploying private networks will not only help with operational control and flexibility, but also save costs for enterprises, as well as security needs and operational efficiency of an enterprise which will be key. Private networks will create a secure business and mission-critical communications environment needed in sectors such as healthcare, military and emergency services, experts say.
The key factor here is not only the cost savings, but also the level and quality of efficiency and output increases that enterprises achieve when they are allowed to design their networks according to their specific business needs. “Captive use of private networks is not driven by revenue or financial motives, but by the need to increase and improve productivity to help enterprises survive and grow in today’s highly competitive and aggressive global market,” Ramachandran said.
“There is significant savings in hardware costs, especially when deploying wide area networks. Another factor is the costs involved in managing and maintaining large amounts of data. Enterprises can reduce these costs as private networks can be adapted to process and store this data on-site. The savings will vary from company to company and in many cases deploying private networks seems more expensive than Wi-Fi,” said Paliwal.
But enterprises need to understand the business rationale related to investments and identify appropriate use cases to achieve positive returns within 2-3 years. Solutions such as private network-as-a-service make it financially easy to understand with no upfront infrastructure costs and no requirement for customers’ IT teams to train on complex solutions, she said.
Enterprises also want to create a personalized and immersive experience within their own data and manage much of the ecosystem around communication networks. The way the 5G infrastructure has been created with software and open brand architecture will make it very possible for private network players to own that part of the spectrum and control that cost.
In the past, companies were heavily dependent on telecom operators. “It’s not that the telecom operators didn’t provide the services, they provided it at a certain price and with certain types of equipment. As organizations and the infrastructure evolve, most want to own their entire ecosystem and then outsource it as needed,” said Purushothaman.
It is also critical that enterprises have the freedom to choose who sets up their captive private networks, based on their specialized and highly customized requirements. “They should not be limited in the choice of parties that can meet their requirements. The full spectrum of infrastructure providers, aggregators and TSPs should be available to them to make the optimal, cost-effective choice,” Ramachandran added.
Giving companies space in private networks will not wipe out business revenues for telecom players. You’ll have some big corporate clients moving and creating their own infrastructure, which is a loss of revenue, but it won’t wipe out the huge opportunities in the corporate business for the telcos, noted another analyst.