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    HomeBusinessWrong call by telcos: Telecom firms are being protectionist in opposing private...

    Wrong call by telcos: Telecom firms are being protectionist in opposing private 5G networks

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    The current debate—whether private enterprises should be allowed to build their own 5G networks or should depend on telcos—is quite similar to our hypothetical.

    India’s decision to end the monopoly of state-owned Videsh Sanchar Nigam Ltd (VSNL) over international long-distance traffic in 2002 enabled private telecom operators (telcos) to capture the market, quite normal in an open, liberal economy. Around the same time, the then government ended the state monopoly over carrying domestic long-distance traffic and opened this market to private players who made the most of the move. Suppose, at that time, VSNL and Bharat Sanchar Nigam Limited had said that these sectors should not be opened up because they would end up losing substantial revenue; what would have been the stand of private telcos?

    The current debate—whether private enterprises should be allowed to build their own 5G networks or should depend on telcos—is quite similar to our hypothetical. The only difference is that after reaping the dividends of liberalisation, the telcos have turned protectionist because the winds of change have reached their backyards. Private networks enable enterprises to set up their data networks for captive purposes instead of taking these services from the telcos, as is the norm today. However, for external communication, they still need to use the latter’s services.

    Telcos are opposing this opening up of technology, possible under 5G, because its use-cases involve machine-to-machine talks, automation, etc, which are not possible under 4G. They maintain that if big companies are allocated spectrum and allowed to set up their networks, a major source of their future revenue stream would be hit, and it won’t make sense for them to invest in 5G spectrum. In short, enterprises must have their networks built by telcos only. To appear neutral, the telecom operators have said that if enterprises want to build their own networks, they must buy spectrum through auctions, ensuring a level playing field and no revenue loss for the Centre.

    The argument is bereft of logic as it compares apples with oranges. Telcos buy spectrum through auctions to provide public services and earn revenue. Enterprises need spectrum for their captive purposes to enhance business efficiency. So, the same principle cannot be applied to both segments. Further, it is nobody’s case that enterprises should be given spectrum for free. The Centre must come out with a pricing structure for such spectrum and charge enterprises licence fees and spectrum usage charge. The telcos have also misrepresented the case of their business loss by stating that the enterprise business accounts for around 40% of revenues. The fact is, of the three operators, only Bharti Airtel’s enterprise revenues is between 17-20%, with the other two having very meagre contribution from this segment.

    Telcos are doing what businesses do—protect their turf. It is the government that is more at fault. On its part, the Telecom Regulatory Authority of India did an excellent job by providing all the options—enterprises can take spectrum directly from the government, on lease from the telecom operators to build their own networks, or get the networks built by the operators. It is the Digital Communications Commission (DCC) that, in its wisdom, omitted the option of direct allocation by the Centre. This is delaying the finalisation of guidelines for 5G spectrum auctions as both sides are lobbying hard; as a result, the Cabinet is still to take up the matter. By siding with the telcos, the DCC is protecting its constituency. But this body has metamorphosed from being a telecom commission to a digital commission—one hoped this change would reflect in its deeds also rather than only in words.

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