In today's Finshots we see why telecom companies aren't particularly fond of private 5G networks
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The Story
5G is going to be here anytime soon. The Department of Telecommunications expects 5G services to be rolled out across the country by March of next year, and 13 cities — Ahmedabad, Bengaluru, Chandigarh, Chennai, Delhi, Gandhinagar, Gurugram, Hyderabad, Jamnagar, Kolkata, Lucknow, Mumbai and Pune will get 5G services on a priority. But there is one thing that has been bothering the telecom companies. It’s the fact the government has allowed private tech companies to set up their own private 5G networks.
What?
What are private 5G networks?
Well, let’s start from the top. As India transitions from 4G to 5G the expectation is that consumers will be able to access better speeds and more reliable connections if they make the switch. They’ll also be able to leverage tech in a way that seems almost futuristic.
Like a world where machines can talk. Not just talk but negotiate with each other as we do on a daily basis. Your smartwatch keeps track of your blood pressure and heart rate to then inform your personal doctor in the off chance there are anomalies. You enter the kitchen to make yourself breakfast and find out that you’ve used up all the milk. But don’t worry, your refrigerator has got you covered. It has already made a purchase order based on your eating habits and your driverless car is just about to pick up the produce from your grocer.
5G can enable all this. And while this is great for consumers as is, it is particularly useful for large organizations. Think about it — Right now, your organization probably relies on Wi-Fi to keep you connected to the internet. But connections can sometimes be patchy and internet downtimes can cripple the whole organization. However, if it’s built on top of a mobile network, say 5G, you could make things a lot more efficient.
The only problem — Public networks are also unreliable. Haven’t we all had an experience with connectivity issues because the network is packed? So if you could somehow allow companies to operate their own 5G network over a certain geographical area (not available to the public) you could solve a lot of their problems.
Okay, so the benefits are clear? But how does one build a private 5G network? Isn’t that like a logistical nightmare?
Well, it is. To run your own private 5G network, you must first buy spectrum from the government — license the frequencies at which you can operate, obtain 5G equipment — base stations, mini towers, all that stuff, configure the various edge devices — routers, gateways, etc to enable communication and then customize it to suit your business needs. Needless to say, it’s both operationally intensive and ridiculously expensive.
So it’s unlikely that each private organization is going to set up their network from scratch. But if the government allows it, they could simply license the spectrum from the government (By filling out an application and paying the required fee) and then use a managed service provider to do all the heavy lifting. The managed service providers could then help businesses plan, design, deploy and maintain private 5G networks. For instance, Google just announced its own solution just a few days ago, explaining how enterprises can now use their offering to build private 5G networks. The likes of Cisco and Ericsson have also been at this game. And companies in China have already been experimenting with private 5G networks for over a year now.
The point is — Private 5G networks will allow companies to bypass telecom companies altogether. And for telcos, this is a massive problem.
For starters, they know that the 5G use case is most obvious in the enterprise setting. Right now, consumers aren’t clamouring for their washing machines to talk to the internet. Instead, it’s companies like TCS looking to build failsafe networks that will help their teams to interface smoothly. Second, enterprise services constitute 30–40% of the industry’s overall revenues. And telecom companies depend quite heavily on this money. If a small chunk of this pie vanishes from their projections, it’s going to deeply affect their bottom line. In fact, they’ve gone ahead and said that allowing private 5G networks could affect the rollout of 5G network in India.
The claim being — “If you won’t let us make money off of 5G enterprise solutions, then we will have to cut down on our investments, which could then delay the 5G rollout alongside it. Do we want that happening? Huh?”
The Department of Telecommunications however doesn’t seem too keen on ceding to telecom companies’ demand. They likely believe that this will foster more innovation and perhaps even birth an entire parallel industry. Also, private 5G networks are all the rage in many countries already and maybe India doesn’t want to be left behind.
So yeah for now it seems the government is intent on pushing for private 5G networks. However we will still have to wait and see how they’ll actually enable licensing (at scale).
Until then…
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