The August 1 spectrum auction has been a highly-successful one, from the perspective of the government, the service providers, and, most importantly, from the telecom consumer’s perspective.
The government was able to generate significant revenues in excess of Rs 1.5 trillion, service providers were able to acquire spectrum in line their internal budgets (and strategies), and for the most part without bidding too much higher than the reserve prices, all of which means that the consumer will have access to world-class 5G services in the near future, and that too at affordable rates.
There was one particular outcome from this auction, related to Reliance Jio acquiring the 700 Mhz band, in addition to C-band (and other bands), which might have come as a little bit of a surprise to certain quarters — not to those who know and understand the logic and the business case associated with the 700 Mhz acquisition strategy of Jio. Let’s look into that a bit in detail.
Acquiring the 700 Mhz band along with C-band gives Reliance Jio an advantage vis-à-vis service providers who have acquired only the C-band. Given the limited amount of sub-Ghz spectrum currently available with Indian operators (across the 800 Mhz and 900 Mhz band), along with the fact that the sub-Ghz bands are currently deployed for 4G/2G services, and that 4G (and 2G, to a lesser extent) will continue to be mainstream technology for the foreseeable future, acquiring 700 Mhz became the only option for any service provider to reap the benefits of a sub-Ghz band on its 5G rollout. This move will deliver a significant revenue/market share, and cost-related benefits for Reliance Jio when compared to other service providers.
Given this background, here are five benefits Reliance Jio will enjoy over its competitors:
Higher Market Share: Improved market share in the mobile services market due to better indoor signal penetration in urban and dense-urban geographies (such as Delhi, Mumbai, Kolkata circles, and large and densely-populated cities such as Chennai, Bangalore, Pune, etc. in other circles).
Our work suggests that all other things being equal, in India, an operator having the sub-Ghz (700 Mhz) spectrum in its 5G layer, can gain between 200-300 basis points (2-3 percent) of total subscriber market, and a much higher number (>10 percent market share gain) in the 5G-only segment of the market, over other service providers who do not have a sub-Ghz layer in their 5G rollout.
Better Customer Experience: All else being equal, a combination of 700 Mhz and C-band in Carrier Aggregation (CA) configuration, delivers around a 10 percent higher throughput when compared to C-band on its own. The higher throughput is analogous with better customer experience, which in turn leads to improved market share in the 5G segment. This benefit will be reaped uniformly across both urban/dense-urban, and rural geographies within India.
Standalone Advantage: From a slightly more medium-term perspective, once 5G is upgraded to its Standalone (SA) version in two-three years’ time, having a dedicated 700 Mhz layer for 5G will help deliver significantly better experience on the enterprise use-cases that SA 5G will deliver. Initial research suggests a market share gain of up to 5 percent in the 5G enterprise use case market.
Cost Optimisation: Having a readily deployable sub-Ghz band in the form of 700 Mhz (in addition to C-band), will provide a much more cost-optimal option that would help significantly reduce coverage site requirements in rural areas. Assuming a similar population coverage of ~90 percent in both scenarios (700+C-band, and only C-band), the 700+C-band scenario will require 40-50 percent less coverage sites over the C-band-only scenario.
No Upgrade Cost: Having 700 Mhz band from the get-go, will help avoid Radio Access Network (RAN) upgrade costs at the time of upgrade from Non-Standalone (NSA) to SA in two-three years’ time.
In aggregate, across the revenue and cost benefits, 700 Mhz band acquisition (in combination with C-band, and verses a scenario where only C-band is acquired) delivers significant benefits, which far outweigh the cost associated with 700 Mhz band acquisition.
Finally, let’s also touch upon the benefits that acquiring mm-wave band will yield for all participating service providers. In addition to lowering the overall spectrum usage charge (SUC) costs (for the incumbent operators), the mm-wave band will deliver the following benefits:
- In the near term (next two-three years), it will help provide a significant capacity layer in high-traffic hotspots such as railway stations, stadiums, etc.
- In the near term, it will help drive exceptional user experience for 5G use cases such as streaming and cloud-gaming in the enhanced Mobile Broadband (e-Mbb) category, and also serve as a potential band for fixed wireless access (FWA) deployment in locations where the economics of fibre rollout do not make sense.
- In the longer term, mm-Wave will be an indispensable band for delivering ultra-low latency (URLLC) and Massive Machine Type (mMTC) use cases on a SA 5G configuration. These two use case categories are expected to constitute 5-10 percent of overall revenues 5-7 years out, and a much higher proportion of the overall revenues 10 years out.
All these points prove that the 5G spectrum auction has been a highly successful one where everyone—the government, the service providers, and the consumer—stands to benefit.
Rohan Dhamija is Manging Partner, Analysys Mason. Views are personal, and do not represent the stand of this publication.
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