The fifth generation of wireless connectivity (5G) promises a 50-fold improvement in data speed over what a large majority of us use today. The future is ‘networked’. Long-anticipated opportunities from the Internet such as immersive gaming, augmented-reality product experience, virtual shopping aisles, adoption of self-driving cars and remote robotic precision surgeries will become a reality. The common thread binding this disparate list is their dependency on 5G’s promise of low latency Internet and network of connected devices that will make the ‘Internet of Things’ (IoT) mainstream.
Telstra in Australia, and NTT and Rakuten in Japan, and several other telcos were cumulatively spending upwards of $150 billion-plus a year in upgrading their networks towards 5G. Reliance Industries Limited’s Jio has joined that club with a significant stack of offerings planned to ride on it. The intensity of play and participation in undertaking the shift differs — from a largely passive wait-and-watch approach among the European Union’s 100-plus operators to huge investments by the troika of Verizon, AT&T and T-Mobile in the United States.
These attempts attain significance in light of Jio’s announcement of having developed an ‘end-to-end 5G technology’ which can be ‘exported’ to players across the world. Over the years, almost all telcos have built the networks (2G/3G/4G) over which the ‘Internet flows’, but customer willingness to pay has dropped dramatically due to data’s commoditised nature. Even if the customers can afford, the rapid acceleration of Internet penetration in India has opened the eyes of countries such as Brazil where data continues to be quite expensive. In this scenario, telcos across the world are seeking a cost-efficient way to offer 5G services to their customers.
A recent research by Praxis Global Alliance on 5G readiness of telcos globally highlights that Jio is uniquely placed to drive and enable this shift. The opportunity also marks a rare coming together of company strategy along with strong geopolitical and macroeconomic tailwinds that Jio stands to benefit from.
The key factors which make Jio poised to win in the new landscape are:
- India is a fertile testing ground to check Jio’s 5G solution as the second-largest base of Internet users with 600 million-plus users. Jio is well placed to test in pockets, validate at scale, and refine its solution before a global launch. The auctions to award spectrum for the provision of 5G are due in 2021 in India, and Jio is already reportedly asking the government to release some rationed 5G spectrum for testing.
- Jio was launched in 2016. The company does not have legacy infrastructure. The absence of archaic hardware, full 4G base (that is much easier to upgrade to 5G) and a ‘software-centric’ approach places the company at a vantage point.
- Most telcos are battling the question of economics from 5G deployment and the timing of it such that the 3G/4G investments yield the intended ROI. Jio’s strategic partnership with Qualcomm could enable it to transfer a cost-competitive ‘5G stack’ comprising of licenses, code, technical blueprints, and production know-how to any telco while giving the telco enough independence to build a virtualised network by picking components across a range of vendors.
- In December 2018, Jio joined the ORAN Alliance — a worldwide, operator-led effort that wants network infrastructure manufacturers of 5G such as Samsung, Ericsson, and ZTE to agree on common standards to make joint operations easier. What started as a technology forum has gained increased prominence since the use of Chinese telecom network equipment is seen with concern, both in Europe and the US. Jio is well placed as a member to cater to the global demand.
- Finally, as a player which has successfully transformed from a telco to one that is establishing a digital ecosystem spanning telecom, ecommerce and retail in India, Jio is well-placed to help operators abroad in their journey of becoming a ‘digital telco’. Jio platforms i.e. ‘the digital ecosystem play’ has received recent validation of multiple global investors and is valued at $ 58 billion currently.
However, there is much to be done in 5G whether by Jio or other players. Beyond technological novelties, the business case for 5G continues to evolve. We do not have a ‘fully-virtualised end-to-end cloud-native network’ as of date, in spite of 20-plus 5G networks that are already running globally. In this scenario, there are three strategic challenges in Jio’s attempt to disrupt the 5G network infrastructure space:
- Developing a successful vertically-integrated 5G ecosystem is hard work. We have seen this from the previous failed attempts of multiple network infrastructure and telco players to forward/backward integrate. ‘Compilers’ and ‘libraries’ (tools which are used to develop software for telecom networking gear) take years to develop, and much rides on Jio’s ability to leverage its strategic partnership-cum-investments from Qualcomm and Intel.
- As of March, the five biggest 5G patent holders are Huawei, Samsung, ZTE, LG, and Nokia. Qualcomm comes in at seventh and Intel at the eight position. While the volume of patents does not always contribute to the value created, this is often a strong indicator of who is leading the technology race. The 10-year lock in period with Samsung is set to expire but that does not obviate the momentous innovation challenges in areas such as network security.
- Network infrastructure players such as Huawei and Ericsson have traditionally been cost-competitive because of their ability to spread R&D costs over many operators. As a new player in the infrastructure game, the company has not clearly outlined the exact nature of revenue and cost apportions between Jio and partners such as Qualcomm.
The opportunity is unprecedented and the window to race ahead is narrow. Specific bright spots include the development of a low-cost 5G smartphone to accelerate the migration to 5G globally and the proposition of a ‘clean’ and ‘converged architecture’ commercially-feasible network in view of rising concerns of data security.
5G innovations such as ‘network slicing’ promise to create access for digital communities, content, and commerce to flourish as easily as in the hinterlands of India to the downtowns of Europe. Eleven years after the first-ever launch of 4G in the Nordic cities of Stockholm and Oslo by TeliaSonera, we are gearing up for disruptions across the global communications value chain by an Indian entity as 5G appears to be set to become the central nervous system of the global economy.
Madhur Singhal is Managing Director, Praxis Global Alliance. Views are personal.Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.