BSNL’s Revival Plan — Falling Just Short of the Finish Line
Yesterday, I did a FAQ on the revival plan announced by the GOI for BSNL. In my, view the plan just falls short of unlocking value. One analogy could be that someone who is fully capable of conquering Everest but just stops 20 mts from the peak and deliberately returns back. Does it not make sense for him not to stretch a little more when the “Finish Line” is just at a shouting distance? Let me explain.
BSNL will find it hard to get 4G customers
But why? The cost of ownership of 4G devices will rise significantly for BSNL’s consumers, and given the fact most are at the bottom of the pyramid, the impact will be significantly more. This is explained in the FAQ (link embedded). It is like a company trying to sell services (products) wrapped in odd packages (700 MHz 4G devices) where there are hardly any volumes. As a result — the BSNL will be significantly disadvantaged, as it will not be able to leverage the economies of scale (volumes of devices) generated by others in the market. Why on earth we will like to do that when hard-earned taxpayer money is a stake? Shouldn’t we be riding on the tide rather than riding against it?
BSNL will find it hard to seamlessly transition to 5G
Again why? To a layman, the statement above might not make any sense. But let me make an attempt to explain. Let’s say you live in a house that is owned by you. And in that house, there is a preferred room (700 MHz) in which you like and spend 80% of your time. Now let’s assume that you want to renovate your house with new features and capabilities (5G). What will you do? Will you not move into an equivalent room (800/900 MHz) in the same house, in the interim, i.e. till the time the construction work gets completed? What if your house does not have this option (of an equivalent room), it only gives you the option to move to the open terrace (26 GHz band), or the enclosed terrace (3.5 GHz band) on the first floor. Will you like to move out there, and risk getting wet on account of occasional rains? I am sure you won’t.
Which is exactly the situation with BSNL. Once it deploys 4G in the 700 MHz band it will not be able to cause a smooth migration to 5G without asking its customers to move out of its network (to its competitors) or continue to experience impaired services.
BSNL can unlock value easily provided…..
…the GOI gives BSNL access to 800 MHz immediately for the rollout of 4G services and can keep the rest of the plan stay the same. If cost is an issue, it can even choose to take back some spectrum from BSNL in the 2500 MHz band. Access to 800 MHz can increase value exponentially — a) BSNL can ride on the economies of scale generated by RJIO (cheap and mature market of time-tested low-cost devices); b) Can use 700 MHz for the deployment of Standalone (SA, pure 5G) without having to go through the painful transition of uprooting its 4G networks; c) Can even think of moving all its GSM subscribers from 900 MHz band, and vacate the band for Bharti and VI to make a smooth transition to SA 5G (which they currently will find difficult due to lack of spectrum in the 900 MHz band).
And the good news is 800 MHz is lying free (unused) with a lot of spectrum. In the last auction, all of it was offered but there were no takers. So why not use this resource for the interest of the country and not waste it unnecessarily?
Conclusion
Now I am sure you will agree with me that BSNL’s revival plan stops just short of the finish line. It is in the interest of the country and its consumers that BSNL is able to complete this race, and not turn back in the face of at least completing it. And that too, when other players (Bharti and VI) will also get empowered to roll out pure 5G, by getting access to airwaves enabled by the vacation of 900 MHz by BSNL. This can easily happen (as explained above) if BSNL moves all its 2G subscribers (in the 900 MHz band) to 4G in the 800 MHz.
India needs pure 5G (Standalone 5G), as the Non-Standalone 5G’s experience at the network edges is not at all good and patchy due to subscribers moving back and forth between 4G and 5G, due to the poor reach of the 3.5 GHz band — the key 5G band for the NSA operators.
India and its customers deserve the best and no less, that too when a huge quantum of spectrum in the 800 MHz band is lying waste. Why not put it to good use for the larger interest of the country? What do you think?
Hope you will find this useful. In case of any further queries, you can reach me on Twitter @Parag_Kar. Thanks for reading.
(Note — No conflict of interest as no one funded me for writing this note)
