Yesterday, DoT (the department of telecommunication) issued guidelines for setting up private networks in India. Parallelly, the DoT made amendments to the existing license conditions to empower the telecom operators to lease their spectrum (acquired through auctions) to facilitate the deployment of private networks. However, the interested entity — wanting to rollout out private network services, can do so only after obtaining a separate license from the DoT. The purpose of this note is to understand what opportunities and challenges exist in the path of setting up private network services.
Opportunites
The following are the opportunities for the operators and the entities wanting to set up private network services.
A) Operators
The operators now have a huge opportunity for monetizing their spectrum by tieing up with an entity -wanting to set up a private network. They can do so by directly offering services to the entity using their existing commercial network, by using a technique called network slicing, which will enable the operators to carve out capacity for exclusive use for the entity. The 2nd option is to enter into a leasing agreement with the entity (on mutually agreed terms) and let the entity set up and operate its own private network.
B) Entities
The entities will have many options. a) take spectrum from the operator; b) use the operator’s existing spectrum and network resources; c) take spectrum directly from the DoT (rules yet to be defined). However, a license from the DoT will be needed in order to roll out and consumption of services.
Since no license fees and entry fee is applicable for those who are wanting to set by private networks (clause 5(a) of guidelines), the issue of double taxation gets totally avoided in this case. This is a relief, as for the first time in the history of India (except in the case of IP licenses for towers) the telecom operators can share (monetize) network resources without having to pay license fees at least twice. Please refer to my earlier note — Telecom Sector — Multiple Licenses a Liability or a Liberator?
Having said that, the only license fee that would have been possible in this case was the “entry fee” or a fee that is structured differently. Why? As the % the revenue share is totally inapplicable here. Since the private network entities are not in the business of selling services, but only self-consumption, and therefore they will not generate any revenues which can fall in the bucket called “Telecom” — which means “revenue share” is simply not possible here.
Challenges
The following are the challenges for the operators and the entities wanting to set up private network services.
A) Operators
For the operators to offer private network services using their commercial networks, they have to deploy a standalone 5G network using a totally separate 5G core. The reason — the “network slicing” feature (mentioned in clause 3a of the guidelines) works only when the 5G core is separated from the 4G. This means the operators will have to deploy 5G in a “standalone” mode. And for that to happen the operator will need a sufficient 5G spectrum in the low-frequency bands (as for both 3.5 GHz & 26 GHz the RF signals will not travel far and will not penetrate walls and therefore, separate BTSs will be needed to be installed in the private network promises anyways). In India, low frequency 5G spectrum is very costly. This means the only viable option/opportunity for the operators will be to lease spectrum, especially the mmWave (26 GHz). And this resonates very well with the objective of containing the private networks within the premises of the entity (requirement of the license conditions — clause 5(4) of guidelines).
B) Entities
The entities wanting to seek spectrum directly from the DoT will have to meet the criteria of Rs 100 Cr net worth (clause 1c of guidelines). Hence, a player smaller in size will not be able to get spectrum and will have only rely on the telecom operators. Also, the rules for obtaining spectrum and the commercial implications are not yet notified by the DoT. Hence, the serious entries with a substantial net worth will be able to make an informed decision only when the rules (including commercial conditions) of obtaining spectrum directly from the government are notified.
And it is important, that the both DoT and TRAI ensures, that such rules, are balanced, and do not end up creating unintended biases for the entities in their ability to make choices in exercising all the options that are available on the table.
Conclusion
Empowering the Indian entities to use private network services for self-consumption is great empowerment. Both DoT & TRAI is worthy of praise for this enablement. But in order for a serious private entity to fully leverage this policy and make an informed choice, all the options (especially the option of taking spectrum directly from DoT) should be available in advance on its table with full clarity. Doing so will also ensure that spectrum in non-commercial spectrum bands (targeted for direct assignment) does not lie idle, and gets fully utilized by the entities for private network services.
(Views expressed are of my own and do not reflect that of my employer)
PS: Find the list of other relevant articles in the embedded link.
