Time to tango

A collaborative mindset similar to that of Japan could take India into a completely different orbit in the global digital ecosystem

The current state of the telecom industry begs a robust reframing of the problem. Instead of “what could/should be done to restore the health of the telecom industry?”, perhaps the reframed challenge could be “in what ways could India’s constantly evolving digital communication infrastructure and digital service ecosystem become commercially sustainable, socially relevant and remain future ready?”. 

Communication technology is known to transition from one generation to another with an uncanny periodicity on the global stage. 3G in 2001 in Japan. 4G LTE in Sweden and Norway in 2009. 5G in Korea in 2019. Of immense significance is the dramatic change in the business context itself after 2007 when, for the very first time, computing power and intelligence moved away from the baseband of the telco infrastructure to the chipset of the smartphone, with iPhone leading the way. IP-based communication had arrived. The resulting over-the-top (OTT) ecosystem gradually started eroding the telco’s traditional revenue stream of voice, messaging, and media, forcing it to either become a provider of commodity bandwidth or reimagine itself as a digital service provider, thus injecting unknown variables into the investment decision of the telco. 

The telecom policy framework in India, unfortunately, failed to recognise this seismic shift in balance of power and continued to treat the industry as the golden goose.

In the Indian context, it was this deep insight that led to Mukesh Ambani’s strategic business call around 2007. A successful implementation of his business plan would not only make Jio, the insurgent, the numero uno in the telecom industry but also pitchfork Reliance into the sunrise digital service industry from the sunset petroleum-based business started by the late Dhirubhai Ambani. So, when the world had already moved on to 4G/4GLTE, incremental thinking based auction of 3G spectrum led to the incumbent telcos acquiring the same at sky high rates, assuming business as usual scenario. 

In hindsight, it was hara kiri. While difficult to decode then, Ambani’s decision to skip a generation and gamble on 4G LTE was a masterstroke which enabled digital services at a far lower cost. Less understood is the fact that it was also an adventurous move, considering that it would ultimately take in a few lakh crores and that there was hardly anyone in the country at that time who had prior experience in rolling out an IP network. While executing, he also took a leaf out of China Mobile’s experience and bridged the technology and digital service ecosystem gap which the incumbents were happy to let the underserved masses live with, a clear sign of incumbents having forsaken promoter’s mentality which had guided their journey since the mid-nineties. 

The stakes were very high. In many ways, Ambani did an encore of what Mittal admirably did as an insurgent to the incumbent BSNL/MTNL while launching Airtel. Unfortunately, such upheavals come at a price. The red ink on the telco balance sheets speaks for itself.

Once again, while the world is moving ahead with 5G, we are beginning to dither and ask the very same questions which were asked about 4G LTE in 2010. What is it that 5G can do with its significantly higher speed and near zero latency which 4G LTE cannot? Without getting into technical complexities, suffice to say that 5G can go a long way towards enhancing enterprise efficiencies, competitiveness and user satisfaction through connected machines/devices and vastly more efficient modes of communication including holographic projections, AR/VR etc. Starting with the underserved urban and moving on to the semi urban/rural hinterland, it could address quality and access issues in the areas of education, skill development and healthcare. Once again, media and entertainment could find user adoption early on and provide the much needed revenue stream. A smart energy system could add substantial value. Without 5G, smart cities would not be smart enough. Naturally, interested players would execute pilots and learn from international experiences before investing sizable sums. Applications of AI/ML/Cloud will also get a serious leg up. 

Could there be other consequences of lagging behind in the gradual deployment of 5G? The next generation technology, 6G, is based on a constellation of low earth orbit satellites which would plug into the country-specific 5G infrastructure.  Expected to roll out by 2030, only a few players would own a 6G global network: the 3 consortiums are currently led by Softbank, Amazon and Tesla. More than geographical boundaries will get blurred as time goes by. 

The key elements of the way forward could be: 

• India’s National Digital Communication Policy should recognise that the risks associated with keeping India on par with the world in terms of its digital communication infrastructure and hence the digital service ecosystem cannot be borne only by the telcos. It should be distributed across key stakeholders. This perspective could help resolve the current tangle as well. 
• Given the uncertainties associated with 5G use cases and business models, aggravated further by the socio-economic complexities of our country, spectrum pricing should be viewed with a lens other than just “global price discovery”? The concept of revenue share needs further fine-tuning to enable telcos to compete with global digital natives. 
• Potential 5G application areas need to be developed on a priority basis and converted into business models. Perhaps policy, developed jointly with industry, could articulate anchor tenants so as to get the ball rolling. 
• The business opportunity, seen over a 10-year time-frame, is far too humungous for a few players to want to straddle it. Specialisation would enable speed and excellence. Policy needs to play a role here. 

Valuable lessons are to be learnt from the collaborative efforts of Japanese government and companies in their ongoing efforts to re-occupy global centre stage in the digital ecosystem after having lost primacy in the electronics hardware business. A similar collaborative mindset could take India into a much deserved orbit in the global digital ecosystem.  

We are in uncharted territory with serious financial, societal and security implications. And time is running out.

The author is visiting/adjunct faculty, IIM Ahmedabad & Bangalore. Views are personal