Are private 5G networks ready for prime-time in India?

The regulatory confusion on sourcing of spectrum has delayed the adoption of this potentially transformative enterprise technology in India

Private 5G networks, which refer to captive, non-public 5G networks that can only be used by a specific entity that has purchased such a network, can be disruptive in terms of their ability to boost and transform businesses. However, even as India continues to notch up new record figures in the consumer 5G space, adoption of the business use cases for private 5G — which were once billed to be the top use case for the present latest generation of the network standard — remains weak in India right now.

While a large part of this stunted adoption was driven by regulatory confusion in terms of sourcing the 5G spectrum, this has now been somewhat clarified — albeit not in favour of enterprises. Has this finally cleared up the path to growth for private 5G networks in India?

THE REGULATORY ‘CONFUSION’

In 2022, a set of regulatory guidelines released by the Department of Telecommunications (DoT) suggested that enterprises could be allowed to lease 5G spectrum directly from the Centre’s telecom department for use within their operations, alongside having the option to ask a telecom operator to set-up such a network for them. Entities such as industrial conglomerate Larsen & Toubro, as well as IT services major Infosys, were at the forefront of lobbying for direct sourcing of private 5G spectrum from the DoT.

Telcos, however, had a different opinion. The likes of Bharti Airtel and Reliance Jio, since the DoT recommendation, lobbied to prevent direct sourcing of 5G spectrum to businesses. Industry experts stated that this was an expected move since enterprise network deployments make for one of the largest revenue drivers for most telcos.

“The market, while focusing on enterprise use cases, is evaluating the use of several technologies, such as Wi-Fi, private LTE (4G), public 5G and private 5G.”- Pulkit Pandey, Principal Analyst, Gartner

“If you look at today’s consumer businesses run by telcos, they have very low average revenue per user (ARPU), which in turn leaves telcos with a wafer-thin margin. Enterprise contracts, as well as tertiary revenue from value-added services, are extremely crucial for the overall good health of the sector. Hence, it was hardly surprising that telcos pushed back against the DoT’s idea of directly leasing spectrum to enterprises for private 5G deployments,” said a veteran industry consultant who works with multiple leading IT services firms, requesting anonymity.

While an official notification is awaited, and so is the adoption of the new, impending telecom bill, multiple media reports affirmed that the DoT has largely decided against sourcing spectrum directly to enterprises — citing that the present legal framework would not allow such a transformative process. This decision, which industry stakeholders say has been conveyed to both telcos and enterprises, has cleared up the ‘regulatory confusion’ that was present in the industry so far.

WHY BUSINESSES NEED PRIVATE 5G?

So, does that imply that private 5G networks are finally ready to take off? The answer is not that simple. But before we proceed, it’s important to understand what adoption of private 5G networks would bring to the table for enterprises.

First, private 5G networks will allow a company to have access to spectrum for a connectivity network that will only be accessible within its facility or infrastructure. By doing this, companies stand to benefit from the ability to customise an internal network to its exact required configuration, including cyber security standards, latency and bandwidth, reduced concerns around network congestion, and the ability to closely monitor a closed-loop network away from external interference.

If deployed at scale, the cost of a company’s own private 5G network would also eventually be lesser than the recurring operational expenses to be incurred if the firm licenses a telco to lease public spectrum for their enterprise network.

DEMAND FOR SUCH NETWORKS?

Yes, there is clear and significant global demand, wherein the enterprise 5G market is pegged to grow at high double-digit figures, according to industry estimates. Clear evidence of increasing adoption is seen in Ericsson’s June 2023 Mobility Report, which indicates that the number of connection endpoints of the Internet of Things (IoT) deployments around the world is set to increase at a compounded annualised growth rate (CAGR) of 18%. IoT deployments refer to the use of smart sensors and related equipment that facilitate the digital transformation of a facility, under the aegis of Industry 4.0.

A top executive at a leading IT services firm, who requested anonymity due to ongoing internal plans around their own private 5G deployment, said that there is “significant interest among Indian enterprises to consider adoption of private 5G services.”

From large service providers to industrial entities, private 5G networks could eventually cut down operational costs in the long run.

“If you look at the long-term cost benefit of setting up private 5G networks, there is plenty for various stakeholders to gain. From large service providers to industrial entities themselves, setting up private 5G networks could eventually cut down operational costs majorly in the long run,” the executive added.

Pulkit Pandey, Principal Analyst at Gartner, said that the industries that are seeking to adopt private 5G networks “include manufacturing setups such as mobile factories, autonomous transportation and guided vehicles within campuses; smart surveillance, remote patient monitoring, smart hospitals and automated healthcare assistants in healthcare, aerospace and defence, energy and utilities, and ports and airports.”

For some industries, the implication of private 5G networks is greater on the cyber security end, over other aspects. For instance, a defence division’s operations will need a private 5G network since such a network would be better configured, deployed and monitored — as opposed to public networks that could be exposed to greater threats.

WHAT ARE THE CHALLENGES?

The second executive quoted above added that one concern for private 5G adoption is cost. “Due to the higher initial setup cost, medium and small businesses will almost entirely refrain from adopting private 5G networks. This is a key roadblock, further exacerbated by concerns around whether leasing private 5G networks through telcos may make sense cost-wise for these firms (or not),” he said.

Gartner’s Pandey raised another issue around adoption: awareness. “The market, while focusing on enterprise use cases, is evaluating the use of several technologies, such as Wi-Fi, private LTE (4G), public 5G and private 5G. The challenge that often arises is to educate the market about the capabilities and differences between these technologies. It is important to understand that different use cases have different bandwidth and latency requirements, which might prompt the selection of different technologies,” Pandey said.

As a result, Pandey estimates that 2023 will largely be the year of early adopters while 2024 could see significant adoption across industries. A report by market statistics firm Research and Markets pegs the industrial IoT market to grow at 13% CAGR through 2027 — rising to nearly Rs 77,500 crore, from Rs 42,200 crore in 2022. This implies that while there is growth potential, the realisation could take a while to come through.

The fortification of the new telecom law could further help in this regard.

By Vernika Awal

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