According to the US Department of State, 40 countries and 50 telcos have already signed to America’s ‘5G Clean Network’ program, which embodies the highest standards of security against untrusted, high-risk vendors’ ability to disrupt, manipulate or deny services to private citizens, financial institutions, or critical infrastructure. Untrusted IT vendors will have no access to US State Department systems. Secretary of State Mike Pompeo says that EU Telco board members may be personally liable for any security or privacy breach due to a 5G untrusted vendor and that NATO is also adhering to the 5G clean program. All this could further accelerate swap decisions in Europe.
Since past two-three years Chinese companies Huawei and ZTE have been under scrutiny around the world because of their close ties with the Chinese government and resultant national security threats. Many countries have banned them from providing components for their 5G networks. In January 2019, the US Department of Justice charged Huawei and its chief financial officer Meng Wangzhou with fraud. Meng is daughter of Huawei’s founder Ren Zhengfei. US President Donald Trump issued an executive order banning any electronic or digital technology that the Secretary of Commerce deems a national security threat.
On January 28, 2020, British Prime Minister Boris Johnson approved use of Huawei’s equipment in building parts of Britain’s 5G network since his predecessor Theresa May had kick-started the move. However, its profound strategic implications for years to come continued to be debated; 5G network becoming crucial piece of national infrastructure and its control handed over to China through Huawei as strategic weapon despite China being chief opponent of the West. Finally, in July 2020, Britain’s Digital Secretary Oliver Dowden told the House of Commons that British mobile providers are banned from buying new Huawei 5G equipment after December 31, 2020 and they must remove all Huawei 5G kits from their networks by 2027. The move followed sanctions imposed by Washington on Huawei in posing national security threats.
In June 2019, Minister for Telecommunications and Information Technology, Ravi Shankar Prasad had stated that India will hold its next spectrum sale marking debut of 5G airwaves during 2019 and 5G trials will be conducted within 100 days. But Director General of Cellular Operators Association of India (COAI) said the 5G planned base price was too high. The Telecom Regulatory Authority of India (TRAI) had recommended auction of about 8,644 MHz frequencies including 5G services at estimated total base price of Rs 4.9 lakh crore, which telecom companies said they can’t afford. Vodafone India, Bharti Airtel Ltd and Reliance Industries Ltd’s Jio, all members of COAI, are expected to participate in the auction.
The spectrum auction kept getting postponed for multiple reasons, latest being the COVID-19 pandemic. The 4G auction planned in early 2020 was postponed to October 2020. But this may be further postponed to the first quarter of next year – before end of the current fiscal ending March 31, 2021. The delay is because of the economic stress on account of the pandemic, which has also hit telecom companies. Besides, telecom operators have amassed debts with the government’s demand for license payments under the country’s Adjusted Gross Revenue (AGR) system.
Reliance Jio is the only mobile operator wanting spectrum auction at the earliest since it has recently injected funding of more than $20 billion and is attracting investment from companies like Google, Microsoft, Silver Lake and Facebook. Jio has written to the Department of Telecommunications (DoT) saying, “We are unable to find any reasonable rationale behind this sudden pause in a successful and fruitful policy of auctioning all available spectrum every year.” Significantly, Jio has also highlighted that spectrum worth more than $50 billion is lying unused with DoT.
The 4G auction would include spectrum in the 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz bands. Auction of 5G spectrum in the 3300-3600MHz band has already been postponed until 2021 after service providers complained they would not be able to afford spectrum fees, especially at the high reserve prices set by the regulator. Government reportedly stands to earn as much as $70.9 billion (Rs 5.23 trillion) from the auction of 4G and 5G spectrum.
When exactly the 4G auction will be held is uncertain but October 2020 is over and telecom authorities have yet to come up with a cabinet note, which would approve the base price for spectrum and the quantity to be sold. The cabinet note is a prerequisite before authorities issue a Notice Inviting Applications (NIA). Typically, it takes around 45 days from the issuance of NIA until a spectrum auction begins. Vodafone Idea and Bharti Airtel don’t want early spectrum auction because of significant AGR debts that are adversely affecting profitability.
Vodafone recently won an arbitration case against India for retrospective taxation under which the income tax department had raised a demand of some Rs 22,000 crore. The Hague-based Permanent Court of Arbitration ruled that imposing a tax liability along with interest and penalties was in breach of guarantee of fair and equitable treatment of the terms laid out in the bilateral investment treaty between the Netherlands and India. Whether India will challenge the ruling is unclear. Spectrum licenses of all three operators (Vodafone India, Bharti Airtel Ltd and Reliance Industries Ltd’s Jio) are due to expire in 2021 and will have to be renewed if they are to continue providing telecom services in India.
Media reports of October 21, 2020 indicate that Bharti Airtel is developing 5G network technologies in India through own R&D and in collaboration with local US and Japanese firms, enabling developing own intellectual property (IP) as against dependence on third-party equipment vendors. In addition to developing technology for 5G, home broadband, Internet of Things (IoT) and other products in India, Airtel aims to locally produce equipment through contract manufacturers like America’s Flex and India’s Tejas Networks. Under its Make in India strategy, Airtel is planning to bring a large ecosystem of partners including US’s Mavenir, Xilinx and Altiostar (part owned by Japan’s Rakuten), Japan’s NEC and Taiwan’s Sercom that will help it develop equipment using OpenRAN technology. In addition, its existing traditional partner Ericsson and Nokia have agreed to provide only locally-made 5G gear.
Reliance Jio says it is developing its own end-to-end 5G technology. Jio wants to first deploy and scale up 5G in India, thereafter take this it to telcos in markets of Africa, West Asia and Eastern Europe. Airtel plans to initially take its 5G and other network technologies to markets like Africa, Bangladesh and Sri Lanka through its own and partner operations, and plans to offer to other telcos. But Airtel wants India to wait for 5G till 2022 enabling better development of the ecosystem including handsets and India-specific user cases.
There is speculation that government may hold 4G and 5G auctions together sometime in 2021. Anything and everything in India is related to politics. Timing of the spectrum auction (s) whether separately for 4G and 5G or together too will be based on political considerations – 2021 or 2022. Logically, all three telecom operators should have adequate preparation time to compete. The good thing happening is that the 5G ecosystem is planned under ‘Make in India’ keeping China out. We must ensure that no Chinese component, however small, sneaks into our 5G network. Akin to America’s ‘5G Clean Network’, our 5G ecosystem must ensure highest security against untrusted, high-risk vendors’ ability to disrupt, manipulate or deny services to the public, financial institutions and critical infrastructure.