Why Price Will Be The Key To The Success of 5G

By: Sutanu Guru

Taken together, telecom companies have committed to pay Rs 1.5 lakh crore as license fee for 5G spectrum.

Prime Minister Narendra Modi formally signalled the launch of 5G mobile telephony services today at the Indian Mobile Congress co-hosted by the Department of Telecommunications and the Cellular Operators Association of India. More significant than the words of Modi during the event is the claim made by Telecom Minister Ashwini Vaishnav a few days where he insisted 5G services will cover 80% of the total Indian market in “a very short time frame”. On paper, the claim could be realistic because more than 800 million Indian consumers already subscribe to 4G services out of a total mobile subscriber base of 1.5 billion. For 4G subscribers, the transition to 5G should be a smooth affair. Yet, a lot depends on Mukesh & son Aakash Ambani of Reliance Jio, Sunil Mittal of Airtel and Kumarmangalam Birla of Vodafone-Idea who were all in attendance when prime minister Modi formally launched the services. The reason is simple: how many consumers will hop on to the 5G bandwagon will depend on how much money they have to shell out for super fast data downloads. 

The history of the mobile telephony revolution in India has been marked by two seminal milestones; both of which were directly related to prices or costs to the consumer. Lets go back a little in time and analyse the first revolution. Even though mobile phone services were launched in 1995, India boasted of a “princely”, rather measly subscriber base of 1.15 million by the end of 1999. The reason was: telecom companies had to pay a fixed and hefty license fee every year to the government for spectrum usage. They had no choice but to charge exorbitant rates (usually at least Rs 16.40 per minute) for making a mobile call. Subscribers had to pay upto Rs 8.40 per minute even for receiving a call. No wonder only the super rich could afford mobile services and just about 1% of the population used it. The then NDA government led by Atal Bihari Vajpayee decided to take a bold step.

Despite furious allegations of crony capitalism, the policy was changed and telecom companies had to share a portion of their revenue with the government from the year 2000 instead of paying a fixed license fee. The results were dramatic, indeed miraculous. As the first chart shows, the number of mobile subscribers skyrocketed from 1.15 million in 1999 to 36.28 million in 2001. The subscriber base kept skyrocketing, crossing 100 million in 2005, 200 million in 2007, 400 million in 2009 and 1,000 million in 2016. The only reason was price. Call rates dropped from Rs 16.40 per minute to 40 paise per minute and even lower subsequently, enabling electricians, plumbers, barbers, carpenters, auto rickshaw drivers, astrologers and gardeners to become regular users of mobile phones.

Source: DOT

By the time the second mobile revolution arrived, call rates had dropped to virtually nothing in the second decade of this century. The arrival of 3Gand then 4G services had made mobile internet data the Holy Grail for consumers. Like the Holy Grail, it proved elusive because of very high prices. That is when Mukesh Ambani launched Jio in 2016 and gambled by offering ridiculously cheap data plans. Within a short span, India became the cheapest market in the world for mobile internet data. As the second chart shows, it is still one of the cheapest markets in the world. The next cheapest BRICS country is China whose per GB rates are 2.5 times that of India. The rates in South Africa are about 15 times higher than India. No wonder a veritable digital revolution has swept over India with the country recording the largest consumption and usage of mobile data in the entire world.

Source: cable.co.uk 2022

Taken together, telecom companies have committed to pay Rs 1.5 lakh crore as license for 5G spectrum. It would be natural for them to hike data charges to recover their investments. But there is little doubt Mukesh Ambani, Sunil Mittal and Kumarmangalam Birla would not forget the lessons of the two “telecom revolutions”. If they want 850 million Indians to upgrade to 5G in a hurry, they have to offer cheap data.