Reliance’s plan of designing a 5G network is flawed as it needs infrastructure to facilitate large-scale networks, but its strategies to manage traffic patterns, pollution and electricity grids are vague
By Shivanand Pandit
In 2012, a quarterly video-conference of executives of India’s largest private sector company commenced with a word of caution. The chairman said: “What has brought us here will not take us to the future.” Due to mounting global trade tautness and a strong push for renewable energy, he was fretful that the company’s main business of crude oil refining and petrochemicals could lose polish. Although his father, the founder of the entity, wanted to compete with international energy titans, his son was quick to comprehend that “data is the new oil” and began the inexorable revolution of the company.
The son, Mukesh Ambani, chairman of Reliance Industries Limited, had planned to acquire Infotel Broadband Services Limited in 2010. However, daughter Isha’s complaints while she was home from Yale University about pathetic broadband speeds in India gave birth to a revolutionary idea. Ambani swiftly realised that digital technology was the superhighway to mammoth accomplishment.
The fruition of that dream was evident recently when his company and Google struck a $4.5-billion deal for a new smartphone. Ambani said Google would build an Android operating system (OS) to power a low-cost “4G or even 5G” smartphone that Reliance would design.
But coming back to his journey, Ambani took approximately four years to launch Reliance Jio in September 2016. At present, it is India’s biggest network with some 40 crore 4G subscribers. This has become Reliance’s evolution engine and has blended with its fast-growing retail arm to help counter-balance the decrease in oil and petrochemicals. Jio’s capabilities include 4G, Cloud Computing, Devices and OS, Big Data, AI, AR/VR, Blockchain, Natural Language Understanding and Computer Vision.
Ambani is known for disrupting numerous business models. In 2016, when he proposed 4G VoLTE smartphones at an attractive price of Rs 2,999, there was scepticism. And recently, during the company’s first virtual annual general meeting, Ambani showcased the new course to disrupt the mobile marketplace again.
He announced that Reliance was a contender with its own 5G network solution. With this technological innovation, a virtualised 5G network, existing hardware-dependent networks can be budged to software-centric podiums. This will also significantly reduce network costs, he claimed. According to software entity Mavenir, 40 percent saving can be done in capex and 34 percent saving in operational costs due to these new networks.
In 2018, Reliance started building a Generation Z network by acquiring US-based Radisys. Through its subsidiary company, Rancore Technologies, which is now amalgamated with Jio, it crafted its telecom R&D design. A few months ago, it also persuaded the centre to grant permission for 5G trials.
With Google’s interest in Jio platforms, numerous plans have been drafted to make India “2G mukt”. Like the cherry on the cake, many international players such as Facebook, Silver Lake Partners, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, LCatterton, PIF, Intel and Qualcomm have joined Reliance as investors and strategic partners. Altogether, Jio has raised Rs 1,52,055.45 crore from 14 financial partners. A majority of them are part of the Open RAN Policy Coalition which was set up in May 2020 to support 5G technology.
However, Ambani’s plan of designing a 5G network does not show a vibrant signal. To a large extent, it seems a foolhardy plan. His speech, sprinkled with many customary catchwords such as dedication of 5G solutions to the prime minister’s Atmanirbhar vision, is short on substance. He also called the technology a “Huawei-killer”. Launching of 5G is not child’s play. It is very expensive and the rollout of 4G has shown that. Again, 5G cannot be launched in one shot. Like many operators across the world who introduced 4G in a phased style, the strategy for the 5G venture should be the same. Premium consumers should be targeted first.
More importantly, creation of infrastructure to facilitate large-scale networks to function in mission-critical mode on a real-time basis is absent. Also, the strategies to manage traffic patterns, pollution levels and electricity grids are vague. In addition, Huawei of China holds the most patents in the world and many Chinese and Korean companies already control a large number of such patents. Numerous entities, including Samsung, commenced work on 5G technology long ago. This is why Ambani’s plan of action looks flawed.
British telecom companies have been granted seven years from now to rip out Huawei equipment from their networks. More time has been granted by UK Prime Minister Boris Johnson considering the capital costs of shorter duration and probable blackout throughout their networks. Therefore, for a telecom company with only a four-year track record and no substantial patents, establishment of a complete home-grown 5G network is a gargantuan task.
Operators in India are hesitant to buy network from an entity which is a rival in services. Furthermore, there is a lesson for Reliance. The biggest operator in the US, Verizon, promised high speed data to its consumers and eventually failed in compliance with the standards laid down. Later, the company adopted a lower technology norm, which is not a comprehensive 5G network.
Plans for launching a 5G network by Japanese e-commerce player Rakuten have already made the news. Reliance will face a tough challenge from it as the latter is already ahead of it and approached Dish Wireless to sell its mobile network in the US. Surprisingly, the key person who played a vital role in Jio’s 5G network business blueprint joined Rakuten as its chief technology officer.
Therefore, in the 5G world, telecom operators need to team up with manifold patrons across sectors, namely, finance, transport, retail and healthcare to deliver ground-breaking digital services and amenities. More importantly, in 5G, the value chain is very complex and multifarious. Even though Jio took a big leap and approached the Department of Telecommunications for assigning 5G spectrum, the government’s imminent auction process might be limited to only 4G spectrum.
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While Ambani is confident of selling 5G technology in global markets like the US, Australia, Japan, Europe and the UK and is sure of making India self-reliant, many questions remain unanswered. Instead of big ticket announcements and lofty claims, the richest man in India has to invent rich measures to make India 5G-compliant. Otherwise, it will remain a distant dream.
—The writer is a tax specialist and financial adviser