5G data plan may pinch pockets of Indian consumers, feels COAI chief

NEW DELHI: When India moved from third generation to fourth generation network services in a span of just four years, no one expected that data would be given at throwaway prices.

Thanks to the tariff war provoked by the entry of Reliance Jio however, incumbent players started giving services at similar price brackets in order to preserve market share.

But, now that 5G is knocking on the doors, there are good chances that Indian consumers might not get the throwaway prices they have become accustomed to.

“Internationally people are willing to pay $75-100(Singapore) for 5G services and at present we are paying only $3 for 4G… But, I think we will move to a concept called value pricing where people will pay more for additional services they get from 5G networks,”

Rajan Mathews, director general of the Cellular Operators Association of India (COAI) said. Mathews was quick to add that while it was early to ascertain 5G costs now, they will still be affordable.

But, setting up an infrastructure for 5G networks will require huge investments which, given that the sector is reeling under massive debt, banks are not too confident extending credit for.

Mathews had earlier estimated that the telecom sector would need around $10 billion a year for the next 5-6 years just to fund the network requirements of the industry.

This, according to experts, might push telecom firms to hike tariffs in order to buy spectrum and deploy the necessary technology.  At present, many telcos are raising funds by selling non-core assets or convincing promoters to pour in money. Expert say that money for 5G will be raised in a similar manner as existing players still have a very strong brand value.

A KPMG analyst pointed out that the telecom industry’s current losses are primarily because of benefits given to users at low prices. For 5G, he adds that tariffs will definitely be higher than current levels.

“I expect prices for even 4G services to go up once by the end of this year and again in the middle of the next year. There will be a correction once the consolidation is complete. You see, setting up network equipments and buying spectrums for 5G is going to be an expensive affair,” he said.

A lot will also depend on how Jio proceeds with its tariff charges. At present, Jio has already secured around 15 per cent of the market.

Experts cited say that if it continues with its aggressive pricing policy, it will be difficult for other players to increase their tariffs significantly.

5G will also see rather different revenues models, even though they are still being defined. Experts also say that since the ecosystem will be a complex one, requiring different stakeholders to work in synergy, a revenue-sharing model between them has be worked out too.

With the government pushing for a fast rollout of 5G infrastructure and services, by 2020 according to policy statements, it is likely that 5G technology will be deployed in metros and industrial places first and later move to less-connected places.

How much more it will cost, however, will depend on how and where telecom firms find the funds for infrastructure creation and how market dynamics play out.