For Telcos, 5G Is A ‘No Regrets’ Investment : Cisco

While the Indian Telecom operators are yet to realise their investment made for 4G roll out in the country, they are being pushed to invest further in order to cope up with the global dynamics around 5G. Large operators across the globe have already finished their share of 5G trials, acquired required spectrum and some even started rolling out commercial services – though in some pockets. At the same time, Indian operators, who were late in launching 3G as well 4G services compared to their global counterparts, do not want to miss the 5G bus this time. More importantly, the current Indian Government, unlike its predecessors, seems to be in sync with the industry and wishes to ride the 5G wave like most developed nations.

All these put a hell lot of pressure on the Indian Telecom operators in terms of deciding their 5G strategy. Besides, upgradation to a newer technology also demands huge investments.

We caught up with two key executives of Cisco – Sanjay Kaul, President – APJ, Global Service Provider Business and Michael Glickman, SVP, Global Service Provider Business, to understand how dilemmatic the situation is for telcos and how they are poised to face the situation in the coming times. Excerpts :

Q.Indian telcos are in a fix now – they have already made huge investments in 4G but the RoI is in questions because of multiple factors. Now, they are expected to launch 5G which needs further investments. How do you see this chaotic situation and how would you address this?

Michael : In any country there comes a saturation point around consumer mobile services. In India smartphone penetration is around 50% which is also growing very fast. India is also consuming huge amount of data and with proliferation of smartphones, data consumption, specifically video data, is set to grow which will put a lot of load on the networks and the consumers are going to demand more and more content and services. The current infrastructure may not sustain that.

However, the interesting thing about 5G, as against 4G, is we are going to see a lot of use cases around B2B application than B2C. This will drive the investments. Some of the vertical applications, for example, say in agriculture, could be the driverless tractors, that in a country like India make all the more sense. Investments towards this will add incremental revenue for the service providers. There are multiple such use cases relevant for India.

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Sanjay Kaul, President-APJ, Global Service Provider, Cisco

Q. You mentioned ‘incremental revenue’. How much incremental revenue you foresee in next two to three years if telcos make investments into 5G today? Is there any broad estimate?

Sanjay : As per latest Cisco VNI report, we predicted 21% of India’s GDP will come through digital channels by 2023. That means, if we are looking at India’s economy at three trillion dollar, this number seems huge. The question is how much of that will be from service providers. Our belief is for digital India and digitalisation, SPs play a crucial role. They lay the foundation, they put in place the connectivity layer and the platform, and on top of that lie all these vertical applications. So, there is huge potential but it depends what the industry doe sin the next couple of years.

Q.The standards for 5G are not yet fully ratified, ecosystem is not in place, OEMs are still experimenting with 5G devices – with all these, do you think it’s the right time for telcos to put in their money, or should they wait till a further clarity?

Michael : I will give my perspective from where Cisco stands in the access order. Besides other solutions, we specialise in IP networking architecture that is paramount to 5G. Think about network slicing – that helps the SPs to use the same resources to use for multiple purposes, for multiple users, at the same time and without compromising the quality – many telcos are not in a good position to do that very efficiently yet. I believe investments in IP networking, the core to 5G, is a ‘no regrets’ investment, because you need that IP network to serve multiple users with multiple services. Be it B2B or B2C applications, IP networking will be pivotal to your service offerings. That’s why I says investments in 5G will be a no regret investment which will pay off sooner or later.

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Michael Glickman, SVP, Global Service Provider Segment, Cisco

Sanjay : If you look at India, we adopted technologies little late than our global counterparts. 3G came 3 years late, 4G came 4 years late, and we have seen the lifespan of technologies getting shorter and shorter. Let’s see 5G, it has inherent advantages. This is an efficient technology, it provides for low latency, network slicing, its a technology that is conducive for IoT, machine to machine and anything that is required for connected world. My sense is in next five to seven years, SPs might sunset 3G. Whatever investments they were to make, they have already put a stop to that. They will move that investments to 5G. Also, I believe 2G has few more years of life left – may be three to five years. So, whatever apex and apex were dedicated for these monolithic technologies will make its way to 5G.

Q. Are the Indian telcos too thinking the same way and getting ready for 5G?

Sanjay: Of course the Indian telcos understand the business case. Its not that SPs are not preparing for 5G. They are working on their networks, they are fixing their backhaul, they are virtualising their network functions – only last thing is put on the radio. We are already helping them fix their core. In 2021, they probably go for testing their radios.

Q. How much investments does a typical telco that offers 3G or 4G services pan-India require to upgrade to 5G? What are the areas that commands majority of his investments and where does Cisco find in the bill?

Sanjay: Its not a massive investment, and its not something very new that he needs to invest. Investments will go in four areas. The first one being the network with IP at its core, the second done is the data centre architecture – it has to be a distributed data centre, and then three you need the platform where you need full automation. Then the last part of investment is in 5G radios. And these are incremental investments and not additional ones. Anyway, telcos need to focus on these areas and need to make some investments.

I was reading a report that analysed telcos’ investments in last 10 years. It said around 46% of the investment has gone into radios and related technologies. If you fast forward that to next 10 years, same has reduced to 18%. The gap of this is going towards the above areas – network slicing, automation, IP network etc -the areas that Cisco focuses in. We are in a sweet spot from that perspective going forward.

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