Home / Opinion / Views /  Captive networks must not distort the market
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Telecom service providers and some backers of private captive networks are in a war of words over 5G spectrum. Having barely emerged from the ravages of a tariff war after Reliance Jio’s market entry, the former were looking to repair balance sheets and stump up big money for 5G airwaves at next month’s auction, but a policy shift that will let corporations run their own networks in India has made them balk—and worry about returns on capital should enterprises, whose use of 5G services they were counting on, go self-sufficient. On the other side, those in support of captive spectrum argue there is no reason to let telecom operators corner all that’s available for commercial use; if state-run organizations have their own share for internal use, why not private firms ready to pay for the security and reliability it assures? What such allottees will pay, however, is the nub of it. If they get direct allotments, fear telecom firms, it could be at rates so cheap as to result in an uneven cost base that would injure their ability to compete for enterprise customers. On this, they are right. What the country needs is a level playing field, as incumbents have asked for. Achieving this, however, may not be easy.

As articulated by the Cellular Operators Association of India (COAI), telecom firms want the same rules applied to captive networks that they abide by. These are so onerous that they may reckon only companies whose core business is telecom would find them bearable, but their advocacy of preconditions would suggest a grudging acceptance of the idea itself. As a licensed category, telecom is already vulnerable to the ills of weak competition, and they cannot expect to remain gatekeepers of every advancement in a field vital to the future of Digital India. Also, we do have businesses keen on their own networks. According to research firm Omdia, that includes over half of all Indian enterprises across the sectors of manufacturing, transport, logistics, healthcare, energy, utilities and broadcasting. The proposal is at a raw stage right now. The Centre has said it will study enterprise demand for airwaves and seek the regulator’s advice before it decides how to regulate these networks. If it’s too burdensome, only megacorps would go for it, while light rules would be unfair to incumbents, unless their burden is eased too. The latter would, of course, have an opportunity for add-on revenues in setting up and managing captive networks for corporate clients. Some tech players contend that as these would be isolated, they would not need to be monitored so strictly for national security. Yet, to maximize value—as with fleet operators—some users may want to link up with open networks, which would end their isolation and expose them to risks. Hence, rules on interoperability need to be clear from the very onset.

A big battle likely to ensue will be over captive spectrum pricing. Apparent hopefuls like TCS have held that it would make business sense only if it’s allotted directly, while the COAI is insistent airwave seekers must win auctions of the same, just as telecom players do. Of high relevance here will be how we interpret the Supreme Court’s directions on the 2G spectrum case that laid down auctions as a fair practice (to avert underpriced allotment). If the idea of private-sector captive networks is not to get bogged down by litigation, the Centre must bear that in mind. As free-range bidding can have dicey outcomes, it should also set a floor price for bids that everyone finds acceptable.

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