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Reliance Jio's Bet to Make Home-Grown, Made in India 5G Technology

Editor, TRANSFIN.
Jun 26, 2020 8:52 AM 5 min read
Editorial

“They are rejecting doing business with tools of the CCP (Chinese Communist Party) surveillance state...companies like Huawei."

That’s what US Secretary of State Mike Pompeo told reporters about Reliance Jio on Wednesday. He credited Jio (and a few other British, Canadian and French telecom companies) for spurning China’s Huawei, branding them “clean telcos” for doing so.

Reliance Jio has since then sought Government permission for lab tests of its 5G products. At a time when faster internet speeds and bandwidth have become all the more important, we look at Jio's pitch to develop home-grown 5G tech and the geopolitical nuances that surround it.

Why Do Some Countries Dislike Huawei?

Driven by Huawei, China is the largest contributor to the global 5G market, accounting for 46% of the sale of all such devices in 2019. Huawei’s premier role in the industry mainly comes from its competitive prices. To illustrate this point: it is estimated that 5G deployment in Europe would cost $62bn more if Huawei is excluded.

But as we all know, Huawei has its fair share of controversies. It has faced various allegations of intellectual property theft and corporate espionage. Many countries accuse the company of giving Beijing a backdoor to sensitive and strategic information and using it as a tool for surveillance. And this has sparked an international backlash against the telecom major.

The US, Japan, Australia and New Zealand have outright banned Huawei’s 5G networks; the UK briefly permitted Huawei infrastructure to be used in the country in a limited capacity; and a group of 10 democratic nations - “D10”, which comprises the G7 nations in addition to India, South Korea and Australia - is mulling major investments to prop up an alternative to Huawei.

 

COVID-19 and 5G

While countries’ complaints against Huawei are not new (it was a major thorn on the side of the US-China trade negotiations), the COVID-19 pandemic has shed renewed focus on the ramifications of the 5G wars.

Millions are working from home, international conferences are being held via video conference, companies’ dependence on cloud computing has surged...every sector from healthcare and education to small businesses and governance is now relying heavily on technology for day-to-day operations. 

This accelerated shift towards digitisation will mean more importance for faster internet services with low latency and increased bandwidth. Enter, 5G.

 

Jio’s Foray into 5G

Now, coming to Reliance Jio, which is India’s leading telecom company by number of subscribers. Currently, it is the only Indian service provider that claims to not have any Chinese components in its network (Mukesh Ambani even affirmed this to Donald Trump at an interaction with the US President during his India visit in February). For its 4G network, Jio relies mainly on South Korea's Samsung.

A month after the Ambani-Trump interaction, Jio made a major announcement. It said it had “developed everything end-to-end around 5G technology” and would be totally self-sufficient with the next-generation cellular technology. The claim was significant because it was a global first among mobile phone companies - to develop 5G tech in-house without third-party vendors.

The telco followed this by seeking the Department of Telecommunications’ (DoT’s) permission to conduct lab tests of its 5G products. The DoT is yet to respond, but if Jio’s trials are successful the company would no doubt play a central role in India’s 5G ecosystem, if not the world’s.

Technically Speaking: Jio was probably well-positioned to build 5G. It began in 2016 as an all-IP 4G network. (FYI: IP = Internet Protocol, which is a standard set of rules for sending data over the internet. All-IP networks use basically those that use a standard communications protocol to send and receive data in packets.) Such networks use IP for both internet and voice data, so most of Jio’s operations are software-based, which is crucial for developing 5G tech. And it had the foresight of boarding the 5G wagon early on - Reliance Industries bought US-based software firm Radisys (a telecom solutions company with a focus on 5G, Internet of Things (IoT) and open source architecture adoption) for over $67m back in 2018.

 

Flush with Funds

Developing 5G is not a cheap endeavour, but Jio has shown that it has the treasure chest to fund such a venture. Jio’s parent company, Jio Platforms, recently emerged from a spate of high-profile deals. This investment spree involved c. $15bn raised from Facebook, KKR, Vista, General Atlantic, TPG, L Catterton, Silver Lake, and United Arab Emirates funds Mubadala and the Abu Dhabi Investment Authority - among others. Subsequently, Mukesh Ambani announced that Reliance Industries was now net debt-free.

 

Geopolitical Games

Jio’s “no Chinese components” pitch is a significant one due to geopolitical nuances.

There are 12 major companies currently researching 5G tech. These are: AT&T (US), Cisco Systems (US), Ericsson (Sweden), Huawei (China), Mobile TeleSystems (Russia), NEC Corporation (Japan), Nokia Networks (Finland), Orange (France), Qualcomm (US), Samsung Electronics (South Korea), Verizon (US) and ZTE (China).

China, as we’ve already seen, has a leg up over other countries when it comes to 5G. And despite the US-led campaign against Huawei, the telco is operational in dozens of countries (here’s a list). Many more countries are still undecided about whether to ban Huawei or not (including India). And it goes without saying, the company has Beijing’s strong backing and banning Huawei would mean picking up a fight with China, and most countries aren’t well-equipped or deep-pocketed enough to do so.

This is where Jio’s 5G venture comes into play. A home-grown independent 5G service provider would mean India could steer clear of Huawei. Moreover, it could enable a scenario where India could export 5G tech of its own, giving the aforementioned D10 a viable alternative to Huawei and ZTE. Not only would this reap economic benefits, it would also help India strategically.

This is all the more important for two main reasons:

  1. The Government’s recent focus towards making India a self-reliant economy i.e. Atma Nirbhar Bharat and incentives to attract manufacturers looking to shift base from China (like the Production-Linked Incentive Scheme).
  2. Recent border tensions that have fuelled anti-China sentiment vis-a-vis to reduce dependency on goods and services made in China.

All in all, there is a palpable anti-China sentiment rising in the West, not only because of trade and geopolitical disagreements but also due to the coronavirus pandemic. India would be remiss to ignore this opportunity. Investing in attracting mobile phone manufacturers, tech giants and automobile firms to set up bases in India will of course yield rich dividends. But so too will investing in home-grown 5G technology, especially at a time when the entire world is online.

As Churchill once mused: “Never let a good crisis go to waste.”

FIN.

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