Mobile operators share and share alike

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Mobile network sharing is now an established strategic choice for the industry. No longer is it just about sharing tower sites. Instead, instances of operators sharing active components of their network are on the rise. Given that this approach has now been proven for both 2G and 3G networks, we believe that active network sharing is set to play a big role in LTE rollout. Ultimately, as active network sharing grows, the big question for the industry will be how many mobile networks a country really needs.
 
The changing argument over network sharing
 
It is interesting to see how the debate about network sharing has shifted in recent years. Passive sharing was generally okayed, and many regulators encourage it as the environmentally right thing to do.
 
But the arguments against active sharing remained, such as “It is too risky” or “You will lose your independence.” It is not that these concerns have disappeared; rather, a bigger headache has made them look paltry.
 
Operators face strongly falling ARPU, yet they are expected to continue investing billions to ensure network availability and appropriate capacity. How to reconcile these two divergent concerns is the reason for heightened interest in network sharing.
 
Network sharing is the logical thing to do now
 
In our recently published report “Mobile network sharing: a post-recession reality”, we explored how the economic downturn has strengthened the case for all forms of network sharing. In particular, interest in active sharing is rising. This could involve only the RAN or RAN plus spectrum, or it could go as deep as the core network. Notably too, operators that share their active networks tell us that there is still a lot of room for differentiation in the way they manage the network.
 
With the Telenor/Tele2 LTE deal in Sweden, plus Lightsquared’s plan to create a wholesale LTE network in the US, we expect up to 30% of all LTE networks in the next five years to involve some form of active network sharing. This will be particularly so in rural areas, where operators plan to use the 800MHz spectrum to provide LTE coverage. For a list of publicly announced network sharing deals, see our “Mobile network sharing deals analyzer”.

Crucially, as momentum grows for more network sharing, it is difficult to see how some operators can keep away from the bandwagon in the long term.
 
3 UK, the smallest player in the market, is now bullish with claims of having the best 3G network in the UK.
 
Unsurprisingly, given its limited resources, the only reason 3 UK has been able to achieve such a feat is because of the benefits from its MBNL active network sharing deal with T-Mobile (and soon Orange).
 
In the long run, we are not convinced that other operators in the UK and around the world can afford to forego such a beneficial strategy. For big vendors such as Ericsson or small ones such as Radio Design, network sharing opens new opportunities while creating some concerns.
 
Is a single mobile network enough for a country?
 
This is the question we posed at Avren’s NGN conference in April 2010. Our core premise is that other utility services – gas, electricity, and even fixed telephony – typically deliver services via a single network.
 
 If it is taking too long to achieve full-scale consolidation in many mobile markets, perhaps pooling the networks together into one or two networks can streamline the industry’s structure and reduce network costs. For this sort of network-level consolidation, competition is no longer at the network level but rather at the service level.
 
Since we posed this question, many others have begun to ask whether four or five mobile networks are really sustainable in any country. UK-based infrastructure company Arqiva has articulated its concept of a “Neutral Host”, positioning itself as a viable candidate to unite, consolidate, and manage the existing networks of all UK mobile operators.
 
But let’s not get carried away just yet. Even if this radical structure can deliver huge benefits to the industry, challenges abound. Questions about loss of network competitiveness, ownership of assets, and regulatory directives all need to be answered before the industry can eye a single network for the future.

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