GSMA: Wholesale open-access networks for the underserved are failing

rural (Pixabay)
Underserved communities are faced with a number of challenges, including low population density—there often aren’t enough potential subscriptions to make it worth a network builder’s investment in infrastructure and service operation—and/or an impoverished population that can’t afford the typical mobile broadband subscription costs.

Despite the promise of the wholesale open-access network (WOAN) model, an analysis from the GSMA shows that deployments are faltering and, in some cases, outright failing. It’s a cautionary tale for those looking to spread the economic boon of broadband to some of the most underserved communities in the world, including here in the United States.

Underserved communities are faced with a number of challenges, including low population density—there often aren’t enough potential subscriptions to make it worth a network builder’s investment in infrastructure and service operation—and/or an impoverished population that can’t afford the typical mobile broadband subscription costs.

WOAN is one model to address this, in which a municipality or public authority will build the infrastructure on a heavily subsidized basis, and then lease it to multiple independent ISPs. These providers will then use the shared infrastructure to compete for customers. Citizens are promised better coverage and, based on presumed competition, more affordable prices.

In its report, GSMA examined how this was playing out in Kenya, Mexico, Russia, Rwanda and South Africa—and has delivered dismal assessments. In the countries examined, there was only one network rolled out (Rwanda), with all other markets plagued by slow progression and delayed or cancelled launches.

In Mexico, for example, an ambitious deployment of a shared public network for broadband access and mobile telecommunication services was supposed to begin in 2014 and be operational by 2018—a government-funded proposition that attracted a promising 21 qualified bidders. Faced with escalating costs, regulators reduced the investment target from $10 billion to $7 billion and the estimated number of cell towers to 12,000 instead of 20,000. All but one bidder dropped out: The Altán consortium will get access to 90 MHz of contiguous spectrum in the 700 MHz band to build the wholesale LTE network and operate a de facto monopoly.

“Policymakers in countries considering a move to a wholesale open-access network for 4G services may believe they can achieve greater network coverage compared with models that rely on network competition. However, the research published today demonstrates that this is not the case,” said John Giusti, chief regulatory officer at the GSMA, in a statement. “We have found that network competition produces faster and more extensive network coverage, and the examples highlighted in the report indicate little evidence that a SWN/WOAN is likely to achieve this.”

In Rwanda, the country’s LTE-based network was launched as planned in late 2014 in the capital of Kigali—a public-private partnership between the government and Korean operator KT. However, as of July 2016, the network was available in 25 (out of 30) districts with population coverage estimated at around 30%. The current progress in terms of coverage suggests it is unlikely the original coverage target of 95% will be achieved by the end of 2017, the GSMA said. Worse, the take up appears to be limited so far, thanks to the cost of the services.

Commercial negotiations set the wholesale prices, which are reviewed twice a year. Over the lifetime of the network there have been several significant reductions in wholesale prices, the GSMA found, but these have not translated into lower retail prices on a consistent basis.

While the report focused on global markets, WOAN is a model employed in the United States as well. Most public entities are willing to subsidize broadband, given that the economic advantages for these types of communities are clear-cut. It plays out in multiple ways, including through the direct effect of infrastructure investment and increased expenditures, as well as shifts in economic activity (e.g. job creation and occupational changes) and productivity gains.

The GSMA acknowledges that both the private sector and public sector have important roles to play in improving the business case for mobile network coverage expansion to the unserved and underserved, in the U.S. and around the world. The report outlined the fact that some operators are already looking at ways to balance competition with cooperation in infrastructure investment.

According to the GSMA, a better way forward will include cost-effective access to low-frequency spectrum and support for spectrum refarming, voluntary infrastructure agreements, the elimination of sector specific-taxation on operators, vendors and consumers, nondiscriminatory access to public infrastructure, support for streamlined planning and administrative processes, a relaxation of Quality of Service requirements, context-appropriate competition policy, especially concerning market structure and support for multisided business models such as zero rating and sponsored data.

“We are concerned that a move to wholesale networks will harm consumers, as history has demonstrated that network monopolies normally result in high prices and lower investment in infrastructure,” added Giusti. “With this in mind, we call upon governments looking to implement a SWN or WOAN to instead support the ability of mobile operators to enter into infrastructure-sharing agreements on a voluntary basis and consider how they can apply market-friendly spectrum assignment methods to maximize coverage, using appropriate spectrum license conditions to extend mobile services to underserved areas.”