The Case for Network Sharing Gets Stronger
Published on: 8th January 2009
Opinion piece by Emeka Obiodu, senior analyst at Ovum
With a mature market, declining voice revenues and now the economic downturn, the argument for European mobile network operators (MNOs) to share their networks has never been stronger. Although there have been several network-sharing initiatives, what is needed is a more coherent commercial and regulatory framework across the EU to make network sharing the norm rather than the exception.
Sharing networks will drive down costs
Apart from the need to achieve nationwide roaming, lowering capex and opex cost is the primary reason for MNOs to share their network infrastructure. Several MNOs have already signed such network-sharing deals. These could be just a wholesale roaming deal, sharing of passive network infrastructure such as cell sites or sharing their radio access networks (RANs). Indeed, earlier this week, there were press reports that Orange and Vodafone are about to expand their existing partnership deal in the UK. If this does go ahead soon, it will help Vodafone in its quest to slash £1 billion from its costs. Similarly, since December 2007, T-Mobile UK and 3 UK have had a partnership where they share access to their RANs in the UK as part of their cost-cutting measures. Vodafone and TIM have also been sharing their passive network infrastructure in Italy, and they signed a six-year renewal deal in November 2007.
Most European markets now have 99% 2G coverage, with 3G coverage fast approaching that figure too. In some places, MNOs spend money running cell sites that are hardly used. Even in heavy traffic locations such as city centres MNOs could save money, especially on their energy bills, by switching off some cell sites at nights or weekends. By sharing networks in these locations, MNOs are also able to slash their rental costs. Environmentally, it is also the sensible thing to do.
There needs to be clarity on network sharing
In Europe, while roaming deals are generally allowed and passive network sharing encouraged, the situation for RAN sharing is less clear. Would regulators tolerate it? Do competition laws allow it? Is it a violation of licence conditions? Previously, EU regulators could mandate mobile network sharing under the market for call access and regulation (Market 15). However, since ex-ante regulation was removed from Market 15 in November 2007, there is almost no clear-cut EU-wide mechanism on how network sharing ought to be pursued. Most of the network-sharing deals in Europe have been treated on a case-by-case basis, and MNOs are left to initiate and push through with the process on their own.
What is needed is a coherent EU-wide directive on network sharing by regulators. It should be clear to MNOs that the same conditions will prevail across the region whenever and wherever they want to share their networks. Most licences were issued with coverage stipulations, and now that the mobile network is already ubiquitous those coverage demands for every MNO ought to be relaxed, especially in the 2G domain. Such regulatory clarity will encourage MNOs to see network sharing as an evolutionary strategy rather than a radical move. Indeed, MNOs have commercial expediencies to seek for in network sharing. With the credit crunch likely to hit them, network sharing should form part of every MNO's cost-saving measures. And with the constant pressure to be environmentally friendly, network sharing has a double-whammy effect.
There are lessons to be learnt
Whether the approach is to rent capacity, like Yoigo does with Vodafone in Spain, or to pull together their separate networks, like T-Mobile and 3 do in the UK, there are convincing examples that network sharing works. The majority of the major network-sharing deals involve 3G too. Tele2 and TeliaSonera have shared their 3G networks in Sweden since inception in 2001. If 3G coverage has not been impeded by network sharing, then any future spectrum licensing ought to encourage network sharing from the start, and maybe put less emphasis on infrastructural competition.