Betting on shares
A number of factors have combined to bring network sharing to the centre of operators’ strategic discussions. Sharing projects are pushing deeper into the network, and the largest transformation of two networks to a shared environment is nearing completion.
August 16, 2010
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Bearing Fruit: Operators Are Increasingly Looking To Network Sharing To Cut Costs
There has been a good deal of debate of late as to whether or not the commercial arrival of LTE will herald the return of the network to the status of key competitive differentiator. During the past decade carrier psychology evolved and the network, in developed markets at least, began to take second place to other elements of the offering—brand, market positioning, content and service mix—in the efforts of the operators to distinguish themselves from their peers.
The big fear for operators was—and is—that they might end up relegated to the role of transport provider. And the network is the huge, expensive, physical embodiment of that undesirable outcome.
More recently, though, we’ve seen evidence of a shift back to a network-centric view of the world among operators. When Nordic player TeliaSonera became the first operator to launch a commercial LTE offering in Stockholm and Oslo late last year, it was in a bid to demonstrate prowess and leadership in the network, said Håkan Dahlström, the firm’s president of mobility services. “LTE gives us the opportunity to give our customers high quality access, and to really prove to our customers that going with TeliaSonera is a future-proven choice,” he told MCI.
A couple of months before this conversation, Matthew Key, head of Telefónica Europe described the network as the “crown jewels of the customer experience” while discussing the progress of the passive network sharing arrangement the firm has in place with Vodafone. He was at pains to point out that the passive share was an economic necessity, and not a value judgement on the competitive collateral of the network.
If carriers are beginning to look to the network as a differentiator once more, then the timing coincides with a growing enthusiasm for something which has historically been cited as evidence that the network was becoming commoditised; network sharing. Up for discussion is not the kind of passive share Key was talking about, which involves collaborating on land and towers in a bid to bypass the huge cost and logistical headaches of site acquisition. Instead the focus is on a rather more literal interpretation of the phrase; multiple operators using a single radio access network to deliver separate commercial services.
There are a number of reasons for this and, as always, money sits right at the top. From next year LTE deployments are expected to begin in earnest and the costs of deploying a new network, rather than another round of software upgrades, are looking ominous to many operators. If those costs can be shared with a partner, and a network jointly deployed, it should mean quicker deployment and quicker coverage spread.
LTE deployment cannot be viewed in isolation from the capacity crunch that has been the industry’s defining recent trend and network sharing is increasingly viewed as an effective way of beefing up capacity in an economic and efficient way. The problem is summed up unsentimentally by Neil Coleman, product management director at Actix: “This nice, comfortable model—get a bit of spectrum, sell a bit of voice—has been blown to pieces by mobile data. Now it’s all about desperately scrambling to get capacity into the network.”
The other reason that network sharing has earned greater prominence recently is the fact that the transformational project that has seen the networks of 3UK and T-Mobile UK painstakingly combined in a deep RAN share is finally nearing its conclusion. The two firms set up Mobile Broadband Network Ltd (MBNL) in December 2007 to oversee the merging of their two networks and in just a matter of weeks—a few months short of three years since launch—MBNL will have succeeded in creating a joint network comprising 12,400 active shared sites.
Those involved in the project describe it as monumental, a world first. They claim it more than answers the sceptics who said such a transformation—an order of magnitude more complex than a shared deployment conceived as such from the outset—could not be done. And they fully expect other carriers to look to implement similar projects of their own, where achievable.
Not everyone’s gung-ho, though, and a good number of carriers remain focused less on what they might gain through an active network share than what they might lose. Perhaps the most often cited fear surrounds network integrity. “Carriers worry about how much information leakage there will be from one operator to another,” says Sharad Sharma, a consultant at Coleago Consulting, a specialist telecoms consultancy that has worked on a number of network sharing deals.