3G-Infrastructure Sharing: the future for mobile networks

SUMMARY

“Network sharing will become essential for operators that are struggling to expand 3G coverage and make funds available for a number of alternative investments.” Dr Alastair Brydon

Faced by the need to make a variety of substantial investments, most mobile network operators will implement network sharing of some sort within the next three years. The recent announcements of major network-sharing deals in the UK between Hutchison 3G and T-Mobile, and between Orange and Vodafone, are indicative of a trend that is set to spread across all developed markets. Network sharing will have many benefits for mobile network operators, but also represents the greatest upheaval to mobile networks in the market's history and will present major challenges. 3G-infrastructure consolidation, to just one or two networks per country, will have profound implications for other industry players, such as equipment vendors and regulators, and will require them to adopt new strategies.

This report reviews a range of network-sharing arrangements, from site sharing to complete network sharing. It evaluates the potential cost savings arising from 3G- and 2G-network sharing and discusses a range of other benefits. The report studies the many challenges that mobile operators will face as they undertake network sharing and identifies the best approaches. It considers the strategic implications of extensive network sharing for mobile operators, equipment vendors and regulators, and defines the actions that they should take. The report includes insights into network sharing from interviews with early adopters and vendors.

3G-Infrastructure Sharing: the future for mobile networks answers your key questions:

• Why is network sharing so important now? How extensive will it be?
• What are the different types of network sharing? Which is the best approach?
• What are the potential capital and operational cost savings of network sharing, and what are the other benefits?
• What are the key challenges of network sharing and how can they be overcome?
• How do you implement a successful network-sharing project while minimising risk?
• Do operators need both 2G- and 3G-network sharing?
• How should network operators choose their network-sharing partners?
• How will network sharing affect the market for mobile infrastructure? What can equipment vendors do to protect and strengthen their businesses?
• What are the implications of network sharing for competition and regulation?

Who should read this report

• Mobile network operators: senior executives, business planners and network planners, to understand the benefits of network sharing and identify the critical actions they need to take.
• Equipment vendors: senior executives and product managers, to assess the potential impact of network sharing on their businesses and to define the opportunities for products and services to protect and increase their market shares.
• Regulators: senior executives responsible for mobile telecoms, to understand the implications of network sharing for customers and competition within a market.
• Analysts and investors: to understand the implications of network sharing for network operator investment strategies and the market for mobile network equipment.

TABLE OF CONTENTS

0. Summary

1. Commercial pressures are reviving interest in 3G-network sharing

• 1.1 Early interest in network sharing subsided, but MNOs have new reasons to reconsider this approach
• 1.2 MNOs are examining ways to reduce costs
• 1.3 MNOs are faced with extensive investment requirements
• 1.4 MNOs must expand 3G coverage to match 2G coverage
• 1.5 3G enhancements will require substantial investment
• 1.6 Infrastructure equipment vendors have been quick to provide network-sharing solutions
• 1.7 Regulators have supported a degree of network sharing
• 1.8 Major MNOs have announced network-sharing agreements

2. MNOs that lead the network-sharing trend will enjoy major benefits

• 2.1 Network sharing can take many forms
• 2.2 Network sharing can have significant cost benefits for MNOs
• 2.3 Network sharing can enable MNOs to accelerate roll-out
• 2.4 Network sharing enables MNOs to deploy LTE, and they could gain additional benefits by pooling spectrum
• 2.5 Network sharing gives MNOs greater influence over network infrastructure vendors
• 2.6 Network sharing provides competitive advantage and avoids competitive disadvantage
• 2.7 Network sharing will become common in developed markets

3. There are nine critical success factors for network sharing

• 3.1 MNOs must heed the lessons from early adopters
• 3.2 Speed is of the essence, but agreements must not be rushed
• 3.3 MNOs need to select appropriate partners, with the optimal strategic match
• 3.4 Partners in a sharing agreement should have clear, common goals
• 3.5 MNOs should have a robust agreement that adequately covers commercial, technical and legal issues
• 3.6 MNOs should adopt a carefully planned, phased approach that minimises risk and maximises short-term benefits
• 3.7 Network-sharing partners need a flexible agreement that allows for service and technological differentiation
• 3.8 MNOs must work with regulators to avoid anti-competitive behaviour
• 3.9 MNOs need an effective strategy towards legacy 2G network infrastructure
• 3.10 Effective vendor support is essential

4. Network sharing has profound implications for MNOs, vendors, regulators and others

• 4.1 The benefits of network sharing are applicable in all markets
• 4.2 Network sharing brings new opportunities for MNOs and increases their focus on service differentiation
• 4.3 Network sharing will radically change the network infrastructure business
• 4.4 Regulators need to prepare for new competition issues and a changing industry structure
• 4.5 There will be new opportunities for third parties to design, build and operate shared networks

Actions

List of Figures and Tables

• Figure 0.1: Incremental capex and opex over ten years for a 3G-only MNO and a 2G/3G MNO, with and without 3G RAN sharing
• Figure 1.1: Monthly mobile service ARPU in Western Europe, 1998- 2007
• Figure 1.2: MNOs' investment requirements
• Figure 1.3: Mobile-originated voice traffic as a proportion of total voice traffic in Western Europe, 1Q 2005- 4Q 2008
• Table 1.1: Major enhancements to the UMTS radio interface, defined by 3GPP
• Figure 2.1: Network and business elements that MNOs could share
• Table 2.1: Comparison of the three broad categories of network sharing
• Figure 2.2: Network expansion options for a 3G-only MNO and a 2G/3G MNO
• Figure 2.3: Incremental capex and opex over ten years for a 3G-only MNO and a 2G/3G MNO, with and without 3G RAN sharing
• Figure 2.4: Network expansion options for two 2G/3G MNOs
• Figure 2.5: Incremental capex and opex over ten years for two 2G/3G MNOs, with and without 3G RAN sharing
• Figure 2.6: Comparison of strategic investment options enabled by independent 3G RAN ownership and 3G RAN sharing
• Figure 2.7: Hutchison 3G's number of 3G base stations in the UK, December 2003- December 2009 (assuming network sharing from 2008)
• Figure 2.8: Estimated downlink data rates achieved by LTE in different radio conditions
• Figure 2.9: Estimated network capacities achieved by LTE in different operating bandwidths with a typical 10 000 base station network deployment
• Figure 3.1: Total incremental cost of different RAN-sharing scenarios for a typical
• 10 000 base station network deployment
• Figure 4.1: Total base station equipment sales over ten years to two typical MNOs for different RAN-sharing scenarios