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Network Economy: Benefits and challenges of active infrastructure sharing

December 03, 2015
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Network infrastructure sharing can be classified into three categories: passive, active and core. Passive sharing refers to the sharing of non-electronic infrastructure like shelters, towers or masts, power supply and air conditioning. This is the most common form of sharing among operators in India. Active infrastructure covers all electronic telecommunication elements like antennas, feeder cables, radio spectrum, radio access networks (RANs), access node switches, base transceiver stations (BTSs) and Node B. Core infrastructure sharing refers to the sharing of parts of the core network, apart from RANs.

Active infrastructure sharing is traditionally regulated by applying the principles of ex-ante regulation. This is asymmetric in nature because its objective is to ensure a balance between competing operators by empowering the weaker ones and imposing certain restrictions on those with significant power in the market.

Types of active sharing

RAN sharing

RAN sharing is the most comprehensive form of access network sharing. It involves the sharing of all access network equipment, including antennas, masts and backhaul equipment. In such a structure, all the RAN access networks are incorporated into a single network, which is then split into separate networks at the point of connection to the core.

One of the main drivers for RAN sharing is the need to reduce operational network costs as there is increasing downward pressure on ARPUs. Both partial as well as full RAN sharing results in substantial cost savings for operators as it can increase free cash flow by up to 20 per cent. RAN sharing is also commercially appealing in rural and peripheral areas with low ARPU users and lesser subscriber density.

However, operators can face challenges in implementing a shared RAN made up of existing networks as different architectures would have evolved independently. For example, there could be complications in operational procedures, control mechanisms, and the interworking of equipment purchased from different vendors. As a result of these issues, RAN sharing has not had much success in India.

Intra-circle roaming

Network roaming is also considered to be a form of infrastructure sharing. In this, the traffic of one operator’s subscriber is actually carried and routed to another operator’s network. No common network elements are required for this kind of sharing.

Roaming produces benefits primarily through delaying or reducing investments in network infrastructure. This is particularly beneficial for operators rolling out new 3G and broadband wireless access networks as they can achieve a greater geographical presence in a shorter time-to-market. This model is rapidly gaining traction as it was first adopted by new operators launching 2G and 3G services, and is now being used by operators like Bharti Airtel, Vodafone India, Idea Cellular, Reliance Communications and Reliance Jio Infocomm Limited for 4G services at a pan-Indian level.

Spectrum sharing

Spectrum sharing typically involves more than one operator sharing spectrum for the same or different wireless services. It is a viable option as spectrum is a scarce resource that is often underutilised if held by one operator.

Various spectrum sharing concepts are prevalent across the world. In its simplest form, spectrum can be shared by leasing a given quantum of it in a particular geographical area for a certain period. The other method involves pooling spectrum resources and deploying them effectively to provide better services to customers, and economising on the number of BTSs needed to roll out services. In spectrum sharing, the interdependence of operators increases. It is generally preceded by them sharing active infrastructure.

Backhaul sharing

Backhaul sharing is a strategy that helps reduce costs and utilise infrastructure effectively. The cost of backhaul contributes significantly to operational costs, especially when traffic is low (such as in rural areas or when a new service is launched). When towers are shared, individual backhaul networks do not need to be laid as one service provider’s network can easily be shared by others.

A common backhaul network is very useful in rural environments, where the traffic from the BTS to the base station controller is quite low. A common radio frequency or optical fibre medium can be utilised, thereby reducing costs and maintenance efforts. Moreover, exits from such sharing arrangements are easily provided if warranted due to an increase in traffic or other reasons.

On the flip side, regulatory or licencing conditions can preclude operators from sharing backhaul facilities, especially when spectrum is employed (as with microwave links).

Changing scenario: Benefits and challenges

So far, active network sharing in India has been hindered by various strategic, regulatory and operational factors, some of which are listed below:

  • Network coverage as a differentiator: Coverage is typically a differentiating factor for operators that have made significant investments in their networks. Sharing RAN could dilute this competitive advantage; a drawback in an aggressive market like India.
  • Service differentiation: Active sharing could restrain operator independence as some network parameters will be common to both parties. They might have to agree on certain factors, which can be a complicated process.
  • Operational challenges: Working out joint agreements is a tedious task that involves complex negotiations on a variety of operational parameters. These could necessitate the sharing of confidential competitor data as well. In India, operators tend to have multiple vendors across circles, making this a major operational issue.
  • Regulatory stance: While the government allowed active sharing in 2008, it was for select components. Spectrum sharing and trading have been allowed recently and their impact is yet to be seen.

The scenario is changing as the policy and regulatory framework required to facilitate active sharing in India gradually becomes clearer. The first set of guidelines for active infrastructure sharing was released by the Department of Telecommunications (DoT) in 2008 when it permitted the sharing of antennas, feeder cables, Node B, RAN and transmission infrastructure. In 2009, DoT enhanced the scope of IP-1 providers to include active infrastructure, if provided on behalf of unified access service licensees or cellular mobile service providers.

In order to put in place spectrum management policies and cover aspects like spectrum pooling, sharing and trading, the National Telecom Policy, 2012 proposed to enact a separate Spectrum Act. DoT issued guidelines in December 2013 for allowing spectrum sharing in the 1800 MHz, 900 MHz and 800 MHz bands in the same circle, while not permitting the leasing of airwaves. These finally got notified in October 2015, allowing the sharing of all currently available spectrum as well as that in new bands that would be allocated in future. The guidelines allow telecom companies to share even traded spectrum, under which they can sell the right to use spectrum to other companies and later share the same.

On the industry front, operators are considering active infrastructure sharing due to factors like the need for operational efficiency and cost optimisation. This is particularly vital as margins are under pressure due to massive investments in spectrum acquisition and heavy debt burdens. Infrastructure sharing will also enable them to monetise 3G spectrum investments and rapidly expand 3G network coverage, which is still limited to a few cities (~20 per cent points-of-presence coverage). Moreover, by combining resources and reducing individual infrastructure needs, mobile network operators will be able to rapidly deploy newer technologies like 3G and LTE. Of late, LTE spectrum holders have been showing a greater willingness to enter into network sharing arrangements to speed up service roll-outs. The auction of additional mobile broadband spectrum in the 1800 MHz, 2100 MHz and 700 MHz bands will result in a number of new network roll-outs by existing and new 3G/4G players, which could drive active infrastructure sharing.

Given the complexities involved in active infrastructure sharing, the greenfield model is likely to gain popularity. In this, operators jointly build new network infrastructure in order to expand high speed broadband coverage in rural areas and deploy new technologies like 3G and LTE in a cost-effective manner. Operators around the globe are finding it beneficial and feasible to adopt the greenfield model in tandem with the joint bidding and sharing of 3G/LTE spectrum.

The consolidation model could also gain acceptance, although it involves a high degree of cooperation. Operators have used it to expand coverage rapidly by leveraging existing network infrastructure in rural and urban areas.

To conclude, while mobile network operators are currently facing a dilemma regarding infrastructure sharing, the decision to do so with all or part of their active infrastructure can be rewarding. However, they must choose the right legal and business model to roll out new networks in a more profitable manner.

 
 
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