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Gaining Traction - Active infrastructure-sharing models and key benefits

February 15, 2009
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Passive infrastructure sharing has proved very successful in the Indian telecom market over the past few years and has been a critical catalyst in the growth of the sector. Its key benefits are faster and better telecom penetration into rural areas and, importantly, reduced costs.

Encouraged by the success of passive infrastructure sharing, last year, the government allowed sharing of active infrastructure in order to expedite rural network rollout. The active components include base stations, radio access networks (RANs), microwave radio equipment, switches, antennas, feeder cables and transmission systems, the core network and even spectrum.

In India, active infrastructure sharing has been limited to antennas, feeder cables, RANs and transmission systems. In more mature markets, however, where the focus is on service innovation, active infrastructure sharing is common. Cost reduction is critical as operators focus on maximising profits and revenues, and hence opt for joining part or all of their individual networks. However, this is complex and several issues need to be sorted out. For instance, when existing networks are being joined together, as opposed to the rolling out of a new single network, the considerations that need to be addressed include the load-bearing capacity of towers, the space within sites, the tilt and height of the antenna, the adverse effects on the quality of service (QoS) when antennas are combined, and the differing standards employed by the equipment vendors.

Active infrastructure sharing may take the form of network roaming, sharing of the RAN or sharing of the core network.These forms of sharing require operators to share elements of the active network layer including, for example, radio access nodes, transmission networks, mobile service switching centre/visiting location register and serving GPRS support node.Each operator, however, has its own home network that contains subscriber databases, services and subscriber billing.

RAN sharing

RAN sharing is the most comprehensive form of active infrastructure sharing. It involves the sharing of all access network equipment or the initial transmission equipment, including the antenna, mast, radio network controllers and backhaul equipment. Each of the RAN access networks is incorporated into a single network, which is then split into separate networks at the point of connection to the core.

Mobile operators have separate logical networks and spectrum and the degree of operational coordination is less than for other types of active sharing. However, operators may face challenges in implementing a shared RAN network formed from existing networks, as their architectures have evolved independently. For example, there may be complications around inter-working of equipment purchased from different vendors and operational procedures and control mechanisms.

Operators share all the access network elements to the point of connection with the core network. At this interconnect point, each operator then splits the traffic from its respective customers on its own core network ring for processing by its own core network elements as well as infrastructure.

One of the key drivers of RAN sharing in mature markets has been a reduction in operational network costs, which becomes important in light of the increasing downward pressure on average revenues per user (ARPU).

Sharing part, or all, of the RAN produces substantial savings for operators. For instance, sharing of the RAN elements between two operators along with site sharing can lead to savings of up to 40 per cent of the RAN capital and operational expenditures. These savings are critical, particularly in the initial coverage building phase of 3G networks, as investment in coverage is substantial where the early traffic and revenues are not in balance to begin with.

RAN sharing would also be commercially beneficial in rural and peripheral areas with lower subscriber densities and low-ARPU users. This becomes particularly relevant in the Indian context given that rural coverage is clearly the order of the day for telecom operators. In dense urban areas, operators need to have much denser antenna locations to ensure minimum quality standards. This increases the cost of equipment and rollout, which encourages sharing.

RAN sharing also allows operators the flexibility to redeploy infrastructure to more remote areas that may have previously been underserved wherever existing networks overlap.

It results in incremental revenues for both parties as it implicitly increases the coverage footprint of both networks. This allows them to capture traffic they might otherwise have been unable to capture.The scale of this will depend on the individual circumstances of the operators and is difficult to estimate due to the many factors involved, such as geography, coverage and network overlap. Agreements also need to provide a process to demonstrate compliance with regulatory requirements.

However, the signal strength may get reduced when antennas are combined.This represents a reduction in output power and impacts the coverage footprint of the network, thereby having an adverse effect on QoS levels.

The drop in signal strength also affects the in-building penetration of the carrier and is likely to impact suburban and urban areas where customers are more likely to use their handsets indoors. A significant reduction in the in-building signal strength as a result of RAN sharing may also result in operators setting up new sites to maintain sufficient in-building coverage. This will offset the reduction in sites that would have resulted from RAN sharing.

Core network sharing

The core network consists of the core transmission ring and logical entities like the switching centre with the home location register (HLR), the billing platform, and value-added services. It is also known as the "intelligent part" of the network.Core network sharing includes sharing of mobile switching centres (MSCs) and various databases.

The core network can be shared at the transmission ring level or at the logical entities level. Transmission ring sharing takes place when an operator has spare capacity on its core ring network and can share it with another operator. This type of sharing is particularly suitable for new entrants who may not have the necessary resources to build their own ring and can purchase capacity, often in the form of leased lines, from established operators to expedite network rollout. However, both operators are likely to develop the same infrastructure capabilities as they share the same transmission and switching core.

In core network logical entity sharing, a partner operator is allowed access to certain or all parts of the core network.This could be implemented to varying levels depending on which platforms the operators wish to share. For instance, sharing of the equipment identity register function is an attractive proposition for operators as it is expensive. Operators may also seek to share one core network, thereby dividing the network capital costs between them.

However, core network sharing has some technical limitations in terms of the technology platform of the operator and the standards employed by the equipment vendor. For instance, 2G networks were designed on a circuit switched architecture while GPRS technology was implemented to introduce the advantages of packet switched networks. The more recent 3G networks have been specified with a more modern IP-based architecture in mind. Interoperability issues come into play if the core network is shared when different types of network architecture are being used.

Moreover, the benefits of sharing the core network elements are not as clearly defined as those for sharing the access network. While there are likely to be some cost reductions in operations and maintenance, it is difficult to provide an estimate on the amount of savings. Operators' focus on network sharing has concentrated on elements in the access network since the cost savings in this area are typically more significant and better understood.

Network roaming

Network roaming can be considered as a form of infrastructure sharing, although traffic from one operator's subscriber is actually being carried and routed on another operator's network. However, there are no requirements for any common network elements for this type of sharing to occur. Roaming may take place at the national or international level.There may also be inter-system roaming, which occurs between networks operating on different standards and architecture as in the case of 3G and 2G roaming.

In the national roaming model, operators build their network infrastructure in different regions of a country. Based on roaming agreements, each operator is allowed to use the shared areas of the other operator's network infrastructure. There may also be competitive areas (for example, where both operators provide 3G coverage) where roaming is not allowed.

This enables each operator to focus on increasing coverage in one region visà-vis both operators deploying their networks in the same region. However, the core networks and the application platforms are completely independent. This ensures that competitiveness in the ecosystem is maintained.

National roaming already exists in GSM. According to industry experts, national roaming improves the business case by establishing greater coverage and providing faster access to services. However, the implementation of independent network rollouts is more complicated than with a network controlled by a single operator. International roaming is similar to national roaming but it takes place among operators in different countries.

While network sharing's ability to radically improve operators' competitive cost position has been clearly established, the complexities involved in selecting an operating model and the practical limitations inherent in executing sharing arrangements need to be addressed to enable operators to derive the maximum benefit from sharing.

Network sharing is clearly here to stay and will play a key role in shaping the future of the telecom industry as operators focus on new services and on increasing network coverage.


Discussion Board

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Green Shoots: Sector outlook improves
  • Hetal Gandhi, Director, CRISIL Research
  • Harsh Jagnani, Vice President and Sector Head, Corporate Ratings, ICRA Limited
  • Murtuza Onali Kachwala, Managing Director, Protivity India
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