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3G Network Sharing - European experience and learnings for India

February 15, 2009
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Wth close to 350 million wireless ubscribers and counting, six panndian players looking to expand their networks, and four new entrants establishing greenfield networks, infrastructure sharing has become the norm rather than an exception in the Indian telecom industry.

For operators in mature markets, infrastructure sharing reduces operating costs and provides additional capacity in congested areas where there is limited space for sites and towers. For operators in developing markets like India's, however, infrastructure sharing helps in expanding coverage into previously unserved geographic areas by reducing subscriber acquisition costs through the sharing of sites, masts or radio access networks (RANs).

However, the emphasis so far has been only on sharing passive infrastructure and the Indian telecom industry is yet to realise the benefits of sharing active infrastructure. Nonetheless, as operators get ready to launch 3G services and continue with rural expansions, active infrastructure sharing will gain traction. In fact, network sharing will become inevitable in the current economic climate. While the telecom sector has so far managed to hold its own in the face of the credit crunch, some impact of the global financial crisis is being felt. Funding has become a key issue for operators as the cost of debt has risen with rising interest rates. Moreover, operators may not be able to recoup these costs as the potential demand for mobile datarich services is yet to be proven.

Sharing of 3G infrastructure will help reduce capital expenditure and will, therefore, improve the funding prospects for all players –­ incumbents and new entrants alike.

According to a report by research firm Analysys, 3G Infrastructure Sharing: The Future for Mobile Networks, network operators who aim to extend their 3G network to 13,000 sites can save $1 billion in capital expenses (by reducing the need for new base station equipment and sites) and $1 billion in operational expenses (by sharing the cost of operating sites) over a 10-year period by sharing 3G networks.Sharing 2G networks could provide even greater cost savings.

Network sharing provides mobile operators with the means to accelerate 3G coverage dramatically. For instance, while it took UK operator 3 about four years to increase its 3G base stations from about 5,000 to 7,500, its network sharing agreement with T-Mobile will enable it to increase this number to 13,000 within two years.

Operators will be able to provide mobile services to their subscribers even in places where their own signals are not available. It will also help them improve the quality of service (QoS) they can offer, at almost no additional expenditure.Moreover, new entrants who are allotted spectrum can completely ride on the infrastructure of existing players and launch services within a short span of time.

International trends

With 3G network capex for Western Europe expected to be over $120 billion –­ over and above the $105 billion already spent on licence fees –­ Europe's mobile operators have taken the global lead in network-sharing arrangements.

Infrastructure sharing started as early as 2001 in Europe, with a few successful deals. It proved to be an attractive proposition for operators who had been dealt the double whammy of high 3G licence fees and major investments in new network infrastructure. For instance, in the UK, operators opted for sharing 3G networks as they were saddled with debilitating debts of over –£22 million after the 3G auctions.For the most part, however, it did not pick up steam and most mobile operators chose to build and operate their own dedicated 3G networks. But with operators facing major expenses over the next few years, including investments on femtocells, long-term evolution, broadcasting networks and fixed broadband, network sharing was back in the reckoning.

The recent announcements of major network sharing deals in the UK, between Hutchison 3G and T-Mobile, and between Orange and Vodafone, affirm that the trend is set to spread across the globe.

For instance, in January 2008, tMobile UK and 3 combined their 3G access networks to form the largest 3G shared network. Under the arrangement, core networks and T-Mobile's 2G network are not being shared. The separation of the core networks also allows each operator to offer differentiated services to their subscribers. A joint venture company equally owned by the two operators, called Mobile Broadband Network Limited, has been set up to supervise the creation and operation of the joint network on behalf of both companies.

The shared network is scheduled to be complete in a little over two years. Decommissioning of over 5,000 duplicate sites from both the operators' combined existing cell sites is in the offing, and is expected to result in significant savings in rent, transmission and other operating costs. The total savings brought about by the agreement are estimated at –£2 billion in 10 years.

Sweden also provides a good example of infrastructure sharing. Three Swedish 3G licensees collaborated through the company, 3G Infrastructure Services, to share infrastructure in less populated areas outside key cities including Stockholm and Gothenburg. However, in the main metropolitan areas, these operators have deployed their own networks as infrastructure sharing is not allowed in urban areas.

In France, although the sharing of passive and active network elements is permitted, in December 2008, the Frenchtelecom regulatory authority, Arcep, launched a public consultation process to examine the conditions and degree to which universal mobile telecommunications system (UMTS) mobile network resources could be shared in the country.

Lessons for India

While the Indian telecom sector is very different from European markets in terms of the competitive landscape, there are also some similarities. For instance, 3G licence winners in India are likely to acquire the licences at very high prices in an auction, and will hence be under financial pressure.In light of this, network sharing could be a useful cost-saving mechanism.

While operators in India have welcomed the move to allow sharing of active infrastructure, the process is currently under evaluation by various telecom operators. It remains to be seen whether equipment with frequencies ranging from 800 MHz to 2,100 MHz can be shared seamlessly through active infrastructure sharing.

Active RAN-sharing solutions are being provided by vendors like Nokia Siemens Networks, Ericsson, Huawei and Vanu. Dual/Quad port antennas are also available and are under evaluation.

The downside

While network sharing clearly benefits operators, it presents major challenges.

According to industry experts, 3G licence winners should restrict network sharing to antennas as sharing large parts of network infrastructure may result in poor quality of service.

Companies will also need to satisfy stringent conditions set by the government. For instance, any sharing of radio base stations and network controllers will require separate management of transmission, reception and control signals.That, in turn, will require the use of sophisticated technology that is yet to be developed. This technology needs to be tested and commercially deployed to make sure that the traffic of players is properly managed.

Managing power consumption in base stations, especially for video services, is another key issue. Depending on the level of interference, a video call could use all the energy in a cellular area, giving rise to the issue of which operators' customers receive services.

Another key issue is interoperability.With operators buying equipment from different vendors, interoperability issues will arise when the equipment is shared.For instance, the combination of two logical node Bs into one physical node B leads to the highest footprint reduction, but also requires the same node B supplier and will thereby limit the choice for partnerships with other operators.

Sharing node Bs also increases the complexity of the operational model.Future hardware upgrades to add capacity or functionality may be difficult to negotiate, as the requirements of the operators may differ. The maintenance of common node B elements like batteries or power supply needs to be negotiated. In cases where the partnership between the operators is terminated, it will be a complicated task to split the logical node Bs into two physical node Bs.

While some types of 3G infrastructure sharing promise huge economic advantages, others have yet to be proven.

Nonetheless, the business case for network sharing has clearly been established, both in the Indian and the global markets.Going forward, 3G network sharing will lead to rapid deployment of 3G networks and accelerated launch of applications and services, which will, in turn, lead to faster subscriber penetration.


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