Could a RAN-sharing model led by site providers be beneficial to site providers, mobile operators and consumers alike?
With declining voice ARPUs and disappointing uptake of data services, mobile operators are currently looking hard at cost reductions to improve their bottom line. This is of particular importance given the substantial investments required to deploy 3G networks. RAN sharing, which includes the sharing of the base station electronics (e.g. BTS, Node B), has been touted as a way in which operators can substantially reduce their costs. In their announcement in December 2007, T-Mobile and 3 stated that their RAN-sharing agreement could save them GBP2 billion over 10 years.
The majority of the RAN-sharing deals announced to date have been between individual mobile operators: Vodafone/Orange and T-Mobile/3 in the UK, Vodafone/Optus and Hutchison/Telstra in Australia. Such bi-party operator agreements can be difficult to reach. The commercial negotiations regarding the value that each party brings to the table can be prickly and protracted, made worse by the intense competitive cultures between the operators. Furthermore, the joint management of the venture can be difficult (e.g. agreeing on where and when to roll out new technologies). As a result, few major network-sharing deals have yet reached implementation.
Though the bi-party operator model has been the most popular to date, there is an alternative: a site provider-led model. Site providers currently offer space and often basic infrastructure (towers, enclosures, power, air conditioning) on their sites for mobile operators to deploy base stations. They already facilitate the sharing of physical infrastructure by housing multiple operators on each site. Historically, each mobile operator has been required to deploy its own base station electronic equipment. However, given the development of RAN sharing-enabled equipment, this no longer needs to be the case. This presents an opportunity for site providers to move up the value chain by deploying RAN sharingenabled BTSs/Node Bs and to offer capacity on each site. Furthermore, site providers could supply antennae, transceivers and even backhaul to the mobile operators’ core networks or defined points of presence.
Critically, the commercial negotiations for this model of RAN sharing are much simpler than for the bi-party mobile operator model. RAN sharing would be a relatively simple extension of an existing service between a buyer (the mobile operator) and a supplier (the site provider). The site provider would also decide where and when it is prepared to offer new technologies, though this may be guided by operator demand. However, site providers must be prepared to take on more risk than previously, as demand for new services and technologies is never guaranteed. Hence site providers will need to think hard about the charging model they offer to the operators.
The site providers would not be the only potential winners from such agreements. Mobile operators could make significant savings through purchasing capacity on a shared BTS/Node B, rather than deploying their own. Consumers could also benefit, as the reduction in costs may make it economical for mobile operators to deploy 3G networks to more rural locations.
Though there have been no major examples to date of site providers offering RAN-sharing services, there has been a trend of increased outsourcing to site providers. Examples include Vodafone, Bharti and Idea Cellular setting up Indus Towers to offer non-discriminatory access to infrastructure, and 3 and Wind combining their site infrastructure assets to sell them to a third party. Whether site provider-led RAN sharing becomes commonplace will very much depend on the mobile operators’ appetite to outsource further.