Operators have shown renewed interest in network sharing in recent years. Conditions for mobile infrastructure sharing are arguably more favourable than they were ten years ago. Regulators and operators are becoming more successful in reaching agreements on networking sharing deals. The market is even becoming specialised: organisations called ‘towercos’ have emerged to provide site-sharing facilities and services.
The reason for this renewed interest is clear: infrastructure sharing offers significant opportunities to reduce costs. Access network costs typically represent between one sixth and one third of a mobile network operator’s (MNO’s) total costs – see Figure 1.
![Figure 1: Typical breakdown of network costs for a mobile network operator [Source: Analysys Mason, 2010]](/PageFiles/15475/Figure_1.gif)
Figure 1: Typical breakdown of network costs for a mobile network operator [Source: Analysys Mason, 2010]
Reducing costs has never been more critical to an MNO’s survival. The stakes are particularly high for operators as they move into the 4G era. Introducing a new technology such as LTE is expensive. Operators will need to purchase equipment and spectrum at great cost. The early take-up of any new service is always slow to start, which places a strain on operators’ cash flows. Sharing the cost of developing the access infrastructure can mitigate this. Concerns that operators may have about differentiating themselves from the competition will become less important as operators increasingly compete on content rather than coverage.
The amount that an operator can save depends upon the depth of the sharing arrangement. Options range from passive forms, such as site sharing, to active forms, such as full spectrum and RAN sharing. MNOs can also share elements of their core networks. The potential cost savings and benefits increase as the depth of the sharing increases, but so do the risks.
We considered the costs and benefits over five years of different types of RAN sharing – for example, two MNOs jointly rolling out an LTE network. Our analysis shows that operators that jointly roll out a new build of 2500 sites in a developed economy will typically achieve a 30% capex saving accumulated over five years (see Figure 2). They would also reduce opex by 15% per year by year five.
![Figure 2: Accumulated capex and opex savings for operators participating in a new-build initiative in a developed market [Source: Analysys Mason, 2010]](/PageFiles/15475/Figure_2.gif)
Figure 2: Accumulated capex and opex savings for operators participating in a new-build initiative in a developed market [Source: Analysys Mason, 2010]
Many pressures are driving many MNOs to consider infrastructure sharing as a means of reducing costs and improving margins. Operators face the growing challenge of maintaining multiple networks with multiple technologies (GSM, HSPA and LTE), which pushes up the costs of network operation and maintenance. Site-related opex is increasing in many markets – particularly as a result of the rising costs of site rental and power. Macroeconomic conditions continue to be very challenging, which makes accessing funding difficult and the cost of borrowing high. In addition, the volume of data traffic continues to increase dramatically. We predict the total data traffic volume in 2015 will be more than thirty times that in 2010. MNOs will need to make capital investments to increase capacity in order to meet this demand, and do so at a time when ARPUs are flat or decreasing and penetration rates are stagnant.
As well as offering MNOs a means of reducing costs, infrastructure sharing can have social benefits.
- Consumer benefits: Both passive and active sharing may benefit consumers by increasing the availability of telephony services, accelerating the pace of mobile network roll-outs, increasing consumer choice and reducing the cost of services. Many governments regard wireless technologies as vital for bridging the digital divide because they will enable operators to provide broadband connectivity in rural or remote areas. Infrastructure sharing may be a useful tool for stimulating mobile broadband provision in areas that may otherwise be uneconomical to serve.
- Competition benefits: Infrastructure sharing may help to stimulate competition by shifting the focus of operators’ differentiation from coverage towards services. It may also enable new entrants to launch their services more rapidly, because it will reduce the number of sites needed.
- Environmental benefits: Environmental concerns have become more prevalent in the past ten years. Infrastructure sharing can contribute towards broader environmental goals. Passive site sharing can mitigate the visual impact on the landscape of mobile networks by reducing the total number of masts and towers (although duplicating sites may at times be preferred to larger sites hosting multiple antennas). Sharing power supplies reduces energy consumption, which helps support government and corporate policies on reducing carbon emissions.
- Spectral-efficiency benefits: Operators that pool their spectrum for a shared RAN operation, or share backhaul microwave frequencies, are more likely to make optimal use of their spectral resources. However, spectrum pooling is more contentious than some other forms of sharing, and operators are often required to use their dedicated frequencies as a condition of RAN sharing. Similarly, regulators may restrict the sharing of microwave spectrum – for example, to rural areas only, where backhaul facilities may be acting as a bottleneck.
Within the past three years, MNOs around the world have reached successful wireless infrastructure sharing agreements – for example: Bell Mobility and TELUS in Canada; Telefónica O2 and Vodafone in Germany, Ireland, Spain and the UK; France Telecom and Vodafone in Spain; and EVN Telecom and Vietnamobile in Vietnam. These arrangements are driving reductions in long-term capex and opex.