With the industry moving from 2G to 3G, and now to 4G, and long term evolution (LTE) and LTE-Advanced (LTE-A), telecom operators are increasingly looking at ways to optimise network costs. In its “Evolution to LTE” report, the Global Mobile Suppliers Association (GSA) has stated that a total of 442 LTE networks had been launched across 147 countries as of October 2015. Meanwhile, 142 LTE operators were investing in LTE-A deployment, studies or trials in 62 countries, and 95 operators had commercially launched LTE-A networks in 48 countries.
To reduce costs and increase network capacity, operators are increasingly sharing their active infrastructure. Active infrastructure sharing refers to the sharing of electronic infrastructure like antennas, feeder cables, radio spectrum, radio access networks (RANs), base transceiver stations, and Node B hardware. Globally, the most widespread adoption of active network sharing has taken place in Europe, a region that has had the maximum number of such partnerships. In the Asia-Pacific (APAC) region, while active network sharing has failed to gain traction, passive sharing has experienced significant uptake.
Rationale for active infrastructure sharing
The strategic rationale for telecom operators looking to engage in any kind of infrastructure sharing may differ, depending on whether a player is a new entrant or an incumbent, or if it is a 3G or 2G network that has to be shared. The situation also differs from market to market.
For network operators in mature telecom markets, infrastructure sharing can reduce operating costs and provide additional capacity in congested areas that have limited space for sites and towers. Meanwhile, network operators in developing markets may share infrastructure to expand coverage into previously unserved geographical areas. This can be facilitated via national roaming or by reducing subscriber acquisition costs through the sharing of active infrastructure like sites and RANs, or by sharing towers and masts.
Infrastructure sharing is also increasingly being done in congested urban centres where the acquisition of new sites is difficult. However, it is less likely to occur in markets where coverage is used as a service differentiator as sharing infrastructure could potentially reduce investment incentives for continued network roll-outs. 3G network operators are increasingly sharing infrastructure from the initial stages of rolling out a network in order to reduce capex and opex. This is technically more attractive than joining existing 2G networks as operators in many markets are looking to use 3G to differentiate their products and services and not their networks. Sharing a new network removes the complexities and costs associated with re-planning existing networks, but it also necessitates commercial agreements on operations and upgrade costs. However, it is beneficial, particularly for new entrants, as it enables them to quickly expand coverage in instances where initial cash flows are limited.
In sum, infrastructure sharing helps optimise scarce resources, decrease investment duplications, and reduce capex and opex. It can also create incentives for rolling out networks in underserved areas and help improve the quality of service in congested areas.
According to a report by Analysys Mason, operators employ active infrastructure sharing for use in cases like rural coverage expansion, cost-effective 3G or LTE deployment, accelerated nationwide coverage expansion, optimum utilisation of established network resources, increasing revenue (through wholesale arrangements), acquiring greater spectrum bandwidth (through spectrum pooling) and reducing spectrum costs (as a result of joint bidding). Despite the potential benefits presented by sharing, operators have not shown much keenness on entering into such agreements and their experience has varied.
Europe has been the most mature region in terms of sharing active infrastructure, with almost 15 deals being signed between network operators as of December 2014. These include deals regarding the sharing of multioperator core networks as well as multioperator RANs. The latest deal in Europe was signed in December 2014 in Russia between Vimpelcom and MTS, when the two operators tied up to jointly roll out LTE networks in 36 regions in Russia, sharing base stations, transport networks, and other infrastructure.
In the Americas, network sharing has been dominated by deals between tower companies. However, these are still limited to only five countries in the region: Brazil, Chile, Columbia, Mexico and the US. According to industry estimates, a lot of opportunities exist in active sharing, where the only deals that have been signed till date are in Canada and Brazil.
In the APAC region, active infrastructure sharing has failed to gain traction primarily because of the reluctance of operators as they are still trying to differentiate themselves in a hypercompetitive market. In the past five years, however, about six active sharing deals have been signed in countries like Hong Kong, Malaysia, Azerbaijan and Papua New Guinea. With precedents of active infrastructure sharing deals increasing and the existence of massive market potential, the region is expected to see a rise in the number of operators sharing active infrastructure.
The Middle East and Africa region is also lagging behind in terms of active sharing. There have been only few active infrastructure sharing deals here till date – one in Israel in November 2013 and the other in South Africa in March 2014. The region holds immense opportunity for active infrastructure sharing as it is still underserved in terms of telecom coverage. Its effective and creative application can allow operators to roll out newer-generation networks at a faster pace.
Despite being limited so far, active sharing is slowly gaining momentum around the world, driven by faster LTE deployment and the need for improving coverage. It is expected to pick up as the telecom industry takes a step beyond LTE and experiments with LTE-A, which is claimed as the best solution for providing true 4G and even 5G speeds. LTE-A is an upgrade from LTE in the sense that it facilitates carrier aggregation (CA), a technology in which operators around the world are showing interest. CA allows the aggregation of multiple LTE carriers with different bandwidths into a single LTE-A car-rier with enhanced bandwidth.
The industry is seeking innovative solutions for increasing the capacity of existing networks a thousandfold to meet the meteoric rise in data demand, and infrastructure sharing is among them. According to data from GSA, 4G LTE networks will cover more than a third of the global population by end-2015 as their deployment continues to accelerate. To save on the opex and capex required for rolling out new 4G networks, operators are likely to increasingly adopt active infrastructure sharing.
However, active infrastructure network sharing involves agreements on a variety of operational parameters, making network governance very challenging. Partners may have to jointly agree on certain key criteria, which can turn out to be quite complex and time-consuming.
Despite these challenges, active infrastructure sharing is likely to pick up across countries as the expansion of 3G services and the launch of 4G provide an added impetus to assess its commercial and regulatory viability