The Indian telecom industry has come a long way since operators first agreed to share passive infrastructure and formed separate entities to manage their tower business. While passive infrastructure sharing is commonplace, active infrastructure sharing has not taken off in India yet. However, operators have started exploring the option to share and trade spectrum after the government gave its go-ahead for it in 2015.
A look at the different sharing models in the industry and the possible impact on infrastructure providers (IPs)…
- Spectrum sharing: This involves the pooling of spectrum by two operators to gain spectral efficiency. In India, current regulations allow spectrum sharing in the same band only. In addition, regulations allow spectrum sharing between operators holding liberalised spectrum acq-uired through auctions or between operators that were allotted non-liberalised spectrum under the previous regime.
- Spectrum trading: This involves outright sale of or right to use spectrum. From a seller’s perspective, it is an upfront monetisation of its spectrum assets, while from a buyer’s perspective, trading is acquiring spectrum to either augment capacity or increase its footprint.
- Active infrastructure sharing: Current regulations in India allow the sharing of antenna, feeder cable and Node Bs among operators. Thus, effectively, operators in India can share their radio access network (RAN) and transmission network. While guidelines on active infrastructure sharing are not very clear on all aspects, they are sufficiently clear to get started.
Approaches towards spectrum sharing
In the case of spectrum sharing, the traditional model applied in most countries is multi-operator core network (MOCN), under which the RAN is shared among two operators. The main disadvantage of such an arrangement is that operators have to plan together. If operators have different levels of maturity, the complexity increases because they may have different priorities.
Alternatively, sharing can be done between two unequal-sized operators. A smaller operator, which does not necessarily have the capacity or the intent to roll out its network beyond the point where it has already rolled it out, can tie up with a larger operator. In this way, it can offer its carrier to the larger operator, allowing it to cover most of the country. The smaller operator can then use the intra-circle roaming (ICR) arrangement to ride on the other operator’s network in areas where it does not have its own network. This reduces the complexity that arises in the case of an MOCN arrangement.
What does this mean for IPs?
Spectrum sharing can affect tenancies and thus IPs in a negative way. Similarly, the immediate impact of spectrum trading will be negative on IPs because it means one operator less in the market. However, a deeper look at the buyer’s profile can reveal the long-term impact on an IP. If the buyer’s intent is to augment its capacity through spectrum trading, then, in the short term, the need for capacity sites will reduce. This will negatively impact IPs in terms of tenancies and loading. However, if the buyer intends to increase its footprint to other circles through the trading arrangement, it is a positive move for the IP. This is because the smaller operator would have done a limited network roll-out with the spectrum in hand, whereas the larger operator will most likely do a near-pan-circle roll-out. Thus, the overall impact on the IP will depend on the buyer and its primary motive behind buying spectrum.
Spectrum sharing and trading are also likely to have an impact on active infrastructure sharing in the country. Spectrum sharing is likely to be positive for active sharing because through the latter, operators can reap additional benefits of reduced capex and opex over and above the increased spectral efficiency gained from sharing spectrum. On the other hand, spectrum trading is clearly negative for active infrastructure sharing.
The primary reason behind operators’ unwillingness to share active infrastructure is that they still hold coverage as a key differentiator and most large operators do not want to give up this advantage. Secondly, active sharing is easier in a greenfield environment than in cases where networks have already matured. In this regard, the roll-out of 4G networks in India presents a good opportunity. Lastly, there exists a perceived threat among operators arising from the sharing of information.
The way forward
Globally, there are several precedents that present important lessons for India. Unlike what is commonly believed, unequal-sized operators have actually come together for active infrastructure sharing. Further, when operators are rolling out new technologies where returns start flowing in much later, active infrastructure sharing can help them minimise their capex and opex.
Global experience also suggests that operators first start sharing passive infrastructure, then move on to share active infrastructure and finally, share their spectrum. Given the experience that India has had with passive infrastructure sharing, it is now time that operators start sharing spectrum at a larger level. This can be an efficient way of using the limited natural resource that spectrum is.
Based on a presentation by Bharat Bhargava, Partner, Advisory, EY