March 2009: Network sharing hits the big time, says Unwired Insight

Dr Alastair Brydon

The announcement on 23 March 2009 of a deal between Vodafone and Telefónica demonstrates the growing momentum among mobile network operators to secure network sharing agreements. Network sharing is a necessity for operators in the current economic climate, particularly in advance of major expenditure on Long-Term Evolution (LTE).

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There are many different forms of network sharing, as shown in Figure 1, with the biggest gains for operators arising from the deeper forms. For simplicity, and to allay regulator concerns, operators have tended to pursue passive sharing and, more recently, RAN sharing. However, there are signs that regulators are becoming more open to other ideas and we anticipate that deeper forms of network sharing will now materialise.

For example, the recent Digital Britain report from the UK government has stated that that the Government and Ofcom will consider further network sharing, spectrum or carrier-sharing proposals from operators, particularly where these lead to greater coverage and are part of the mobile operator’s contribution to a broadband universal service commitment.

Vodafone and Telefónica have announced their intentions to share network infrastructure in Germany, Spain, Ireland and the UK, with detailed discussion ongoing in the Czech Republic. Cost reduction represents the biggest short-term gain from network sharing. Vodafone and Telefónica anticipate cost efficiencies of hundreds of millions of pounds over ten years.

This has followed a network sharing announcement by T-Mobile and 3UK in December 2007, in which they estimated that they would save GBP2 billion over ten years. To illustrate the potential cost benefits of network sharing in a realistic network deployment, we have modelled the case of two typical mobile network operators undertaking RAN sharing. One operator has a 3G network and the other has 2G and 3G networks. Between them, the operators have 18 000 cell sites and have deployed 13 000 3G base stations.

The coverage of these 3G base stations overlaps substantially because the operators have targeted the same highly populated areas. The model considers the total capex and opex incurred by the operators over ten years. Without RAN sharing, the operators each expand their 3G networks to 13 000 sites.

With RAN sharing, the operators retain the best 8000 3G base station sites (and upgrade the equipment to support RAN sharing). They redeploy the 3G base station equipment from the other 5000 sites to rural areas that only have 2G coverage, in order to provide additional 3G coverage. As shown in Figure 2, over ten years, 3G RAN sharing saves the MNOs a combined total of USD4 billion, comprising about USD2 billion in capex (by eliminating the need to build additional base stations) and USD2 billion in opex (by reducing the number of sites that they need to operate).

While the immediate cost benefits of network sharing are impressive, there are additional important benefits. For example, network sharing enables mobile network operators to accelerate 3G coverage roll-out by:

• minimising the need to acquire new base station sites
• improving the economic case for providing 3G coverage to rural and low-traffic areas
• avoiding the delays caused by organisational limitations.

The agreement between Hutchison 3G and T-Mobile in the UK demonstrates the improvement to 3G coverage that can be achieved through network sharing. It took Hutchison 3G about four years to increase its number of base stations from 5000 to 7500. Its network sharing agreement is targeted to increase the number of base stations the operator has available from 7500 to 13000 within two years.

Network sharing enables operators to share the cost of deploying LTE, and thereby increase their speed of roll-out. LTE is a major enhancement to 3G networks, and will be needed to support the rapidly increasing penetration of mobile broadband services.

According to the GSMA in March 2009, 26 network operators have committed to LTE technology. Ten of these are planning to launch their networks by 2010, including: CenturyTel, MetroPCS and Verizon in the USA; Bell Canada, Rogers Wireless and Telus in Canada; TeliaSonera in Norway and Sweden; and KDDI and NTT DoCoMo in Japan.

The investment cost per operator would be substantially lower for a shared LTE deployment than for the construction of individual LTE networks.

Furthermore, the early deployment of a shared LTE network could provide operators with a strong competitive advantage, based on superior coverage and faster data rates.

Deeper forms of LTE network sharing could provide even more substantial benefits for operators. For example, they may be able to combine their separate spectrum allocations (which individually may be relatively small) into wider bandwidths, to maximise the performance of their shared LTE networks.

LTE has been designed to deliver its best data rates and capacity through the use of the widest radio bandwidth possible (20MHz), as shown in Figure 3. A single operator may not be able to set aside this much spectrum for LTE, but two operators that share an LTE network could combine their spectrum allocations – for example, each could provide 10MHz to enable them to dedicate 20MHz to LTE.

With so many benefits from network sharing, we expect most mobile network operators to implement network sharing of some sort during the next three years. However, there will be many challenges and it will be crucial for operators to choose the right partners. Infrastructure sharing constitutes the greatest upheaval to cellular networks since their inception, and will be a considerable undertaking that will require robust commercial, legal and technical agreements between partners.

Unwired Insight can support you with network sharing strategy and implementation. We can help you identify the best partners and the best approach to maximise commercial benefit in your own specific circumstances.

Email us us or phone +44 (0) 1480 819391 for more information.