Wholesale-only networks seem an almost inevitable result of the evolution of mobile communications. Yet according to a GSMA report, most of the national initiatives which have been set up in recent years around the world are failing.
This is serious news, because without workable approaches to network sharing and wholesaling, it will be impossible to build 5G to the density required, in an economic way, and many aspects of the 5G vision, including on-demand services, will be hard to realize.
As mobile connectivity becomes essential to life, the need for ever-increasing capacity, reliability and ubiquitous coverage grows. Even with the developments which will transform the cost of building and running those networks – automation, virtualization, commoditized hardware – those challenges will require huge amounts of money to meet. And as networks become denser, there will be pressure on sites and backhaul if MNOs continue to build their own individual networks.
So sharing the cost and resources involved in expanding mobile broadband services is essential, and there are various models to do this:
neutral host platforms, run by an infrastructure provider or a cloud operator;
one telco adopting a utility model to support others, as has happened in other industries like gas and electricity;
network sharing among MNOs;
a national wholesale network, backed by the government, a private entity or a collective of MNOs, for everyone to use as required.
The options will only get richer as network-as-a-service, dynamic spectrum and network slicing technologies allow more enterprises and providers to access mobile resources on an on-demand basis.
But there have always been technical and commercial obstacles to the shared networks ideas. Regulators are concerned about diminished competition if active infrastructure or spectrum are shared (ignoring the fact that the most innovative services are coming from MVNOs or over-the-top providers). MNOs tend to guard control of their network jealously, seeking differentiation via the best sites and network optimization. There are standards for multi-operator RANs, including small cells (where sharing is most essential), but specs like 3GPP MOCN are underused.
One of the approaches, sometimes adopted by governments to kickstart new network build-out while reducing the MNOs’ cost burden, is to create a wholesale open access network under the auspices of a state initiative, usually with some investment from private backers and possibly the MNOs themselves. But in the GSMA’s report, ‘Wholesale Open Access Networks’, the association for mobile operators takes a strong stance against this approach.
It states at the beginning of the document: “Some supporters claim that these networks will deliver greater coverage than market competition can. However, those making this claim often gloss over the fact that, in order to be built, the SWN [single wholesale network] or WOAN [wholesale open access network] require significant public subsidies and other forms of support which are typically not available to competing network operators. The GSMA believes that network competition can and does deliver mobile network coverage. In areas where building networks is uneconomic there are other approaches. They include voluntary network sharing that can facilitate coverage in a particular area.”
John Giusti, chief regulatory officer of the GSMA, reiterated the points, saying in a statement: “We have found that network competition produces faster and more extensive network coverage, and the examples highlighted in the report indicate little evidence that a SWN/WOAN is likely to achieve this.”
Of course, the GSMA exists to represent the views of the MNO community, which largely favor the status quo of one operator, one network, with sharing largely confined to passive infrastructure.
But such statements do little to move the industry forward towards the environment of shared resources, which will be essential to 5G success. Instead, they reinforce traditional MNO fears about new competition enabled by wholesale networks which they do not fully control – but ignore the fact that neutral host and sharing will occur anyway, where more wireless coverage is required, harnessing WiFi (and in future MulteFire) in unlicensed spectrum, and creating a dynamic platform that bypasses the mobile operator.
The failure of leaving everything up to the MNOs themselves is seen in attempts by various countries to push the operators into voluntary sharing arrangements (sometimes with the threat of compulsion) in rural areas. From the UK to Australia, these efforts have resulted in disputes and litigation, but not satisfactory ubiquitous services.
If well thought-out, a wholesale network with external or state investment could improve the business case for MNOs, at least partly addressing their complaint that, in a market-based system, they cannot justify investing in unprofitable networks such as those in remote areas. Yes, open access brings new competitors, but those exist anyway in the unlicensed spectrum world, and companies like Google and Federated Wireless will enable a whole new approach to wholesale access, operating geolocation databases and, in future, on-demand spectrum services, in shared or unlicensed bands. And MNOs still have advantages over any new rivals, with their extensive customer reach, brand awareness and apps partnerships.
But these arguments appear to be carrying little weight with the GSMA. Its report examines five SWN or WOAN projects, in Kenya, Mexico, Russia, Rwanda and South Africa, in a follow-up to its 2014 study by Frontier Economics, which assessed the economic case for a wholesale network model.
The new report makes valid points about the delays and political disputes which have dogged progress in nearly all state-inspired WOAN initiatives. But it takes a very rosy view of MNOs’ progress in voluntary infrastructure sharing, which almost always stops short of active RAN pooling, and claims its members are “also exploring new business models with third parties to share the cost and risk of investment in rural and remote locations”, without providing much evidence.
The report also argues that network competition is essential to drive innovation in devices and services, a view that is surely belied by the level of creativity and competition in over-the-top services, and the emergence of virtualized technologies which will allow operators to differentiate their quality of service and their services in software, which can run on commoditized, shared infrastructure and sites.
“We are concerned that a move to wholesale networks will harm consumers, as history has demonstrated that network monopolies normally result in high prices and lower investment in infrastructure,” said Giusti. “With this in mind, we call upon governments looking to implement a SWN or WOAN to instead support the ability of mobile operators to enter into infrastructure sharing agreements on a voluntary basis and consider how they can apply market-friendly spectrum assignment methods to maximize coverage, using appropriate spectrum license conditions to extend mobile services to underserved areas.”
Of course, this is the real GSMA agenda – to lobby for more spectrum on more flexible, cost-effective terms, and lower taxation burden, but still with allocations largely geared to traditional MNOs. The fact that dynamic wholesale networks are being created in shared and unlicensed spectrum, threatening the whole entrenched system of auctions and long licences, does not get a mention.
The report’s recommendations are that governments and regulators should work towards:
Cost effective access to low frequency spectrum
Support for spectrum refarming
Support for all forms of voluntary infrastructure sharing
Elimination of sector-specific taxation on operators, vendors and consumers
Non-discriminatory access to public infrastructure
Support for streamlined planning and administrative processes
Relaxation of Quality of Service requirements
Context-appropriate competition policy, especially concerning market structure
Support for multi-sided business models such as zero-rating and sponsored data
This is a traditional MNO wish list, and many of the recommendations are indeed important, such as better access to public infrastructure, especially for small cells and smart city projects. However, the smart city is a good example of a system which will evolve best if it is based on a shared, open access network, under the auspices of the local government, with private investment and participation, and with all the MNOs able to tap into the network, along with other providers. That will drive new citizen services and automated, intelligent municipal applications far more effectively than each MNO putting up a few small cells in areas of premium usage.
There have certainly been many problems and delays in the wholesale projects cited in the report, and these have been covered in the past in Wireless Watch. Russia’s supposed neutral host operator, Yota, ended up being acquired by MNO Megafon and the operators went their own way on 4G (though the government’s shared network plan certainly pushed them into action). And Kenya’s project seems to have been shelved amid MNO opposition.
Two other projects are criticized mainly for being delayed, meaning that there are no real results to be assessed. Mexico has finally awarded the 700 MHz spectrum, and contract to build and run its wholesale LTE network, to a consortium called Altran and this will be eagerly watched in a country which is trying to reduce the power of the incumbent Telmex and introduce new competition and services.
Meanwhile, South Africa has had several false starts, but last October published an ambitious plan which would, if accepted, up-end the country’s approach to spectrum licensing and access. It proposes a public-private partnership (PPP) to develop an open access wireless network, with the consortium including a wide range of participants including the MNOs, private equity, OTT and ISP players and infrastructure companies. It proposes to use all the spectrum available rather than assigning just one band. This is a radical approach, and will come with risks and a significant dose of political conflict. However, it does set out a vision which will, we believe, become far more normal during the second phase of 5G, when extreme densification, network slicing and vertical/IoT services transform the mobile model for everyone.
The GSMA is predictably wary, saying in the report: “Irrespective of its motives, the government is putting a lot of faith in an unproven model. The repercussions, if the project goes ahead, could be irreversible and result in a negative impact to the country’s economy.”
By contrast with these as-yet untested projects, Rwanda has a live WOAN, which launched on schedule in late 2014 in capital Kigali as a PPP between the government and Korea’s KT, called olleh Rwanda networks (oRn), . As of July 2016, the network had reached 30% population coverage and since then, wholesale prices – originally slammed as being too high to make the business case – have been reduced several times. The GSMA claims the network will miss its target of 95% population coverage by the end of 2017, and that retail data prices remain too high, limiting uptake.
oRn complained last year that, despite reducing wholesale fees, LTE providers were still pricing their retail offerings too high, implying that the three MNOs – MTN, Tigo and Airtel – were deliberately sabotaging the LTE effort because they wanted to push their 3G services and get return on that investment first. However, that will surely change as demand for 4G data rates inevitably rises in Rwanda as everywhere else, and because there is competition from 14 other ISPs providing LTE services, including ISPA and Popconn. No updated data is provided in the report from later than July 2016.
If it does not, and oRn is right that the MNOs are wrecking the plan, it highlights all the issues which face wholesale and neutral host models, many of them stemming from an ostrich-like unwillingness, among many operators, to evolve their approach. Even the promise of cost-effective 4G densification and 5G roll-out does not seem to break down the resistance to losing control of the physical network – at a time when the more advanced carriers are rapidly turning those networks into software. Network slicing, dynamically shared spectrum, open source base stations and orchestrators, multi-operator network-as-a-service in the cloud – all these are on the horizon. If the MNOs adapt and take advantage of these developments, they could kickstart a new phase of growth and profitability. If they cling to the one MNO/one network norms, they will be pushed aside by new entrants, cloud platform providers, and even their own vendors.