Operators often express their determination not to let 5G create a massive capex hike, but unless they adopt radically different approaches to deployment, they are likely to get caught up in a spiral of investment. 5G was meant to be all about virtualized, software-based networks, and an open, WiFi-like ecosystem – both trends creating a new cost base. But first wave 5G is looking similar to 4G – mainly physical baseband equipment; increasingly large and complex antenna arrays; high priced spectrum licences; the same old vendors (though even fewer than there were at the start of 4G).
If the new, open, software network will have to wait for a future phase of 5G deployment – and if operators do not feel able to put off 5G roll-out until then – they will have to consider far greater degrees of sharing. This might involve building shared networks (where the regulator allows), and extending that from passive infrastructure to the active RAN. Or it might involve riding on a neutral host network operator, especially for difficult environments like deep indoor networks, or railways and highways. Or it might involve co-investing in a 5G network with an industrial or webscale partner, giving them priority access, or a say over how the network is planned and optimized, in return for the dollars.
There are examples of all these. The last approach, industrial co-investment, has been adopted by China Unicom, with its strategic enterprise shareholders, and by Japanese newcomer Rakuten, which is working with electricity utilities. Neutral host players remain rare in the active network, though common in operating towers and fiber backhaul – however, some are emerging in specialized environments such as transport systems or large industrial complexes, and this trend is likely to gather pace as industrial 5G demand rises.
As for network sharing, many operators are starting to reduce their natural hostility to losing full control of their active RANs, when they consider the cost benefits. In Russia, two operators – Rostelecom and Megafon – are in talks with state-owned company Rostec to form a 5G consortium.
The idea is to create a common platform, largely using homegrown equipment sourced through Rostec, which will support the two operators’ 5G services, and potentially those of other service providers. This would reduce cost, especially for the first phase of deployment when 5G networks would not be fully loaded, and would also address the shortage of spectrum which Russian MNOs claim will delay at-scale 5G.
However, there may be opposition from some authorities. At the start of 4G, the Russian government was very keen on sharing, setting up former WiMAX provider Yota as a neutral host operator whose network would support all four MNOs (Megafon, Veon, MTS and former wireline incumbent Rostelecom. There is now a fifth national MNO, Tele2). However, this fell apart amid lack of enthusiasm from the operators, and in-fighting over how costs and capacity would be allocated. In the end, Megafon acquired Yota.
This time, at least two operators are keen on the idea, according to reports in local newspaper Kommersant, but it quoted Alexander Gorbatko, deputy head of the Department of Information Technologies of Moscow, saying that, while “creating communication networks on the basis of a single infrastructure operator will allow all market players to reduce costs… the unified platform carries the risks of lack of competition and, as a result, high prices for residents and consumers, lack of operator flexibility and monotonous services”.
The mooted joint venture could, if the regulator does not take this negative view, come into being by March next year. The proposals are the result of a working group which was set up in late 2017 by the three organizations, mainly to explore options for roll-out in the 3.4-3.6 GHz and 26 GHz bands.
MegaFon CEO Sergey Soldatenkov said in a statement last December: “In the current market conditions, the most logical and cost-efficient option for deployment of the new standard is cooperation between several players. We are already working together successfully with Rostelecom as part of the working group on information infrastructure under the government program for digital economy and we see huge potential for further cooperation.”
MTS might take some persuading, however. Responding to the new deal between its two rivals, a spokesperson said: “We always look for ways to be more efficient in our investment plans. Given the high level of cooperation on the market already, however, we don’t see the need to create additional groups or entities.”
MTS has an infrastructure sharing initiative called LTE Union with MegaFon, VEON and Tele2 and says it is sharing “everything from towers to spectrum”.
MTS is the market leader in Russia with 78m mobile subscribers, followed by MegaFon on 76m and VEON on 59m, according to Ovum. Rostelecom is a mobile minnow but would be valuable in providing fixed lines for backhaul and fronthaul, and it does have its own spectrum.
The Russian operators have shown mixed levels of interest in 5G so far, although they have all been involved in some kind of trials – for instance, Megafon has successfully tested mobile data at 1Gbps speeds using Huawei equipment and at 5Gbps in a trial with Nokia.
Like other operators, such as the UK’s BT, MTS has admitted it cannot yet see a business case for 5G – and in fact, the executive who said that most vocally, CMO Vasyl Latsanych, has now become CEO of Veon Russia. Veon’s group CTO, Yogesh Malik, has said 4G networks remain underused in Russia.
And Rostelecom recently signed an agreement to set up a 5G pilot zone in Moscow to explore various use cases. It is working with Nokia and technology non-profit organization the Skolkovo Foundation. The latter will host the zone in its innovation centre near the Russian capital. Among the first use cases to be explored will be self-driving vehicles; ways to use connectivity to improve the efficiency of electricity and heating networks; and smart construction.
Mikhail Oseevsky, president of Rostelecom, said: “The agreement is a logical follow-up of Rostelecom’s efforts aimed at building and testing 5G networks. In May 2017 the company signed a Memorandum of Understanding with the Government of Tatarstan to build and run a 5G network in the Republic. In the framework of the 5G project in Skolkovo, Rostelecom will evaluate the usage of various segments of its frequency resource for advanced technologies, including IMT, with the use of LTE/LTE-Advanced systems.”
Other countries are taking a high interest in greater sharing, and many of the Russian official’s objections will become old-fashioned when these pooled resources can feed into virtualized, sliceable networks, converged with cloud compute resource – enabling a huge array of services and differentiation on the same infrastructure.
In New Zealand, Chorus – the national wholesale fiber provider – is calling on the government to consider enabling shared infrastructure to support all the MNOs in deploying 5G. Chorus is looking to bolster the sharing model, to improve its own business case. Kate McKenzie, the firm’s CEO, said there was a “strong argument” for sharing 5G network assets in a small country like New Zealand, whose population is only 4.8m.
“There are far more effective outcomes for the country if you build it once and encourage competition at the retail layer and share as much as you can,” she told the Broadband World Forum in Berlin. “That is what we’ll be arguing for down the track.”