Russia’s shared 5G network plan harks back to 4G failures

If the definition of madness is trying the same thing and expecting a different result, Russia’s mobile operators are verging on insanity. Despite repeated and ugly failures to share networks between the main four MNOs, two of them – MegaFon and Rostelecom – say they are exploring a joint venture to deploy a single 5G infrastructure.

This brings back memories of an attempt by the Russian government, at the start of the decade, to reduce the cost of LTE roll-out and accelerate deployment, by creating a single wholesale network, to be shared and co-financed by the three main MNOs (Vimpelcom, now Veon; MTS and MegaFon); plus Rostelecom, the wireline incumbent, which only entered the mobile market at the 4G stage. There is now also a fifth national MNO, Tele2.)

That fell apart amid political wranglings and a failure by the players to agree on the terms of their engagement with the wholesale entity, Scartel (which had built a WiMAX network in Moscow and St Petersburg under the brand name Yota).

The quartet was supposed to take equal stakes in Yota in return for access to its network, but after a series of disputes and delays, only MegaFon finalized a deal with the wholesaler, while the operators also gained their own 4G spectrum and started their own roll-outs.

The MNOs went their own way on LTE, and the final deathknell sounded in 2013 when MegaFon acquired Scartel, at around the same time that state-owned Rostelecom launched its mobile business.

Will MegaFon and Rostelecom fare any better in grabbing a 5G headstart? They are initially setting up a working group to explore options for roll-out in the 3.4-3.6 GHz and 26 GHz bands. That could lead to a formal joint venture and a “single infrastructure operator”, said MegaFon in a statement. That, in turn, suggests the network could be made available on a wholesale basis to the other MNOs, or that the co-financing could be extended to other players.

MegaFon CEO Sergey Soldatenkov said in a statement: “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.

But of course, many early 5G roll-outs are being driven by sporting events, which allow a country to showcase early 5G progress but within a constrained environment and service platform. Russia is no exception – it will host the football World Cup in 2018 in Moscow and St Petersburg, and Megafon plans to set up 5G test zones around these events.

Spokesperson Yulia Dorokhina said: “One of the main advantages offered by the new network is its huge capacity. The client receives high quality signals in places of mass gathering of people – stadiums, railway stations, traffic jams.”

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.”

Earlier this year, the Moscow mayor’s office was reported to be in talks with a consortium of mobile operators with a view to deploying a commercial 5G network, or at least a downtown 5G zone, in 2020. Megafon and the new entrant Tele2 responded enthusiastically to the reports, but there was no comment from Rostelecom, VimpelCom or MTS – the last of which has questioned the near term 5G business model.

“The consortium may lay the foundation for the joint development of this technology by all the operators,” said Konstantin Prokshin, head of strategic communications at Tele2, while Megafon said government support would be important to reduce the cost and complexity of deployment and power supply.