The UK MNOs have announced a prospective collaboration that will bring LTE coverage to rural areas, and in so doing, have illustrated the problem that scaling out the IoT presents in the marketplace. The Shared Rural Network (SRN) proposal demonstrates why overlapping efforts from competitors are inefficient, and given the slow progress of the LPWAN sector, makes a strong argument in favor of wholesaling wireless networks.
Currently, the UK can claim 99% population coverage for LTE, and around 93% landmass coverage too. However, according to O2, one of the UK MNOs, only 67% of landmass receives coverage from all four of the MNOs, with 7% of the country receiving no LTE coverage at all. There are no stats given for the amount covered by two or three MNOs.
As such, the MNOs have proposed the SRN project, which requires government and regulatory approval but boils down to pooling resources. The proposal should bring the landmass coverage up from 67% to 92%, but O2 warns that if any of the MNOs does not play their part, the SRN will not be successful.
This approach is one that could be readily copied in other countries and markets, especially as regulators begin realizing that leaping to 5G before 4G buildouts are complete is not a good look. Reading between the lines, one can infer that such MNOs are only grouping together to ensure that they meet the required build-out targets – which are often tied to the spectrum licenses granted by the operators, and which frequently carry financial penalties for missing.
Further scrutiny leads you to the conclusion that a market such as the UK, where there is overlap between all four MNO networks in 67% of the country, considerable amounts of investment have been effectively wasted, as some form of SRN agreement could have been reached that would ensure a more efficient rollout.
However, this line of thinking very quickly leads you to an argument in favor of monopolies or state-regulated (or owned) wholesale network providers that would simply install and then sell access to the network assets to whomever wanted it. Monopolies have obvious anticompetitive problems, while state ownership or mandated providers are politically unappetizing in many countries.
But the UK already has an example of a wholesale network provider. British Telecom (BT) was forced by the communications regulator Ofcom to spin-out its Openreach division, after it was deemed that Openreach was not being sufficiently neutral – apparently favoring BT in requests for access and maintenance, at the expense of the other broadband providers that wanted access to Openreach’s fiber and copper infrastructure.
In theory, a truly independent sole-provider of network infrastructure could deploy coverage in the most efficient manner, without incurring the wasted investments that competitive rivals face when covering the same town four times over. However, a single provider doesn’t face the same open market competition, which many (depending on your politics) would argue leads to a lack of innovation and poor performance, as another rival can’t swoop in and undercut on price or outperform on service. Relying on government policy to keep the sole-provider up to spec leaves it vulnerable to changes in government priorities too.
Further, as Ofcom is reporting, the now ‘in-theory independent’ Openreach hasn’t silenced all complaints. Ofcom decided not to go as far as an entire legal separation of the subsidiary, when it made the decision back in 2017, but it is now recommending further action be taken. Currently, Openreach still has its budgets allocated by BT, and its profits go back to BT too – which of course, was at one point (as the name suggests) a state-owned firm.
So if we take the Ofcom-Openreach experience as indicative of the trouble in forcing an existing wholesale provider to become independent, that the firm is so full of existing business relationships that it would need a complete gutting of the leadership to rectify this and then aggressive hiring to make up for the loss of experience, it seems that the better approach would be to create one focused solely on the new technologies.
We’ve missed the boat there on 5G, and the integration difficulties between 5G Standalone and 5G Non-Standalone are indicative of the problems that all the MNOs are going to face as they try to integrate the new technologies into their legacy operations. Perhaps there will be appetite to try this with 6G, whenever and whatever that is, as the wholesale provider would be able to deploy a new platform while leaving the MNOs to handle their legacy operations. This option sounds like it could get messy very quickly, but it could be the kick that the MNOs need to modernize their networks sufficiently.
As for the IoT, and particularly LPWAN, we have long noted that in the L-LPWAN world, low RoI in rural environments is not going to motivate the MNOs to build out coverage in these areas. However, a proposal such as the UK SRN could readily address that problem. The burden of deploying LTE infrastructure for the MNO is effectively split between itself and its rivals, and of course, its customer base is expanded to include the areas that it itself hasn’t built out to cover, but now every customer could be served by every MNO, as coverage would (in theory) no longer be the differentiator.
This approach could solve the chicken-or-egg problem facing L-LPWAN technologies in the MNO – whether to invest in the build out and hope that customers will come, or to hold off until a sufficiently large customer slaps down an order that justifies taking on the expense of building out LTE Cat-NB or LTE Cat-M into every nook and cranny of the network.
For potential L-LPWAN users, an SRN-type deal might sway them towards using an MNO, rather than installing their own U-LPWAN network – slapping a LoRaWAN gateway up on their grain silos or warehouse wall, for instance. Of course, the U-LPWAN network providers would still be competing directly, and to some extent, the SRN argument applies here too – although U-LPWAN is not as burdened by the cost of purchasing spectrum licenses.