DUBLIN, Ireland-The cost of building individual third-generation (3G) networks has been described as a noose around the neck of European mobile operators already struggling with huge debts. But several 3G license winners could gain at least a stay of execution in the form of network sharing with regulators conceding that cooperation and competition are not mutually exclusive.
The leading supporters of network sharing are those operators that paid billions of dollars for 3G mobile licenses in Germany and the United Kingdom, where the costs per subscriber were much higher than other countries in Europe.
The German regulator was the first to allow 3G license holders to share infrastructure in a move expected to wipe up to US$11.8 billion off construction costs. Operators will be allowed to share “active” elements, such as transmitters, as long as each member of the shared site can demonstrate it is operating independently.
Immediately after the German regulator’s announcement, a spokesman for U.K. telecom regulator Oftel said he was not aware of any similar request from the U.K. 3G license holders. But within days, British Telecommunications (BT) and Deutsche Telekom announced a cooperative deal on network building in Germany and the United Kingdom, suggesting the terms of the U.K. license do not forbid network sharing either.
Debt-ridden BT reckons the agreement to share new and existing equipment in urban areas could reduce total 3G capital expenditure by around 20 percent or US$1.8 billion during the next five years, during which there will also be sizeable savings on operational costs.
The concept of network sharing has also extended to European states where license fees did not reach such high levels. In Sweden, Telia, which did not win a 3G license, and Tele2 established a joint venture to share the cost of network rollout, while fellow license holders Europolitan and Hi3G agreed to share about 70 percent of their infrastructure.
But there are still strict conditions on coverage. European license holders will not be able to develop different regions and then use roaming agreements to satisfy their minimum coverage requirements-and important commercial issues must be addressed.
“There are no major technical barriers to network sharing, but operators must determine exactly how much they can share without compromising their business plans,” said Sara Harris, U.K.-based Strategy Analytics senior industry analyst. “The operators would have to be prepared to share confidential forecast data, and that is not a straightforward decision.”
Under European Union (EU) competition law, operators must also demonstrate they are not acting anticompetitively or compromising network quality.
Equipment vendors are putting on a brave face regarding suggestions their revenues will be severely affected. A Nortel Networks statement said its revenue will be improved if traffic can be delivered more quickly, even though less equipment will be required overall, a view shared by Debbie Morgan, research analyst with U.K.-based research firm Analysys and author of a new report on 3G network sharing.
Of course, some observers believe that even network sharing will not be enough to save the more indebted companies. “The money saved on building costs is only a very small percentage of the total debt carried by many of these operators,” claimed one Germany-based analyst.
However, Morgan’s Analysys colleague Eddie Murphy, senior wireless analyst, disagrees. “Operators will save billions of dollars, particularly on infrastructure outside urban centers where a combination of low population density and challenging physical conditions drives up costs massively,” Murphy said.
And that is also the opinion of Nortel Networks spokesperson Jamie Moody. “Savings in site costs where operators will be able to share all capital and operational costs related to building and maintaining the sites could be up to 30 percent of the capital costs of building a 3G network,” Moody said.
