As telecom operators move to decommission legacy GSM and CDMA networks in favor of LTE technology, steps must be taken to ensure a smooth process.
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GSM and CDMA, the two major radio systems used in cell phones, have been the lifeblood of mobile carriers for more than two decades. As you might expect, carriers have fully depreciated these assets, making services on these technologies some of the most profitable that they’ve offered. That’s the good news. The bad news, however, is in many cases these services are nearing the end of their lifecycle – with old equipment and significant (burdensome) use of power and tower space. Moreover, GSM and CDMA typically use premium spectrum for coverage and carriers are re-allocating it to LTE where demand is highest. As voice traffic moves to voice over LTE, carriers are increasingly showing interest in harvesting this spectrum and reducing operating expenses. Ready to move on, to re-use the valuable spectrum and reduce tower rents whenever possible, this is just the beginning of a long journey ahead for many carriers. Large scale decommissioning across the globe is in its early stages and will likely expand to most carriers in the coming years.
Retiring a well-established or legacy technology isn’t easy, but it can be done
Decommissioning older technologies is a multistage effort, initially focused on migrating customers to newer technologies and defining a strategy to reduce site rents for tower assets and operational expenses. Addressing key items right away can help the process move along more smoothly and make the entire organization aware of the complexities associated with a decommissioning.
Sales organizations may have a hard time finding all of the customers who still use the older technologies. Individual users may have old, prepaid balances on phones they no longer use. Mobile virtual network operators may have many customers that are not tracked effectively and other internet of things-like devices (e.g., monitoring, ATMs) may still be utilizing the legacy network. Carriers have to notify the individual customers via text, mail and phone calls, and may have to carefully coordinate the termination of service with regulatory agencies.
For corporate customers the migration may be even more difficult. A salesperson may not have been in direct contact with some of these customers in a long time, and they may have equipment and applications that are tied to these old technologies. Carriers have to provide an easy path to migrate applications and replace old devices. For example, carriers may provide LTE cards to replace CDMA cards across a national ATM network, and assist the customer with the management and cost of that migration. Carriers will need to contact most customers individually, explain the upcoming change, and present a roadmap for migrating to LTE devices and applications. These increased customer contacts and service changes materially increase the risk of churn.
Making a smooth transition
As the migration strategy is executed, carriers must provide customer care staff with scripts to address questions and in-store training to help customers through the process. Most customers have already traded their phones for a newer model that supports 3G or LTE. For those with a single-technology phone, a coupon for a low-cost replacement would likely be well received. Customers should be encouraged to go into any of the carrier stores and sign up for new services. This pool of customers is more likely to be price sensitive and/or less technologically savvy. They will require more handholding and extended time to fully migrate.
In addition to the customer migration, the carrier must focus on how to reduce tower rents after equipment is removed. Rent reductions over a five-year lease term can often cover the cost of the decommissioning. Carriers should identify leases that are coming due and notify landlords immediately, locking in rent reductions whenever possible. Rents are dependent on individual lease conditions that often have unique terms related to the equipment on the tower. Landlord negotiations often have to be done on an individual basis with a careful examination of each lease and direct negotiations with each landlord. In the U.S., many leases are contracted with the major tower companies – that often do not consider reductions in rent when equipment is removed. As such, carriers should carefully develop and execute a landlord negotiation strategy and fully investigate the business case for moving off of high rent sites.
As customers are migrated and a plan is developed to re-use spectrum, carriers must develop a complete plan for the logical and physical decommissioning of the network. In many ways, decommissioning presents many of the same challenges as a network deployment and can have a direct impact on equipment that will be remaining in service. Core elements must be identified, separated from the other technologies, logically shut off and then physically removed to free up data center space. Applications and services running on the legacy systems (e.g., voicemail) often support multiple technologies and these functions have to be migrated to new platforms. At cell sites, legacy power supplies may be near end-of-life and removed, which will require migrating in-service technologies to new or other existing power plants. Lastly, the proper disposal of all equipment must be accomplished in compliance with local environmental laws while maximizing the value from recycling or resale.
Decommissioning a network technology requires a delicate balance among providing exemplary customer care, not disrupting current operations, reducing tower rents, and maximizing financial recovery of recycled materials and equipment. The decommissioning of legacy networks is not a trivial activity. It needs to be diligently managed like any large-scale network build program – with sufficient up-front planning to ensure success.
Shaun Cohen has more than 25 years of industry and consulting experience, combining operational and financial expertise to deliver outstanding results. He has led operations teams to design and implement wireless network deployment and backhaul, managing multiple vendors to meet project schedules and budgets. Cohen has managed finance and accounting teams, both as a CFO and as a project consultant to improve reporting, cost analysis and accounting compliance. He has led acquisitions, turnarounds, due diligence efforts and deal negotiations. Prior to joining Pace Harmon, a boutique consulting firm focused on sourcing and IT strategy, he was the CFO for a national home inspection company and the CFO of a VoIP service provider. Cohen is a graduate of the Wharton School of Business with an MBA and a graduate of Princeton with a BSE in Electrical Engineering.
