Could Iliad Italia be a victim of Corporate Darwinism?

Iliad’s Italian business unit has lodged complaints with Italian and European regulators regarding network sharing deals, but could these objections be effectively ignored?

While network sharing is a proposition which offers great benefits to cash-strapped telcos in pursuit of the eye-wateringly expensive 5G connectivity dream, it is not without its opponents and critics. Some regulators have become very defensive about the progressive idea, while there are telcos being left out of discussions who are objecting also.

In Belgium, Telenet has raised concerns over a tie-up between Orange and Proximus, while the European Commission prevented O2 and T-Mobile from expanding an existing agreement to include 5G in the Czech Republic. Both of these network sharing partnerships have been halted in the pursuit of maintaining attractive levels of competition, but Iliad’s objections might fall on deaf ears.

Iliad is objecting to network sharing agreements between Wind Tre and Fastweb, as well as another between Telecom Italia and Vodafone Italia. Iliad is the only major telco in Italy not to be in a network sharing discussion. If these partnerships bear fruit, efficiencies will be realised, meaning competitor funds can be redirected elsewhere.

If this is a prediction of the future, Iliad will be in a weakened position to compete in the Italian market, and financial pressures could become too much to justify the venture. Iliad could become a victim of Corporate Darwinism.

The competition versus consolidation conundrum

Competition has been somewhat of a difficult topic of conversation between the regulators and telcos in recent years, primarily because of the polar-opposite opinions on market consolidation. The telcos would like to consolidate to achieve scaled economics, while the regulators want to preserve the number of telcos in each of the markets to maintain competition and encourage investment.

There are pros and cons on either side of the fence, though the regulators do not seem to be shifting. This argument has knock-on effects for network sharing agreements.

Ovum’s Dario Talmesio points out, network sharing could be viewed as consolidation through the backdoor. Combined assets reduces the number of independent networks in the market, and potentially reduces investments and competition.

In the Czech O2 and T-Mobile case, the European Commission suggested as there were only three major players in the market, further combination of assets between two of the parties would present too much of a risk of the third being squeezed out. The same case has been presented by Telenet to the national regulator in Belgium.

Regulators are sensitive to any propositions which would negatively impact competition in a market, but what about markets where the number of telcos could actually be reduced?

How much is too much competition?

While there is no official stance on the number of telcos in a market, the European Commission does not generally approve activities which would reduce the number of telcos below four. Vetoing the O2/Three merger in the UK, or Telia/Telenor in Denmark are two examples, but this might not be the case in Italy.

If regulators were to allow the network sharing agreements to proceed, Iliad would certainly be in a very precarious position, though there would still be four mobile service providers in the country; Telecom Italia, Vodafone Italia, Wind Tre and a Fastweb proposition enabled by its agreement with Wind Tre. This might be deemed enough competition in Italy to maintain a healthy market for the consumer and a financially sustainable one for the telcos.

The four telcos named above are venturing into untested waters here. This presents a new question for the regulators to answer on competition. Theoretically, suitable levels of competition are being sustained, and this network sharing dynamic has been approved by regulators in the past.

In the UK, Three and EE have formed MBNL, while Vodafone and O2 have CTIL. These are passive infrastructure sharing joint ventures, focusing on the rural environments. It is a similar situation which would be created in Italy, and the UK does have a sustainable telco industry. It is evidence that the dynamic could work, with or without Iliad in the mix.

Could this be a case of Corporate Darwinism?

Corporate Darwinism occurs when a market evolves to such a degree that players are either irrelevant or uncompetitive, and therefore go out of business.

The best example of this is Blockbusters. Once a dominant player in the movie rental business, as the distribution of content moved online the proposition of Blockbusters was no-longer relevant, therefore the company did not survive. This is an example of a market evolving to such a degree that the business was no-longer relevant.

The Iliad example is perhaps one where the market evolves to such a degree that the business is no-longer competitive.

If the four remaining mobile service providers have network sharing initiatives driving network deployment, investments can be more intelligently spend (a) on the network, or (b) in other areas of the business.

The shared networks might have a greater geographical footprint, have future-proofed technology and higher performance specs. Theoretically, Iliad would churn subscribers to higher quality rivals. Also, as less money is being spent on network deployment, tariffs could be lower, but profitability could be maintained. Or, more cash could be invested in value-add propositions for products. Rival offerings could look more attractive than Iliad products.

If regulators approve the network sharing agreements between Telecom Italia and Vodafone Italia, alongside Wind Tre and Fastweb, Iliad would find itself in a very difficult position. It become difficult to see the telco surviving in the long-term.

Unfortunately for Iliad, there is a coherent argument to approve the partnerships to drive towards a more sustainable telecoms industry, allowing the telcos to realise efficiencies ahead of the vast expenditure of 5G. The consumer would benefit, as would enterprise customers and the Italian economy on the whole. It might be a case of letting Iliad die out for the greater good of the Italian telecoms sector.

Iliad calls on courts to block Wind Tre and Fastweb sharing deal

Wind Tre and Fastweb have been attempting to take network sharing in Italy to a new level in recent months, but once again, Iliad has its objections.

While there will always be objections to network sharing agreements from some corners of the telecoms industry, Iliad is making a habit of it. As the only telco without a partnership to share communications infrastructure, the Italian disruptor is seemingly attempting to make sure it isn’t left on its lonesome.

According to Reuters, Iliad has submitted documents to an Italian court seemingly in an attempt to obstruct the partnership between Wind Tre and Fastweb. A first hearing will take place on February 12 to access whether Iliad should have access to the deed, though this follows objections made by to Italian courts for a similar deal between Vodafone and Telcom Italia.

The agreement between Wind Tre and Fastweb was originally signed in June 2019. The pair would deploy a shared 5G radio access and back-hauling network across Italy, and also Wind Tre and Fastweb macro and small cells, connected through dark fibre from Fastweb. The aim is to cover 90% of the Italian population with 5G connectivity by 2026.

Wind Tre will also provide Fastweb roaming services on its existing mobile network, while Fastweb will provide Wind Tre wholesale access to its FTTH and FTTC network. It is a very complementary deal for the pair, with the opportunity to realise genuine cost savings when looking forward at 5G.

However, Iliad seems to want to put a stopper on the partnership before it gets going in earnest. This is not the first time it has rejected the network sharing momentum in the country either.

The European Commission is also investigating whether plans to merge Telecom Italia and Vodafone Italia tower assets into a single operating company violate antitrust laws. Iliad has reportedly complained about this deal to regulators also. A decision on this dispute is set to be given on February 21.

The tie-up between Telecom Italia and Vodafone Italia is built along similar lines to the Wind Tre and Fastweb partnership. Firstly, the tower assets of both companies would be merged within telco neutral infrastructure company INWIT, with each telco taking a 37.5% stake. The next stage would be sharing active infrastructure, testing first on the existing 4G network with the intentions of realising efficiencies on 5G deployment plans.

But perhaps the most interesting aspect of both these partnerships is the validation of network slicing. While other agreements have focused on the passive infrastructure, this extends the sharing model to active equipment. Both of these parties would effectively be running virtualised networks over the shared infrastructure, a major validation of network slicing if it works.

This is the sort of partnership which telcos will be very keen to see work, while network infrastructure vendors will pray to see fail. Validation of network slicing could revolutionise the way in which rural networks are deployed and managed, allowing consolidation of CAPEX between national telcos through a single point for both passive and active infrastructure. It could drastically reduce overbuild and save the industry billions.

“Completion of this transaction is key for the country’s infrastructure and technological development and will enable us to further accelerate the deployment of 5G, with Italy already among the countries taking a lead in trials of this new technology,” TIM CEO Luigi Gubitosi said at the time.

Despite the clear benefits of network sharing agreements, there are still concerns in the industry. Regulators are worried over the impact of competition, most notably as to whether non-participants in the sharing trusts will be squeezed out of the market. One means to counter this would be to have an independent or nationalised wholesale party, with all mobile service providers effectively becoming MVNOs, but it is highly unlikely telcos would want to move in this direction, effectively diluting their influence on the industry.

That said, the industry is gradually heading that direction as telcos search for funds to fuel the 5G expansion.

Infrastructure companies such as Cellnex are hoovering up passive infrastructure assets across the European continent, while infrastructure investment funds are also seeking out deals. In both of these instances, the acquirers recognise the telcos need money desperately; there are good value acquisitions to be made for those who have a long-term view on ROI in the passive infrastructure game.

The next step is network slicing, which will be taken forward during with 3GPP’s Release 16. Should network slicing be validated, it will only be a matter of time before owners of passive infrastructure start to put their own active infrastructure on the assets and sell slices to the mobile service providers. It certainly won’t happen overnight, but it is a very feasible outcome.

The telecoms industry is at somewhat of a crossroads. 5G is on the horizon, and the realities of funding this expansion are hitting home. The telcos have seen revenues eroded over the last decade but are now being asked to underwrite the most expensive infrastructure project to date. The equation is not balanced, so new ideas are needed.

Italy is a country which is perhaps under more pressure than most. Aside from the drastic reduction in pricing thanks to the introduction of the disruptive Iliad, few spectrum auctions have pushed the financial capabilities of telcos as much as the Italian’s. This is a market which is under pressure.

Network sharing agreements, both passive and active infrastructure, are interesting ways to generate more with less, though it does appear Iliad will attempt to derail progress. As the mobile player in the country without a deal, it does appear the firm fears being squeezed out of the market.

Interestingly enough, the question remains whether authorities will care? If Fastweb is to introduce its own mobile products, Italy would have four mobile service providers fuelled by the efficiencies of network sharing agreements. This might be deemed sufficient competition in the market, therefore the needs of Iliad might be sacrificed in pursuit of benefits for the greater good.

Deep dive: what’s the deal with network sharing?

Information is only as useful as the context you place it in, and for that reason Telecoms.com periodically provides deep dives into industry-defining topics. In this one Jamie Davies explores the opportunities and challenges surrounding network sharing.

Each year brings different trends and talking points to the forefront of the industry, and 2020 is no different. This year, it appears network sharing will be one of the biggest talking points.

5G is on the horizon and it has the telcos scrambling. Upgrading telecoms infrastructure is going to be a very expensive job, ranging from fibering up a nation, to purchasing active infrastructure for sites and even paying for civil engineering jobs; building passive infrastructure is not cheap! Telcos need a way to make the financials of the telecoms future work.

All about the money, money, money

While it might not sound like the sexiest of trends to be assessing, it could turn out to be one of the most impactful. Telcos are scrapping and scraping around to fuel the 5G euphoria which has gripped the industry, and any option to do it more cost effectively would be lovingly embraced.

“Network sharing will be vital to mobile operators still grappling with ways to make the economics of 5G add up,” said Kester Mann of CCS Insight. “Deutsche Telekom for example has projected that the cost to deploy 5G across Europe would come out at between €300 and €500 billion.

“It’s no surprise then to see a growing list of operators partnering with each other in a bid to keep a lid on 5G capex. But these deals may just be the tip of the iceberg; investment models probably need to evolve to become more creative and innovative in the long run. For example, Poland has been considering plans for a single national 5G network at 700MHz. And it would be no surprise to see a European city take the plunge and deploy all 5G mobile infrastructure through a third party.”

Back in October, during a Madrid 5G core conference, Telecom Italia’s Lucy Lombardi outlined the difficulties being faced by the operators. Between 2010 and 2018, Lombardi suggested industry revenues were down $27 billion, but the telcos had invested $250 million in the network. Over 2019-2025, Lombardi suggested another $1.4 trillion would be spend by the industry, 70% of which would be on deploying 5G.

In short, the old ways of telecommunications are not going to cut it in the digital world of tomorrow. There are plenty of opportunities for the telcos to make money as everything and anything gets connected to the internet, but new business models need to be created to ensure these companies do not go bust in the pursuit of profits.

As Mann highlights, various different countries and regulators are pursuing different approaches to create value and efficiencies in the deployment of next-generation communications infrastructure. The Poland example is an excellent one, though the UK is pushing forward with its own innovative approach.

“In the UK, the recent confirmation of plans to introduce a shared rural network is rare example of successful collaboration between mobile operators more often engaged in cut-throat competition to attract and retain subscribers,” Mann continued.

“It aims to curb costs and accelerate timelines to bring more people on online who live in remote areas. It will also help overcome the perennial challenge of tough planning and access restrictions that has hindered network roll-out in the past.”

The UK Shared Rural Network could be described as both an innovative initiative and a business compromise.

As part of the initiative, £530 million will be contributed by the telcos with another £500 million being put forward by the UK Government. The plan will include reciprocal agreements between the telcos to share existing infrastructure and also joint investments to build telco-neutral sites for total not-spots.

This is an innovative approach to deliver connectivity to the most difficult to reach places in the UK, but it is also a compromise. To secure agreement from the telcos for the Shared Rural Network, the Government and the regulator will have to agree to drop the deeply unpopular coverage commitments attached to the 700 MHz and 3.6-3.8 GHz spectrum auctions.

However, what is worth noting is this is not necessarily a new idea. EE (or what was T-Mobile at the time) and Three formed MBNL in 2007, initially to operate and deliver 3G networks, while O2 and Vodafone teamed ahead of the 4G rollout to form CTIL in 2012. Both of these organisations offer financial benefits to the telcos.

“From a cash perspective it’s broadly 50/50 on the usual operating expenditures – so site rental, rates, field operations, etc. We then have the option of sharing the build of networks – we don’t do that for 4G or 5G, but we did that in the 3G build and that saved 50% of the initial capital expenditure, including on capacity and transmission costs by usage,” said Tom Bennett, Networks Director at EE

We’re not alone…

Elsewhere around the world, regulators have taken their own approach to encourage cooperation in the industry. In Malaysia, for example, the Malaysian Communications and Multimedia Commission (MCMC) has outlined another unique approach.

Licenses for the 700 MHz and 3.5 GHz spectrum bands will be given to a consortium rather than the individual telcos. Investment in infrastructure will be shared, as will the spectrum resources to deliver commercial services, though it is unclear how the telcos will play with each other.

For Malaysia, this is an important initiative. 5G is an expensive technology to deploy, but the regulator is also keeping an eye on 4G. In Western markets 4G investments are not front of mind as coverage is wide and deep, however in countries like Malaysia, the digital divide is a lot more apparent. 4G investments need to continue, and this approach to shared infrastructure is partly to ensure enough money is still directed towards 4G.

However, what is also worth noting is that not it is not a given regulators will be accepting of shared network initiatives.

Earlier this month, the Belgian Competition Authority (BCA) put the brakes on a joint-venture between Orange and Proximus which would create a shared network. The regulator is investigating whether this would negatively impact competition, after Telenet complained over the tie-up.

The issue in Belgium seems to be focused on the number of telcos which are currently present and the breadth of the agreement between the pair. As there are only three mobile players in the market, and the JV would span across all generations from 2G to 5G, the complaint focuses on the idea that it would reduce the number of infrastructure players from three to two. This might have an impact on deployment, as well as placing an unreasonable stranglehold on Telenet.

This is not the first time this issue has been raised either.

Last August, the European Commission informed O2 CZ and T-Mobile CZ that the proposed network sharing agreement in Czech Republic would breach the Commission’s rules on competition. The duo have been in a network sharing agreement since 2011, which incorporating 2G, 3G and 4G for 85% of the country, though the European Commission has now prevented this expanding further.

As is the case in Belgium, the Czech Republic only has three material telcos investing in mobile communications infrastructure. Although there are benefits for scale deployment, the European Commission suggested:

“…the network sharing agreement is likely to remove the incentives for the two mobile operators to improve their networks and services to the benefit of users.”

The European Commission and national regulators are generally open to ideas on how the telecommunications industry can be more efficient, though they are particularly sensitive to competition. Anything which would hint at removing competition would be quashed almost immediately, which is the tricky path which telcos tread. This is particularly notable in markets where there are only three operators, and one has been left out of the network sharing agreement.

Looking at the rules in question at a European level, Article 101 dictates the state of play. These rules effectively look to prevent:

  • Price fixing
  • Production, development or investment limitations
  • Supply scarcity
  • Placing a competitive disadvantage on other parties

The maintenance of a fair and reasonable market is of course a noble pursuit, but the European Commission and national regulators do have to be careful in applying these rules. The telcos do need to apply new models to ensure the feasibility of the 5G business model.

Consolidation is still the enemy

“Regulators will clearly be vigilant, as they want to make sure that sharing does not turn into mobile-to-mobile consolidation, which they don’t like,” said Dario Talmesio, 5G Practice Leader at analyst firm Ovum.

“They could see that sharing can be consolidation through the backdoor.”

The European Commission and its regulators are very sensitive to consolidation. Despite the industry begging for attitudes to change in the pursuit of scale economics to ease the burden of deployment, the regulators have stood their ground to refuse consolidation. The attempted merger between O2 and Three in the UK during 2016 was blocked on the grounds of competition, as was an effort by Telia and Telenor to merge their Danish businesses in 2015.

The rationale for both of these mergers was to create a single-entity where the economics of running a telco at scale were more attractive. As Talmesio points out, network sharing initiatives are very important to ensure the industry progresses in a manner which keeps pace with the consumer and enterprise.

“CSPs have for very long been sharing some elements of their networks, and every G has pushed them to share a bit more, mainly because of the cost and time it would take to build new sites,” said Talmesio.

While it will never be the case that the network is finished, the widespread upgrades which are demanding with every new ‘G’ is what makes the telco industry unique and eye-wateringly expensive to play in. This is where the economics of scale are critically important and why European telcos are perhaps on the backfoot.

European nations are small, and some are drastically smaller than say China or the US. While larger countries present their own challenges in terms of coverage, the benefit of a scaled subscriber base gives more confidence to make bigger investments. Some European telcos will never have this advantage so will have to look for alternative means to fund network deployment.

Although the estimates vary quite considerably, one thing is for certain; network sharing initiatives ease the financial burden of network deployment.

There are of course financial benefits to network sharing, though the estimates do vary. A report from the Body of European Regulators for Electronic Communications (BEREC) suggests the following:

  • Passive sharing cost saving of 16-35% on CAPEX and 16-35% for OPEX
  • Active sharing cost saving 33-35% on CAPEX and 25-33% for OPEX

Efficiencies are increased when spectrum costs are also shared, though this is unlikely to be a common practice as spectrum assets are often considered a differentiator. If this was to be removed, the industry would start the precarious walk towards utilitisation.

Looking at the proposed joint-venture between Orange and Proximus, the duo will of course be saving money, but another interesting opportunity is in scaling the network. The shared network initiative would increase coverage by 20% in comparison to the combined footprint if the teams are to pursue network deployment independently. We suspect 20% is a comfortable number, and this could be increased should a partnership want to deploy more aggressively.

The financials of the telecoms industry is not working in conjunction with the demands of the consumer and authorities. Cheaper tariffs, faster speeds, greater coverage, better reliability. All of these factors weigh one side of the equation making it difficult for the telcos to continue.

Another factor to build the case for network sharing initiatives is somewhat more bureaucratic.

Telcos are being asked to improve both outdoor and indoor coverage in both the rural and urban environments, but in some cases the biggest problems can be accessing or procuring new sites to deploy infrastructure, both passive and active. It might make sense to share these sites as there is limited availability, or it would at least make more sense to share the transmission lines to ease the burden of civil engineering costs. Another factor you have to consider is the rental fees charged by landowners, some of which are deemed unnecessarily high by the telcos. This has been frequently highlighted under the term ‘ransom rent’ as the telcos have little option if they are to expand coverage.

In some towns there is another bureaucratic nightmare to consider; listed and historical buildings. In Cambridge, UK, for example, so many of the structures are deemed historical or protected, the number of potential mobile cell sites is substantially smaller; share infrastructure is a creative solution.

Its not all plain sailing

What is worth noting is that there are also drawbacks to network sharing agreements.

Firstly, more cooks spoil the broth. With shared assets in operation, especially active assets, require consent and coordination between the sharing parties. There are numerous challenges here, most notably aligning commercial objectives of the parties and more signatures to acquire. Evolution of these sites could certainly take longer in the future.

Another challenge arises when something goes wrong. Debugging the issues could be much more complicated, though this is entirely dependent on how much the two operations are entwined.

BEREC has also noted shared networks could also increase the electromagnetic field emissions. Each regulator imposes limitations on electromagnetic field emissions therefore bureaucratic revision might well be needed should more of these initiatives bear fruit.

The combination of or joint-funding of assets also decreases the resilience of communications infrastructure in a country. Fewer independent mobile networks or infrastructure might well make a country more vulnerable as it reduces the number of points of failure and robustness.

It is also worth bearing in mind that there is only so much space available on masts for active equipment. These concerns were raised in Bulgaria, Cyprus and Croatia, amongst other nations. Networking planning is another concern, as each MNO has its own unique requirements, while technical issues in relation to existing suppliers and protocols could mean MNOs are not compatible with each other.

It would be unfair to suggest network sharing is an uncomplicated path forward.

Despite there being momentum for network sharing, not all of the regulators share the enthusiasm. Aside from Belgian scepticism, Hungary believes non-participating MNOs would face a risk of being squeezed out of the market, while Austria has suggested incentives for investment will decrease in the long term.

There will be pros and cons on both sides of the equation, but it does look to be the fairest and most reasonable compromise to ensure a healthy and sustainable telecommunications industry. The traditional way of deploying networks does not look to be financially feasible, therefore new ideas are needed.

Network sharing is one of the most prominent trends during the early days of 2020 for good reason, and it is safe to assume more of these initiatives will emerge as we progress through the year.

Vodafone kicks off UK 5G multi-operator RAN era

UK operator Vodafone wants everyone to know how much it’s ramping 5G, but the big news was the hard launch of 5G RAN sharing.

The approved acronym is MORAN (multi-operator radio access network) and Vodafone reckons it’s the first operator in the UK to ‘support’ it. While there is already extensive passive infrastructure sharing between Vodafone and O2 via CTIL, this new set up involves the active radio. Not only will this save the companies money on buying new kit, it’s also more energy efficient. How, if at all, sharing the RAN will affect the 5G performance of each operator.

Vodafone’s announcement focused more on the fact that it’s now offering 5G roaming to the Republic of Ireland, which it seems to think is a big deal and that it has switched on 5G in Belfast, Edinburgh and Leeds. This year will see a succession of ‘look how much 5G we’re doing’ announcements, so just get used to it OK?

“We have started the new year as we mean to go on,” said Vodafone UK CEO Nick Jeffery. “We now offer 5G in double the number of places than our nearest rival and we have significantly boosted the capacity of our network. It is ready for the arrival in 2020 of some great new 5G handsets and the next big software release bringing ultra-low latency. Together, these will push 5G to the next level.”

In other news Vodafone has been designated the most improved UK network by Umlaut (previously P3), which has a whiff of damning with faint praise about it. It’s also the best for smartphone use indoors, we’re told, and you can see the full Umlaut findings here.

Belgian watchdog puts the brakes on Orange and Proximus JV

The proposed network sharing joint venture between Orange and Proximus has been slowed as the Belgian Competition Authority (BCA) launches an investigation.

At the request of Telenor and Telenet, the Belgian authorities have placed temporary measures on Orange and Proximus to halt a network sharing joint venture while it investigates the potential impact on competition in the market. The original agreement was between the two parties was concluded in November and will remain stagnant until at least March 16.

Both Orange and Proximus have noted the complaint but rejected the basis of the opposition from Telenet.

“The sharing agreement for the mobile access network will have positive effects for the customers and for the Belgian society as a whole, in particular a faster and more extensive deployment of 5G, a significant reduction in total energy consumption and an improvement of the global mobile service experience, while maintaining a strong differentiation between the parties on services and customer experience,” the pair said in a joint statement.

As part of the joint venture, the pair have said the rollout of a joint radio access network would allow the number of mobile sites to be 20% higher compared to each operator’s current stand-alone radio access network. This improved coverage is claimed to increase the footprint to more than 10,000 households across the country.

Each party would retain full control over their own spectrum assets and operate their core networks independently to drive differentiation. The network sharing agreement would span across 2G, 3G, 4G and 5G.

While this does sound positive for the consumers of Belgium, a complaint from the third-largest operator should not be a monumental surprise.

Telco Subscriptions Market share
Orange 4,895,631 35%
Proximus 6,310,403 45.1%
Telenet 2,801,759 19.9%

Statistics curtesy of Ovum World Information Series (WIS)

Telenet’s has suggested the joint-venture would create a quasi-monopoly, as the number of infrastructure players in the market would be reduced from three to two. The telco also suggests BEREC guidelines would prevent such a joint-venture from materialising as it would undermine intense infrastructure competition.

Telenet is also pointing towards a similar agreement in the Czech Republic between O2 and T-Mobile. Despite this agreement was far less wide-ranging (it did not span across 2G, 3G, 4G or 5G), the European Commission opposed the tie-up with the suspicion it would have a detrimental impact on competition in the country.

With the drive towards 5G and full-fibre broadband straining CAPEX budgets throughout the industry, the impact is perhaps felt more in countries such as Belgium where populations prevent scale. Network sharing agreements are not uncommon as a means to more efficiently invest, though these are usually focused on specific geographies or limited to 5G expenditure. Other initiatives are usually in countries where the base-level of competition is higher than what is currently in play in Belgium.

While this investigation is underway, Orange and Proximus are able to begin the groundwork for the joint-venture, sending out RFPs (Request for Proposal) or select staff to be transferred for example, though Telenet has presented an interesting case. European regulators are incredibly sensitive to competition, especially in markets where there are only three telcos.

Dutch regulator hints at 5G network sharing plan

The Authority for Consumers and Markets (ACM) has proposed plans to create a network infrastructure sharing framework to counteract any potential for a digital divide.

With the plans intended to be released before the next spectrum auction in 2020, the regulator is putting in the groundwork ahead of time to theoretically ease the investment burdens of 5G network infrastructure in the rural environments. Telcos generally don’t like to be told how to spend their money, but the ACM is taking appropriate, proactive steps to prevent the digital divide which tends to emerge when telcos are left to their own devices.

“We regularly receive questions about what is and what is not allowed with regard to infrastructure sharing,” said Henk Don, an ACM board member.

“Working together in this can bring many benefits to telecom companies, but this should not be at the expense of mutual competition. With the guidelines we want to offer clarity to the parties on the mobile market and thereby contribute to a smooth rollout of 5G.”

Although the 5G rollout in the Netherlands is progressing at a much slower rate than other countries in the bloc, the pondering approach is allowing bureaucrats to create the necessary regulatory and legislative landscape ahead of time. Other nations, the UK for example, seem to be taking a ‘build now, regulate later’ approach, which runs the risk of creating the digital divide as telcos chase profits and an overbuild situation in the highly urbanised areas. As with anything in life, it is much easier to plan to tackle a problem as opposed to fixing after it has emerged.

As part of the ‘slow and steady’ approach to network deployment, coverage obligations will be placed on any future spectrum auctions. 98% of the Netherlands geographic area will have to be covered by a certain time, though more details will emerge over the coming months as the auctions close in. 98% might sound like a ludicrous objective, though the network sharing framework should aid this.

These are just very top-line ideas which are being presented by the ACM here, though more details will be offered over the short-term. Ahead of 2020, plans are being ironed out for spectrum auctions for the 700 MHz, 1400 MHz and 2100 MHz 5G bands, while the valuable 3.5 GHz 5G auction should take place at the end of 2021 or beginning of 2022. The ACM has suggested the proposals will be in place to ahead of next year’s auction.

Network sharing frameworks are not exactly uncommon throughout the telco world, though many regulators err on the side of caution in the pursuit of competition. The UK is considering such plans also, though these would only be in the regions which are seen as the most difficult to justify commercially. Generally, these not-spots have almost no coverage nowadays, usually home to an incredibly low population density or no-one at all.

This might not be the most rapid of rollout plans, but the ‘first’ tag does not necessarily mean much, or it might not end up meaning much. Laying the necessary regulatory framework ahead of plans, instead of playing catch-up like some nations, might just be a more considered approach. That said, the Dutch Government will not want to fall too far behind.

China Telecom and China Unicom jointly build and share 5G RAN

China Telecom and China Unicom, two of China’s three leading telecom operators, and two of its four 5G licensees, will jointly cover parts of the country with one shared 5G radio access network.

The two companies, both listed on the Hong Kong Stock Exchange, signed the “Framework Agreement on Co-building and Co-sharing 5G Networks” on Monday. According to the Agreement, the two operators, by sharing the radio spectrums to their names, will “build together” and “share together” one 5G radio access network in 15 major cities, including Beijing, Shanghai, Shenzhen, Guangzhou, etc. The 5G core networks will be built separately.

The Agreement also laid out the plan on how to divide the work between the two in the cities they will share the network. Territories each will cover is divided roughly based on the number of 4G base stations. For example, in Beijing, China Telecom will build 40% of the 5G base stations, while in Shanghai it will build 60%. Each company will be responsible for investing in, maintaining, and operating the base stations it builds. The Agreement also commits “non-aggression” between the partners, for example, collaboration with third parties by one partner should not harm the interest of the other partner. Details of revenue settlement in the shared networks will be worked out later.

On top of that, the two companies will build their own separate 5G networks in other parts of the country. China Telecom’s own network will extend to 19 provinces, while China Unicom’s will cover 10.

The two operators, together with China Mobile, the world’s largest mobile operator by subscriber numbers, and China Broadcasting Network Corporation Ltd, were all awarded 5G licences in June, well ahead of what the industry had expected.

Europe not happy about Czech network sharing arrangements

The Czech Republic’s two dominant mobile operators are sharing one network and the European Commission thinks this is taking things too far.

When the EC thinks something might be dodgy, but hasn’t totally decided yet, it likes to kick things off by sending a statement of objections to all concerned. This puts them on notice that it’s looking into the situation and initiates an investigation. Hence the network sharing arrangement between the Czech versions of O2 and T-Mobile is now under the EC microscope.

“Operators sharing networks generally benefits consumers in terms of faster roll out, cost savings and coverage in rural areas,” said Commissioner Margrethe Vestager. “However, when there are signs that co-operative agreements may be harmful to consumers, it is our role to investigate these and ensure that markets indeed remain competitive. In the present case, we have concerns that the network sharing agreement between the two major operators in Czechia reduces competition in the more densely populated areas of the country.”

This is an intriguing conundrum; how can something good suddenly become bad when it’s done too much? To be fair, between them T-Mobile and O2 account for almost three quarters of Czech subscribers. If the only other MNO of note – Vodafone – is frozen out of this arrangement that would appear to put it at a massive disadvantage. The EC is also concerned that their collective dominance means they have a disincentive to provide a decent service.

O2 and Vodafone double down on network sharing deal for 5G

Network sharing deals are not new in the UK, but with O2 and Vodafone evolving their existing relationship to active infrastructure, the partnership certainly has a new mission.

Announced today, O2 and Vodafone have agreed to share 5G active equipment, such as radio antennas, on joint network sites across the UK. The approach should accelerate 5G deployments in the areas where infrastructure investments are not as commercially attractive, though the 23 largest cities have been excluded from the deal.

“Today is an important step in demonstrating our commitment to invest for the future, with mobile connectivity one of the UK’s most powerful opportunities to strengthen the economy and improve the lives of British people,” said O2 CEO Mark Evans. “This agreement will enable us to roll-out 5G faster and more efficiently, benefiting customers while delivering value for our business.  It also importantly allows us to utilise the spectrum we acquired in the last auction very effectively.”

“We’re driving our 5G roll-out forward with this agreement, and taking our customers, our business and the whole of the UK with us,” said Vodafone CEO Nick Jeffrey. “Greater autonomy in major cities will allow us to accelerate deployment, and together with active network sharing, ensures that our customers will get super-fast 5G in even more places more quickly, using fewer masts. We can boost capacity where our customers need it most so they can take full advantage of our new unlimited plans.”

Prior to this announcement, the duo were already in partnership through the Cornerstone Telecommunications Infrastructure (CTIL) joint-venture. This company effectively acquires and manages passive infrastructure across the country, enabling the pair to share costs on some of the most expensive aspects of network deployment; site acquisition, local government bureaucracy and civil engineering.

This new agreement takes the relationship one step further. Although many telcos around the world believe active equipment is a means to differentiate experience, the pair are putting aside their squabbles to grow the network across all regions in the UK. For those areas where ROI is more difficult to realise, spectrum assets will be the only differentiating factor.

In the larger, more densely populated environments, the duo will remain competitive. In 23 large cities, covering 16% of combined cell sites, all assets will be separate. In cities such as London, Manchester or Liverpool, profitability has not been difficult to demonstrate through network expansion, such is the number of subscribers in such a small geographical zone.

Although we are slightly surprised by the concept of sharing active equipment, it is a logical path for the two telcos to take. Spectrum assets should be enough to deliver some sort of differentiated experience, and if the telcos want to move up the value chain, they will need to reconsider their thoughts on the delivery of data.

Connectivity revenues will remain the core business, but 5G presents an opportunity to create a new role in the ecosystem and deliver more value-added services. To enable this, a new mindset to network infrastructure has to be acquired to free up revenues for other areas. This is not the only advantage of network sharing deals, but the intelligent reallocation of funds could allow MNOs to transform from ‘Communications Service Providers’ to ‘Digital Service Providers’.