Is the UK’s Shared Rural Network a ploy to extinguish spectrum obligations?

The UK government and operators have pledged to spend £1 billion on rural coverage, but is it enough to convince Ofcom to drop the deeply unpopular coverage obligations placed on the 700 MHz and 3.6 GHz spectrum licences?

Next year Ofcom will auction licences for valuable spectrum assets in the 700 MHz and 3.6-3.8 GHz bands, and while these airwaves are incredibly attractive to the telcos, the attached coverage obligations are not. This has been a point of conflict in the industry over the last few months, with Vodafone being particularly critical.

Sources have suggested to Telecoms.com that the Shared Rural Network is an effort to appease the demands of the UK regulator. Over the coming months, we are likely to see a consultation from Ofcom, and perhaps it will be tempted to drop the universally unpopular coverage obligations which have been attached to the 700 MHz and 3.6-3.8 GHz spectrum auctions as a result of the Shared Rural Network.

Looking at the obligations, the MNOs who profit from securing the valuable spectrum assets would have had to dig even deeper in the pockets to fund the obligations. Not only would geographical coverage have to be increased to 90%, an additional 500 sites would have to be built and the winning telcos would have to provide good quality service outdoors for at least 140,000 premises to which it currently does not.

One of the issues with these obligations is that there is no consideration to how they might individually influence each other. An auction winner might not have to build an additional 500 towers or add an extra 140,000 premises to the coverage cone to get to 90%, but that didn’t matter. The money and effort would have to be spent in any case.

Telcos generally do not like being told how to spend their money, and these obligations were met with widespread criticism. Ofcom created a common enemy to unite the telcos, which is no easy task, to figure out a way around these demands. This appears to be the driver for the Shared Rural Network; invest in rural together, to rid the landscape of what is perceived by private industry as unreasonable coverage obligations.

As you can see from the statement below from Ofcom, the plan seems to have been successful, though we will wait for the ink to dry.

“We warmly welcome these commitments, which follow detailed discussions between Government, Ofcom and the mobile operators,” said an Ofcom spokesperson.

“These improvements will make a real difference to mobile customers across the UK, and we’ll ensure they’re legally binding by writing them into operators’ licences. We will also monitor and report on companies’ progress in achieving better coverage.

“Separately, we will shortly set out revised plans to release more airwaves for mobile services next year. In light of today’s agreement, we are no longer proposing to include coverage requirements in our auction process. We will now press ahead, with industry, on the urgent task of getting better mobile services to people wherever they are.”

These are promising noises being made by the regulator, but the Shared Rural Network is only a proposal for the moment, and Ofcom can still go back on the suggestion it will remove coverage obligations. However, the telcos should view this as a win.

The UK Government and the four MNOs have finally come to an agreement to fix the digital divide with a £1 billion shared rural network.

With £530 million being contributed by the MNOs and an additional £500 million being squeezed out of the UK Government, the aim is to increase geographical coverage of 4G networks to 95% of the UK. Part of this will involve reciprocal agreements between the telcos to share existing infrastructure, but the plan will also include joint investments to build telco-neutral sites for the total not-spots.

“Brokering an agreement for mast sharing between networks alongside new investment in mobile infrastructure will mean people get good 4G signal no matter where they are or which provider they’re with,” said Digital Secretary Nicky Morgan.

“But it is not yet a done deal and I want to see industry move quickly so we can reach a final agreement early next year.”

While the digital divide in the UK is no-where near as apparent as some places around the world, it does still exist. In recent months, this has also become a mainstream, politically charged issue and this is not a reversible change. The telcos will be under continued pressure to deliver connectivity in the nooks and crannies of the UK, though for it to be commercially viable this initiative will be crucial.

As it stands, only 67% of the UK landmass is covered by all four MNOs, while 7% are deemed total not spots, with zero coverage from anyone. Under the new plans, each of the MNOs will bring their own geographical coverage up to 92%, which when brought together, will bring 4G coverage to 95%.

Looking at the total not spots, although this is a secondary objective of the shared rural network, addressed further down the line, the aim is to bring this 7% of the UK which gets zero 4G coverage down to 3%.

“There is no other scheme like this in the world,” said Vodafone UK CEO Nick Jeffery.

“It will spell an end to annoying mobile ‘not spots’ for hundreds of thousands of people living, working and travelling in the more remote parts of the UK. By working together, we will deliver better coverage while offering more choice for consumers and businesses using far fewer masts.”

This is a good scheme, which should go someway to addressing some of the challenges which are being faced across the UK’s connectivity landscape. What is worth noting however, is this is not an overnight fix. To get to the 95% threshold suggested in this statement, it make take five to six years.

What is also worth pointing out, is the contributions by the telcos are unlikely to be equal. Those who have the most to gain from a shared rural network will likely be asked to contribute more to the CAPEX column, while the OPEX of these sites will be split evenly between the four MNOs.

And there are of course other questions which remain, such as, how will this process and mechanism be managed? The most logical answer would be for the four MNOs to create a joint-venture, invite Government stakeholders to sit on the board, to manage this process commercially. That said, we suspect Ofcom and the Department for Digital, Culture, Media and Sport will want to have more skin in the game and may well push for this management function to be an offshoot of an existing public sector body.

That said, the proposal is a promising one to address Government demands to meet coverage obligations and MNOs needs for investments to be commercially viable. But who gains the most from this initiative?

Looking at the 2018 Connected Nations report from Ofcom, O2 would have the most to gain and EE the least:

Operator Geographical coverage
EE/BT 84%
O2 74%
Three 78%
Vodafone 79%
All MNOs 66%

While these figures are a little bit dated, we can’t imagine the rankings have changed too significantly. One aspect which we were surprised about was the city-centric Three pipping O2 on geographical coverage across the entirety of the UK.

Just taking the figures at surface level, EE might be a bit irked with the Shared Rural Network as it erodes a competitive edge. EE can sell its services to customers with the promise of having the most widespread network across the UK, and the holding-hands approach to bring everyone up to 92% might undermine this. However, there are some advantages.

Firstly, 92% coverage will not appear overnight. It will take years to get to this number, allowing EE to maintain its competitive edge for some time. The other element you have to consider is the work it will take to get to 92%.

Although the pain of building passive infrastructure will be shared between the four MNOs, not evenly however, the purchase and installation of active equipment will be down to each of the telcos. EE does not have as much of a gap to bridge to reach 92%, freeing up time and resource. This could be spent on improving networks in the cities to reduce network congestion or improving connectivity on the transport links throughout the country. It might seem like a negative, but it can be turned into a positive.

While many in the industry will complain about the mountains of red-tape which is constructed through the aisles of the telco industry, this is an example of a forward-looking, collaborative initiative. It marries the coverage demands of the Government which are set forward in campaign promises, while being sensitive to the CAPEX and OPEX requirements of private industry.

Governments and regulators around the world should look at these proposals and take inspiration. The digital divide is not as great in the UK as elsewhere, though this is certainly a step forward.

Vodafone and O2 UK buddy up over 5G infrastructure sharing

Vodafone UK and Telefonica UK (O2) will be entering into a new infrastructure-sharing relationship ahead of the much-anticipated 5G rollout.

The duo already has an existing relationship for shared infrastructure activities, managed through the Cornerstone Telecommunications Infrastructure Limited (CTIL) joint venture, with this extension to include 5G at joint radio network sites. In theory, such a tie-up will allow the pair to accelerate 5G rollout plans over the coming months.

“We believe that these plans will generate significant benefits for our business and our customers as we move into the digital era of connected devices, appliances and systems on a mass scale,” said Nick Jeffery, CEO of Vodafone UK. “Customers will benefit from the best 5G experience available and we will deliver even faster speeds by using our spectrum holding more effectively.”

“I’m excited by the potential of these plans to meet the future needs of our customers while delivering value for our business,” said O2 CEO Mark Evans. “In addition, these plans would allow us to utilise the spectrum we acquired in the last auction very effectively.”

Looking at the 5G ambitions, both companies are being relatively coy with the specifics. Vodafone has confirmed it will launch commercial 5G services during 2019, exactly when is unknown though, while O2 has already stated it will not enter the fray until 2020. For Vodafone, some industry analysts have commented it is pitting itself in a race with EE, suggesting the launch would be at some point during early summer.

Perhaps this is an indicator of the importance of 5G scale. Being the first to market may not mean anything in the long-run, it’s a gimmick to include in advertising more than anything else, but nationwide deployment will be critical. O2 has a marketing leading position to protect, while Vodafone wants to recapture the fortunes of yesteryear. Clearly offering the 5G network with the widest coverage will be critical to winning subscribers once 5G vaults towards mass market adoption, and this partnership seems to have an eye on that.

As part of the agreement, more responsibilities will be devolved to the CTIL, allowing the JV to improve the efficiency of its operations and pursue opportunities to add further third-party tenants to the assets. The companies also intend to upgrade their transmission networks with higher capacity optical fibre cables, readying the infrastructure for low-latency use cases such as VR, while there is also an eye on future transmission operating model which could drive synergies for investment and operations.

Although trying to get telcos to play nicely with each other is a tricky task, the idea of shared infrastructure has been on Ofcom’s agenda for some time. It might create a bit of a red-tape maze in the first instances, though there are clear benefits to the concept.

“UK 5G roll-out is on the way and operators need to be more accepting of sharing infrastructure to ensure that coverage demands from consumers and businesses can be met as quickly as possible,” said Ingo Flomer, VP Technology at Cobham Wireless.

“Deploying new 5G networks typically require operators to install and maintain new antennas, hardware and cables, which requires significant planning, management and expense. By using one common architecture, operators can minimise cost and disruption.”

Fears the highly dense urban areas will be favoured over rural regions will certainly not be dismissed following this announcement as the cities are still much more attractive commercially, but with such partnerships the delay might not be as painful. A digital divide was created by the slow rollout of 4G, but shared-infrastructure relationships should ease this chasm, at least theoretically.