Ovum Analysis --

Future sharing opportunities for Mobile Network Operators

Steven Hartley, senior analyst at Ovum

A whole lotta sharing going on – but where will it lead?

Ten years ago, site sharing was deemed an anathema to mobile network operators. Operators felt the network was key to differentiation. Fast-forward to today and commercial realities are driving operators to cut costs. For now, passive sharing is most likely. It is easier to implement, maximises operator control over the network and brings satisfactory savings. Yet what if we fast-forward to 2020 – would that still be the case?

The notion of one network is not entirely far-fetched

After the savings of passive sharing have been realised, where can future savings come from? In our forthcoming report 2020 vision for mobile we predict that operators will seek increasingly active forms of sharing. Sharing ever more of your infrastructure might sound ridiculous today, but all forms of sharing sounded ridiculous ten years ago.

This will be driven by a combination of data demands driving up capacity needs, competition eroding prices and the propagation characteristics of Long-Term Evolution (LTE) requiring more sites. LTE will be a mature technology too by then and its efficiency gains will have already been largely realised.

The result will be a dwindling number of physical mobile networks, until some markets at the forefront of this trend are left with just one mobile network, including the RAN, backhaul and even transport elements of the core. However, some elements may remain independent, particularly at integrated operators in which proprietary legacy systems are either unable, or unwilling, to be incorporated. 2020 won’t see the conclusion of this trend, but its advent will certainly be apparent, most noticeably in Europe and particularly the UK.

The notion is not entirely far-fetched and not without precedent. Functional separation is becoming increasingly common in fixed telecoms, again with the UK leading the way. For mobile it is merely market forces leading to a single network, rather than a dominant player being forced to open up its network.

Vendors could end up operating the single network

An interesting facet of recent announcements has been Ericsson’s role. It could end up managing the networks for four of the UK’s five operators, if it adds O2 – highly likely given its past experience with the combined T-Mobile and 3. Therefore, in the long-term future, why not let it operate the single network? Today’s mobile network operators could then be service retailers.

We’re not suggesting that Ericsson has hidden notions of becoming a mobile wholesaler. That would be unfair. However, following the chain of thought to its logical conclusion, this is a reasonable outcome. And of course Ericsson’s rivals will be joining the managed services fray too to add the spice of competition.

There’s also the option to nationalise the network. The banking industry is currently undergoing this process, so why not?

Mobile regulation would have to evolve

Regulation of mobile services has focused on infrastructure-based competition since the industry’s inception. Only over the last couple of years has there been a shift in ideology towards more services-based competition, starting in the fixed network but increasingly now in mobile. While many regulators impose limits on network sharing, the pressure to change will become unstoppable, with the change simply occurring at different rates in different markets.

If there is a single infrastructure, then mobile regulation must evolve. Those with significant market power in the future will be today’s vendors. Today’s MNOs will effectively be MVNOs. Furthermore, how do regulators deal with the process of transferring ownership of spectrum and infrastructure to an infrastructure vendor?

In markets where vendors control networks, surely their own equipment will be favoured? From an infrastructure industry perspective this means a smaller global equipment market and managed services deals becoming crucial to survival. The only other survival strategy will be to innovate – and thereby become indispensable to the mega-vendors / network operators.
Survival of the fittest

Ultimately, following current trends to their ultimate conclusions offers interesting insights into the future of our industry. It also highlights how change will impact operators, infrastructure vendors and regulators equally.

So, who will be the winners and losers from all this? Quite simply, commercial Darwinism will reign: those that can most ably adapt to the changed environment will prosper. Those that can not, or will not, adapt must perish.

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About Ovum

Ovum is a global advisory and consulting firm. Its primary activity is providing value-added advisory services and consulting to retained and project clients. The company acts as a well-respected and trusted source of industry data, knowledge and expertise on the commercial impact of technology, regulatory and market changes. Ovum engages in continuous research and industry analysis to determine market dynamics in its specialist sectors.

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Ovum is part of the Datamonitor Group.

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