Could Australia’s telcos share 5G infrastructure?

Optus and Vodafone are at least open to increased sharing of mobile network infrastructure

5G mobile wireless network technology emerging from smartphone
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Two of Australia’s mobile network operators (MNOs) are at least open to the idea of increased sharing of infrastructure, as telcos ramp-up the deployment of 5G.

Mobile infrastructure sharing can be either passive — sharing access to masts and power at a cell site, for example — or active. The latter involves shared use of radio access network (RAN) infrastructure such as antennas.

Courtesy of a carrier licence condition, Australia’s MNOs are currently obliged to abide by the Facilities Access Code (FAC), which is overseen by the Australian Competition and Consumer Commission (ACCC).

The FAC mandates that telcos offer access to transmission towers, tower sites, and eligible underground facilities to other carriers. The aim of the code, first introduced in 1999, is to encourage co-location and promote competition in the telecommunications sector.

However, in some other jurisdictions telcos are engaged in sharing so-called active infrastructure, and there indications that the economics of 5G rollouts may make it an increasingly attractive option.

In April 2017, New Zealand mobile network operators Vodafone, Spark and 2degrees unveiled a proposal to roll out shared infrastructure in rural parts of NZ. In August of that year the NZ government announced that the telcos’ joint venture — the Rural Connectivity Group (RCG) — had been tasked with delivering 4G mobile and wireless broadband in regional areas.

RCG is aiming to build 520 cell sites in some of the most remote parts of the nation, with the three MNOs sharing radio access network (RAN) hardware and antennas. The sites are also open to wireless Internet service providers (WISPs).

A study issued by the NZ Commerce Commission in September last year concluded that in the future there may be increased infrastructure sharing but its impact on enhancing or supressing competition would depend on the particular arrangements entered into by MNOs.

“Depending on its configuration, parts of the RCG infrastructure could be reused for future deployment of 5G technology by MNOs, at lower cost than a greenfield implementation,” the Commerce Commission market study noted. “In this way, it is possible that it will be economic to provide 5G services in areas where it might otherwise be uneconomic.”

A June 2018 report by the Body of European Regulators for Electronic Communication’s (BEEREC) outlined a provisional analysis of infrastructure sharing in European markets.

It found a variety of arrangements in place, including passive sharing on a lease basis, active sharing based on joint deployments of infrastructure, cases where an MNO can use another operator’s network for a specific technology such as 2G, and some agreements that related to a specific location (such as indoor sharing).

Most national regulators, BEEREC concluded, expected that 5G-driven network densification and consequent cost pressures would lead to more MNOs examining the possibility of sharing.

The need to roll out small cells to fully deliver on 5G’s potential as well as additional backhaul is expected to “lead to an increase or at least an increased call for sharing (passive, active, backhaul, active indoor, spectrum and others),” the report stated, although it noted that regulators “want to ensure that sharing arrangements do not result in competition being distorted.”

Optus has said it believe 5G may make network sharing and joint-ventures between telcos more appealing in the Australian market, helping minimise the significant capital costs of the wireless technology as well as “urban disruption” through the rollout of new infrastructure.

In a submission to a parliamentary inquiry into 5G, the telco called for scrutiny of any factors hindering sharing as well as structural barriers “to increased sharing, including whether current market structure with one large dominant player in the enterprise market is an impediment to commercial sharing.”

Optus said that “network sharing is not a form of free-riding such as roaming” and “requires joint investment by mobile operators in infrastructure and technology, some on a stand-alone basis and some of which can be shared.”

The telco’s submission cites 5G network-sharing arrangements in the UK and Italy, as well reports that China Telecom, China Unicom and China Mobile have considered sharing infrastructure.

And it’s not purely the economics that make the prospect of rolling out less mobile infrastructure attractive: 5G has suffered an unprecedented level of opposition compared to the other generations of mobile technology. Anti-5G campaigners have spread a variety of unfounded fears about the impact of the technology on human health and the environment.

Optus’ submission cites a February 2018 analysis published by McKinsey that argued network sharing is not a novel approach for many mobile operators and that 5G could make the model even more appealing.

“For example, the cost of small-cell deployment can be reduced by up to 50 percent if three players share the same network,” the McKinsey analysis argues. “But the rationale for sharing extends beyond cost, as it could solve many practical roadblocks of 5G deployment in urban areas, such as the potential for urban disruption and visual pollution from the installation of excessive equipment and fiber.”

Last year S&P released a report on the rollout of 5G in the Asia-Pacific that claimed the rollout of the technology will be “slightly credit negative due to high capital spending and marketing costs.”

The S&P report adds, however, the over the longer term “5G has the potential to expand market size for telcos, because its applications could increase revenues from both consumer and commercial users.”

“We believe 5G's faster network speeds, combined with growing demand for high-quality video content, will drive up demand for data usage,” said S&P Global Ratings credit analyst JunHong Park. “However, the costs related to rollout and competition will hurt margins.”

A joint submission by Communications Alliance and the Australian Mobile Telecommunications Association (AMTA) to the 5G inquiry stated that although sharing of passive infrastructure is a “well-established industry practice,” sharing active infrastructure “has a range of technical and economic constraints” that “make it generally not feasible”.

The submission cited the disparate spectrum holdings of Australia’s MNOs as one challenge, arguing “it is simply not possible to build a single radio system capable of spanning such a wide frequency range” (in NZ, the RCG participants share spectrum).

“As we move to deploying small cells, precise placement is critical for them to be effective,” the submission added. “It will be rare that the needs of all carriers align for any small cell to a sufficient extent for sharing the small cell to be viable. The factors requiring precise small cell site placement include amount and geographic focus of customer demand and location of surrounding network elements (macros and other small cells) and these are unique to each carrier.”

There are also “strong economic incentives” against sharing, the associations argued, with most of the gains available through passive infrastructure sharing.

“Regulation in the Australian mobile market already promotes competition and choice by giving competing network operators access to one-another’s base stations for co-location of equipment, as well as access to data transmission links at regulated prices (which the ACCC reduced by 72 per cent in regional areas during their last review),” a Telstra spokesperson told Computerworld.

“This means that as Telstra continues to invest and co-invest to build new towers and improve coverage, competition is made even easier because the amount of investment a competitor would need to make themselves is reduced.”

The spokesperson also noted that the Australian Communications and Media Authority (ACMA) imposes limits on the amount of spectrum a single mobile network operator can purchase during auctions “to ensure all competitors have equal opportunity to acquire spectrum”.

Vodafone Hutchison Australia (VHA), by contrast, is firmly in favour of increased infrastructure sharing.

“Vodafone has been a strong advocate of infrastructure sharing which is the norm in many countries, including for 5G,” Vodafone’s chief strategy officer Dan Lloyd told Computerworld.

“That’s why we advocated for domestic roaming and reforms to the mobile black spot program with reference to New Zealand’s innovative active sharing model.”

(The ACCC in 2017 announced it did not intend to introduce a regulated mobile roaming regime; Vodafone lost a court challenge it launched in the wake of the ACCC decision. The ACCC’s decision was supported by both Optus and Telstra.)

Lloyd said that VHA was also “calling for the introduction of a mandated co-building process under the ACCC’s Facilities Access Code.”

“Unfortunately, Telstra has opposed all of these measures. Infrastructure sharing not only makes economic sense but helps address community concerns regarding the visual impact of equipment,” the VHA executive said.

The ACCC is currently reviewing the FAC. Its draft report (PDF) of the FAC review, released in November 2019, said that the competition watchdog had two areas of concern it would seek to address. One is that consultations between carriers “either are not occurring or are not occurring early enough to allow co-building or co-location requests to be factored into plans to build new sites”.

The second is that owners of facilities “can frustrate and/or delay access through reserving capacity for their own future use for unreasonably long periods without genuine plans to use the reserved space”.

However, the ACCC noted that the submissions it received from telcos didn’t indicate any changes to the code were necessary to facilitate the rollout of 5G, with small cells, for example, generally expected to affect non-carrier infrastructure.

“In relation to the rollout of 5G networks, the ACCC considers that it may be too early in the rollout for any issues to become apparent,” the draft report stated. “The ACCC is not proposing to make any changes in this area at the present time, but will continue to monitor facilities access issues as the rollout proceeds.”

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