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The mobile industry is a competitive battlefield, with no love lost between competitors doing everything they can to win market share and, in turn, revenues.
But mobile providers face a bigger enemy than one another in the current climate and the argument is beginning to surface that working together could be the only route to survival.
The topic of operators sharing resources was one of the hottest topics at Mobile World Congress (MWC), the annual mobile and telecoms industry trade show held in Barcelona.
Gabrielle Gauthey, vice-president of public affairs for Alcatel Lucent, made a strong argument for collaboration to help combat the squeeze companies are feeling on their profits thanks to both political and technical pressures.
“The world is changing so quickly,” she said. “We [have] shifted from using traditional, voice-centric networks to very high bandwidth intensive applications, with smartphones, iPads and increasing consumerisation of video-hungry applications. Mobile users in the developed world are running similar applications now on their mobile devices as they used to on fixed networks and forecasts [suggest] global mobile traffic will increase by a factor of between 15 and 20 in the next five years.
“[Connectivity] is what people want and what countries need. However, there is a problem as we are facing challenging times. It is paradoxical that at a time where heavy investment is needed – Neelie Kroes [European Commissioner responsible for the digital agenda] said we needed somewhere between 280-300 euro investment – there is scarcity. Scarcity in spectrum in the future, scarcity in CAPEX [capital expenditure] planning capacity of operators and environmental challenges as well.”
The telecoms industry has to consider even more urgently today new ways to go, new ways of investing and new business models
Gabrielle Gauthey, vice-president of public affairs, Alcatel Lucent
There is no argument that the backhaul of a mobile network is the biggest expense of an operator. The investment into hardware and software needed to run the heavily-used system, ensuring some of the highest levels of uptime and availability of any industry, costs big money – as does keeping everything updated once it has been installed.
Gauthey believes this is one of the main areas mobile providers should be looking to share costs, without losing their identities.
“[There are] increasing capital investments needed [and] pressure on margins for operators,” she said. “Today, the telecoms industry has to consider even more urgently new ways to go; new ways of investing and new business models.”
The telecoms expert encouraged the established European networks to look at the emerging markets who are just building up their infrastructure and realise the pressure of adding too many cooks to their technological broth.
“Some governments want to foster network sharing, or even build wholesale networks, where operators will rent network capacity in similar models to MVNOs,” she said.
“This can ensure truly natural infrastructure with good coverage, even of rural areas, rather than duplication of infrastructure when networks run parallel in densely populated areas but refuse to go to the rural ones without government subsidy.”
Perhaps surprisingly, the operator perspective seems to align with a lot of what Gauthey said.
Eduardo Duato, CTO of Orange Spain, said the challenging economic times and the particular way the European market had shaped itself over the years meant things needed to change.
“If there is something we [as operators] have to do it is to be cheaper and much more efficient,” he said. “Projections for revenues in the European market do not look that good. We have lost nearly 30% of the market value while in North America the operators have been able to increase their value by 25%.”
Duato explained the number of operators in Europe dwarfed those of other regions and made it harder to make money.
“We have a situation which is structural but a reality, and that is the fragmentation,” he said. “If you go to the market in North America there are not so many networks. In Europe, we may think we have 40 main networks but the end result is that we have an average of 12 million subscribers per network.”
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“[Compare that with] Asia-specific [operators] who have double the size, or in North America where they have five times the size per network. These are volumes that are of the essence.”
The CTO also explained the need for investment coming across Europe; something that has been neglected in recent years and left the once-dominant industry at the back of the pack.
“Ten years ago Western Europe was at the forefront of the mobile network,” he said. “This is an example that glory is fleeting though and we [have] ended up being far, far behind in the case of LTE [and] fixed connectivity.”
“We have lost the tenacity and it is time to do something.”
Duato supports the idea of network sharing but his issue isn’t sitting nicely with other operators; it is overcoming the hurdles put in place by regulators across Europe.
“Once we have the network size [from sharing] and new network software, the [hurdle] is the regulator,” he said. “There is the European regulator and [as well as] the initial regulator, you have units within that and within separate countries. This holds up so much as it is really difficult to convince everyone that [sharing] the best thing.”
“We need more cooperation between the regulatory authorities. At times, we have got contradictory information from regulators and this makes it difficult for the operator. We spend a lot of time dealing with it.”
Some authorities have concerns that by allowing networking sharing, there could be damage to competition and countries could end up with just one, overarching network, damaging choice for consumers.
Duato thinks this is the wrong focus though and sharing networks would just build a stronger technological base and provide a better service to the customer.
“We would like the regulators in Europe to promote us to close the gaps we have with competitors rather than discussing how many operators we have to have,” he added. “It is much better that we concentrate on helping the operators roll out. We will certainly benefit, as will both the customers and the industry.”
Nicolas Ott, managing director of mobile, government and enterprise for Arqiva, agreed there were issues but believed sharing was already being embraced by the industry and would be the golden ticket to a stronger mobile market.
We would like the regulators in Europe to promote us to close the gaps we have with competitors rather than discussing how many operators we have to have
Eduardo Duato, CTO, Orange Spain
“There is already RAN [radio access networks] sharing across the world and outsourcing is common practice, with shared backhaul commonly used,” he said. “The world is not perfect [and] these solutions are complex to operate. The regulators in some countries are not very [positive] about agreeing this, with some countries even nervous considering maybe there would end up being one unique brand for all the operators in one country.”
“However, the world is definitely changing. The capital constraints are more and more important because investment needs are getting bigger and bigger. At the same time, the spectrum auctions are taking place all over the world and the majority have what they want, which manages to pacify the debate and allow us to have more constructive discussions.”
There are already examples of both companies outsourcing their networks or teaming up to share the costly matters of backhaul. Three UK has signed a deal with Huawei to manage its infrastructure while the major merger of Orange and T-Mobile to form EE showed the cost savings achievable from merging network hardware.
However, despite the industry’s finest making the right noises about the proposals at MWC, there was still an air of distrust between the rivals. Mobile might seem on the cutting edge of technology when it comes to the gadgetry but when it comes to the backroom and years of network capacity and reach being the name of the game, there is a clear struggle to change this mindset.
But, when companies from all sides are standing on stages discussing the topic and big names are getting behind the idea, it seems inevitable that the European mobile operators will need to learn to share, not just to compete in the modern mobile era, but to survive.
This was first published in February 2013