Infrastructure sharing

01 January 2009 |


In an era of shared facilities, co-location and the unbundling of the local loop, there’s nothing new about the idea of more than one company making use of the same physical infrastructure.

 
 Global lit submarine cable capacity


But in developing economies, the principle of shared infrastructure has a quite different resonance. The reality remains that much of the world’s population has no access to basic voice services, and an even smaller subset enjoys any kind of broadband internet service. The recent Global Symposium for Regulators, held in Thailand and organised by the ITU, was themed around establishing best regulatory practices to foster and encourage the sharing of infrastructure resources in less developed economies as a means of stimulating investment and growth in the ICT sector. Around 600 participants from 96 countries attended the event.

So why is this a regulatory matter?

ITU secretary general Hamadoun Toure says that “sound regulatory frameworks” are the key to the effective sharing of infrastructure. “Pro-competitive and open access strategies are needed to cut the cost of deploying ICT networks – and thus take a big step towards achieving targets,” he told delegates at the event.

He pointed out that regulatory reforms over the past decade have been the driver behind the huge take-up of mobile telephony in developing countries. Regulators, agreed the symposium, will have a role in all the key elements of shared infrastructure, including the liberalisation of international gateways, the opening of access to submarine cable networks, the sharing of mobile towers and rights of way for fibre backbones to reach rural users, the reduction of costs to provide real consumer choices, the regulation of international mobile roaming rates and improved sharing of wireless spectrum.

Regulators will furthermore have to decide how to approach new service areas like IPTV and mobile broadcast, as well as the involvement of other infrastructure industries, such as electricity, gas, water, sewage and railways to distribute the cost of civil works in spreading affordable services. In order to encourage universal access and bridge the “digital divide”, the symposium discussed ways of incentivising service providers who share infrastructure, including financial subsidies on a competitive basis.

Are there specific real-world examples?

India has plans to connect every village in the country to the internet by 2010, amounting to 500 million subscribers nationally, doubling the current figure. Every village with a population of over 2,000 is to be hooked up with individual fixed or mobile phones. As a way of encouraging rural subscribers, taxation is being brought down on handsets.

Indian mobile operators will automatically receive subsidies for the deployment and management of towers, as long as they share the towers with at least three other operators or service providers.

Vodafone Essar, Bharti Infratel and Idea Cellular have already agreed to form an independent tower company, Indus Towers, to provide passive infrastructure services in India to all operators on a non-discriminatory basis. The companies will each merge their existing passive infrastructure assets in 16 circles in India. Vodafone Essar and Bharti will own 42% each, and Idea will own the remaining 16% stake.

In a different example, the Nigerian government has said that since the liberalisation of the international gateway in 2006, fixed-line rates have dropped by 90%, traffic has increased considerably and revenues for international call operators have grown.

Does this apply to developed economies also?

Operators around the world, especially mobile ones, are considering sharing infrastructure in order to lower network deployment costs. Some analysts expect that 3G network sharing in particular is set to sweep through developed markets, with profound implications for mobile operators, vendors and regulators, an idea aired when 3G licences were first being awarded but not favoured at the time.

With the requirement to invest in areas like femtocells, and 4G technologies like LTE, many operators are realising that they can’t afford to address 3G with their own dedicated infrastructure.

A living example is a consortium of Israeli cellular telephony operators who claim to have managed major savings through 3G network sharing arrangements. In the UK, there has been a recent network sharing agreement between T-Mobile and 3.

This sort of network sharing can take different forms. Two mobile operators might decide to share physical resources, like sites and masts, but not network equipment, or else all mobile operators in a country could share the same radio access and core networks.

So there’s a commercial angle to all this?

Infrastructure sharing is certainly not just an altruistic thing – not even in developing economies. Companies like Reliance Communications in India are setting up separate entities to manage the business of sharing infrastructure, out of which they are looking for a return.

One positive, say analysts, is that sharing of assets reduces the unhealthy emphasis on building and owning infrastructure that has been the mindset of so many carriers in recent years. It compels them to address arguably more important issues, like delivering the right level of service to their customers, which is the sort of thing that can get sidelined in the drive to build, build, build.