Major MNOs are in a very challenging position as mobile data demand continues to expand at breakneck pace. As smartphone usage becomes an inherent part of everyday life, MNOs are challenged to keep up with ever increasing demand for perfect coverage and adequate capacity. Markets in developed countries are very competitive for subscribers, have flat ARPUs, and yet must keep up with the escalating demand for capacity, which translates to more and more CapEx each year.
At some point, one would think, MNOs would reach a point where they cannot keep up with the continuously expanding demand for to increase capital spend each year. One potential solution is to embrace shared infrastructure where third parties provide a single mobile infrastructure which can support all of the operators.
This would enable operators the pay these neutral host providers on an OpEx basis for only the capacity used by their subscribers, or for a fixed monthly fee. Financially, this would result in a more efficient use of capital for the operators. But their ingrained network-oriented culture seems to prevent them from embracing what should be a potential way out of their current challenges to keep up with exploding mobile data demands. The questions is why are operators reticent to embrace the shared infrastructure model?
MNO culture
Traditionally, mobile operators are network organizations. Up until now, much of the perceived positioning of MNOs is based on who has the best network. But all mobile networks have significant coverage with only a 2-3% difference in coverage, and a high level of reliability. Any incremental investment an MNO makes in their network now provides a small amount of coverage in a specific area or building, or a small increase in capacity. For the investment required, these marginal deployments bring a marginal ROI. MNOs should recognize that their most valuable asset is owning the subscriber, not the network.
A generation ago, operators realized that their towers were not a differentiating asset. When the financial benefit outweighed the differentiation of tower ownership, they sold the towers and moved to a shared infrastructure model. A similar change of attitude about network infrastructure could provide a path to a more efficient capital model that would help meet their current challenge to keep up with ever- increasing data demand for mobile subscribers. Recognizing this critical trend can provide an opportunity for third parties that want to develop plans to provide mobile capacity-as-a-service to the MNOs.
Types of shared infrastructure
Shared infrastructure can take many forms. The first consideration is the spectrum to be covered. To provide support for all MNOs, there are two choices; either support all of the bands for all of the operators, or support one neutral spectrum that can connect with subscribers from all operators. DAS networks are well suited for supporting spectrum bands from multiple operators. While DAS networks can be expensive, this cost is distributed across multiple operators to provide an overall cost savings. Typical small cells can only support one operator at a time. Therefore multiple sets of small cells must be deployed to support multiple operators, minimizing the cost savings.
New technologies being brought to market can help to solve this puzzle. Neutral host technologies like CBRS using shared spectrum and MulteFire using unlicensed spectrum can enable new business models where a third party can support all subscribers. Also new architectures enabling Cloud RAN networks offer new strategies for wider “DAS-like” networks capable of supporting multiple MNOs.
In-building networks may be the easiest form of a shared network to understand, because it is literally contained in a box. In many major venues, like airports, malls, stadiums and very large office buildings neutral hosts have put in DAS networks that support all operators to provide comprehensive improvement in a building. Most MNOs want to put in a small cell network in a building dedicated to only their subscribers. But this is a short sighted attempt by an operator to have an advantage over their competitors, and an inefficient use of capital.
MNOs cannot afford to invest in every rumpled edge of the network, which includes every inside building that needs in-building coverage. They are willing to make a poor investment for an advantage in a single venue that can be eliminated by another MNO making a similarly poor investment. Instead, MNOs should embrace a shared infrastructure approach for in-building networks. By working with building owners and neutral host operators, they can greatly accelerate their in-building coverage, while enabling others to invest CapEx on their behalf, in exchange for a monthly payment which may be based on the traffic actually used by their subscribers in that venue.
Similarly, the same model can be applied to the outdoor network as well. Third parties could deploy infrastructure to augment MNO investment. Today, the most common form is for a third party to deploy small cells for particular operator, in exchange for an on-going monthly fee for that location. While this type of “lend-lease” arrangement has been acceptable for MNOs for public small cells, they have been unwilling to fully embrace this model for forms of shared infrastructure.
Even for outdoor multiple operator networks, the cost savings could help operators in their efforts to meet the need for increasing capacity in key network pressure points, and coverage in difficult to reach areas. While embracing the shared infrastructure approach would require a change of attitude on the part of MNOs, the benefit would be great in terms of improved service, and improved financials for operators.
Operator differentiation
The model of operator differentiation is changing. The value of having a better network is more difficult to justify. With all networks at a similar level, the marginal improvement of coverage or adding capacity adds little to the value of a provider’s brand. In today’s environment, service offerings and customer service may well be more important to gaining and keeping subscribers in very competitive markets.
The main value for MNOs is the ownership of subscribers, which can lead to additional revenue and service potential. In today’s value model, it is transparent to a subscriber if they are own an operator’s network, using WiFi calling, or using a third parties network. Operators should be open to leveraging networks from other sources to create comprehensive coverage, and meet critical capacity demand in high traffic areas, and peak traffic times.
Today, the engineering focus of MNOs as network companies will give way to more of a market focus through economic necessity. Eventually, operators will have to move to this kind of mix network model for economic efficiency, and to enable more of a brand-focused model emphasizing their offerings and service to maintain customers.
Neutral host future models
New organizations can view this key industry trend and position themselves now to create new business models with mobile operators. This trend has been in use for years for major venues, as discussed before. But as the pressure increases for operators to provide perfect coverage and high capacity for subscribers, the need to cover more small and medium sized venues will out strip both their financial and deployment resources to deploy their own networks. Third party neutral hosts can develop plans to deploy network infrastructure for the MNOs now, anticipating this demand. While operators have not reached a comfort level today with third party networks, new business models can be created to making shared infrastructure networks easier for MNOs to accept. Neutral hosts today can stake out key areas and venues to deploy new shareable technologies in today knowing that these will have increased value for all MNOs later.
Shared infrastructure is good for MNOs
Mobile operators should embrace shared infrastructure models. It will become more and more difficult to provide the perfect coverage subscribers expect, and to keep up with the ever expanding capacity demands for mobile data. MNOs should welcome third parties willing to pay CapEx and OpEx to expand and enhance their networks, especially in areas of the network where it is hard to justify if that investment is only supporting their own subscribers. A business model where the investment is made by a third party neutral host, and supports subscribers from all of the operators, creates a profitable opportunity for the neutral host, brings more capital to the wireless industry to accelerate the expansion of networks, and makes financial and marketing sense for operators. With such a strong motivation for all players in the market, eventually to network-centric bias of the MNOs will give way to a shared infrastructure model.