5G May Drive Carriers to Share Networks – Like It or Not
As the global wireless industry plods into the first stages of real, commercial 5G, a growing chorus is arguing that US operators will increasingly, inevitably move toward a shared deployment model.
However, that sharing will likely happen slowly, piecemeal and without much fanfare. And, at least according to some, it will never reach the egalitarian levels of "even-steven" network sharing employed by operators in Europe and elsewhere.
Nonetheless, it's reasonable to assume that, at some point in the future, there may not be much daylight between AT&T's eventual 5G network and T-Mobile's eventual 5G network in the cases where they use the same small cells, backhaul and, potentially, data center processing.
"Sharing network infrastructure in order to better allocate capital and thus expand service to more people is not a radical idea," wrote Tom Wheeler, the former chairman of the FCC under President Obama, in a post last year to the Brookings Institution blog, where he is now a visiting fellow. "Rental car companies share the same facilities at airports, for instance. The cars the companies rent are the same, and their rental counters are right next to each other under the same roof. Rental car competition is enhanced, however, by the sharing of costs of a common infrastructure."
"To deliver 5G and overcome deployment roadblocks, operators should consider a different approach: network sharing," wrote the analysts at Delta Partners, an advisory and investment platform in the telecoms, media and tech space, in a recent post.
"Think outside the box," suggested Dan Rabinovitsj, vice president of Facebook Connectivity, in recent discussions about his company's efforts to promote network sharing in Latin America.
Shared 5G networks gain ground
Operators around the world have already teamed up in pursuit of the 5G opportunity. Net4Mobility is a network-sharing joint venture between Swedish operators Telenor and Tele2, and it is moving forward into the 5G area. Telefónica and Vodafone in the UK announced a similar 5G expansion of their sharing agreement. SoftBank and KDDI in Japan plan to share basestations in rural areas for 5G. And Orange Belgium and Proximus will team up for a 5G buildout in that country.
Facebook's Rabinovitsj pointed to Internet para Todos (IpT) in Peru -- an open access wholesale mobile infrastructure operator charged with upgrading 3,000 cell towers from 2G to 4G and financed by Telefónica, Facebook, IDB Invest and Development Bank of Latin America -- as a model for a shared future. "We can bring on a second operator to share these assets, and that's the intent," Facebook's Rabinovitsj said recently. He didn't name America Movil as the other intended operator partner, but that's the only other major operator in the market.
"It's truly a business model innovation, not a technical innovation." Rabinovitsj said of IpT and network sharing, acknowledging though that "sharing resources is not natural for anyone."
The notion of network sharing in the US market is certainly verboten. "Quality of service and user experience are the market differentiators in the US," said ACG Research analyst Chris Nicoll. "You don't get that by sharing."
Nicoll argued that US operators would never embrace the kind of overt network sharing found in Europe and elsewhere."I just don't see that happening in the US. It's a very different business model."
Interestingly, another country that hasn't embraced network sharing for 5G is China -- that's noteworthy considering widespread expectations that the country would engage in some kind of shared or merged 5G deployment model.
It takes a village
The maturation of the US wireless industry can be loosely compared with the way children grow up. In 1929, Mildred Parten Newhall noted that, as children mature, they often move from playing by themselves (solitary) or next to other children (parallel) to playing directly with other children (associative and cooperative). That kind of development is the signal of a healthy child, the theory goes.
Similarly, in the US wireless industry, operators no longer play by themselves: They've sold off their cell towers to the likes of SBA Communications and American Tower, and now they often share space with each other on towers typically owned by third parties. Such sharing will likely extend into the small cell arena, given that companies like Crown Castle are betting that their small cell deployments will support equipment from more than one operator.
US carriers also roam onto each others' networks -- Sprint recently expanded its coverage area due to a roaming agreement with T-Mobile. They also sometimes use the same backhaul links, albeit via discrete and separate agreements with the same backhaul providers. And in some cases they even share the same WiFi networks -- see AT&T and Sprint's offloading agreements with WiFi provider Boingo.
In all of these scenarios, each operator maintains its own spectrum licenses, billing platform and authentication services, but much of the network's core infrastructure might be shared with its competitors.
However, it's worth pointing out that there are plenty of examples of operators actively opting out of this approach. Verizon, for example, has been working to "vertically integrate" in some markets by deploying its own fiber backhaul and small cells.
Sprint shows the way
Two relatively recent developments in the wireless industry hint at additional sharing mechanisms potentially available to US operators, and both involve the nation's smallest nationwide provider. Sprint inked an innovative infrastructure-sharing agreement with cable company Altice just months before it agreed to a massive merger with T-Mobile, the nation's third-largest wireless network operator. In both cases Sprint acted out of a need to shore up its flagging market position and finances.
"The model for convergence may be Altice USA's clever 2017 MVNO deal with Sprint," wrote the analysts at Wall Street research firm MoffettNathanson in a recent note to investors. "Under that agreement, Sprint can build small cells on Altice's network, principally using coaxial strand-mounted small cells, anywhere they want to (indeed, part of the rationale behind Altice's fiber build is to free up their coax for strand-mount small cells). Sprint pays nothing to Altice other than the construction cost of the small cell itself; there are no follow-on leasing or backhaul fees. Altice, in turn, gets to ride on those small cells for free, so the more of them there are, the lower the cost of Altice's Sprint MVNO becomes. Sprint has already deployed some 19,000 small cells on Altice USA's network under this agreement."
The MoffettNathanson analysts argued that Verizon would be wise to ink a similar type of agreement with a cable company like Comcast or Charter.
Further, the Wall Street analysts at New Street Research wrote that Sprint's ongoing efforts to consummate its merger with T-Mobile again raise the specter of network sharing. Specifically, they argued that one possible condition on the merger would be to require T-Mobile and Sprint to share a 5G network in a move that would keep the number of nationwide wireless providers at four instead of reducing it to three through a standard merger.
That kind of sharing could reduce costs for all involved, some analysts argued. "Simulations from one case showed that by sharing 5G small-cell deployment and building a common, nationwide 5G IoT macro layer, operators could reduce 5G-related investments by more than 40%," wrote analysts with McKinsey & Company last year.
However, the New Street analysts floated their network-sharing proposition well before Dish Network entered the picture as a possible fourth provider in the ongoing Sprint/T-Mobile merger drama. Based on reports of negotiations, the prospect of some kind of shared network doesn't appear to be part of the Department of Justice's ongoing negotiations with T-Mobile and Dish about the proposed transaction.
Sharing through virtualization
One final note that's worth including in any discussion of network sharing is the effect of virtualization technology. Such technology promises to replace much of the basestation hardware powering wireless networks today with cheaper and more flexible software -- software that could run in any standard data center. Indeed, just this week Verizon said it tested cloud-native container technology with vendor Ericsson -- another indication that the operator is keen to implement virtualization.
If US operators do virtualize their network functions, they could well end up sharing the same data centers for that work, although their individual computational processes likely would be walled off from each other. Already Google, Microsoft and other web-scale companies run some of their software processes in shared facilities operated by third parties like Equinix.
This kind of virtualized network would still leave operators' physical antennas separate -- likely a necessity given that Verizon, AT&T, Sprint and T-Mobile each use different spectrum bands -- but it would most likely put everything else on equal footing in shared facilities.
"That is a distant future possibility," argued ACG Research's Nicoll. "We're still some years away from having a virtualized infrastructure."
All that said, operators should at least consider the possibility of sharing to some degree, argue the analysts at McKinsey & Company. "Achieving a network-sharing agreement is a complex and timely matter," they wrote. "The time from initial discussions and feasibility analysis to a signed contract can easily be six to nine months. If operators plan to meet expectations for 5G deployment before 2020, or act before they are forced into 5G deployment by competitors, they need to start now."