Telecom Infrastructure Sharing  

 

 

 

 

 

Chapter I 

Research Overview 

 

 

 

 

 

 

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Telecom Infrastructure Sharing  

GENESIS 

With India emerging as the largest mobile player and as many as eighteen

service providers jostling for space and higher share of revenue, one query that keeps

on popping-up is that despite the tremendous growth the high costs of rolling out

services is still a major pain for the service providers.

In such a scenario, sharing of telecom infrastructure among service providers is

becoming the order of business in the telecom industry where rivals are becoming

partners in order to lower the increasing investments.

The growth in wireless mobile subscribers in last few years has been

phenomenal and over 10 million new mobile customers are being added every month.

Due to intensive growth, intra-site distance of base units are reducing drastically and the

formation of such cluster of base units opens a new opportunity of sharing the

infrastructure which could be passive as well as active.

The country would require about 3.3 lakh towers by 2010 in order to meet this

target and even if the target is achieved, it will only be about 50per cent of the tele-

density with major gaps in the rural areas. Telecom companies, which rushed to set up

towers to cope with the explosion in the number of subscribers, have now realized that

it’s better to share the infrastructure. For large players who have a pan-India footprint, it

means a new source of revenue, while for those expanding nationwide, it means lower

capex and opex, as well as faster rollout of services.

In view of stated importance of passive infrastructure, Reliance Communications,

which is the country’s second largest mobile telecom company, became the first to

demerge its tower operations, christening it Reliance Telecom Infrastructure Ltd (RTIL).

Bharti Airtel, Tata Teleservices and Idea Cellular followed suit.

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BACKGROUND 

After several years of successful growth, wireless networks have covered large

territories where the revenue generated from population densities and the wealth of the

relevant populations is sufficient to support the cost of acquiring and operating such

networks. However, as much as two-thirds of the world's population does not have

service from wireless networks due to the difficulty in recovering the costs of acquiring

and operating the networks through charging for services. This is especially true in

areas where low population density or low income limit the revenue potential of a

proposed network site. While telecommunications manufacturers have made significant

progress over the years in reducing the prices of acquiring and operating wireless

networks, these costs still limit the deployment of wireless networks.

The liberalization of a country’s telecom industry can enable economic growth

across various sectors, but its success depends on regulatory policies that are

conducive to the development of competition. One element of such a policy would be

the creation of regulatory and economic incentives that encourage the sharing of

infrastructure among telecom companies as a key lever to foster competition and

optimize investments. Operators may perceive the economic benefits and adopt a

collaborative approach autonomously; however, a clear policy, a commercially friendly

price-regulation mechanism, and tailored regulatory safeguards may be necessary to

successful infrastructure sharing.

Infrastructure sharing may be new to India, but it’s a standard practice, globally.

Though tower sharing has not been very successful in most European and Asian

countries, experts believe India will do a US, because no other country in the world has

12 operators. Currently, there are 3.1 lakh towers in the country. To meet the

government’s target of providing 500 million telephones by 2010, nearly 3.3 lakh towers

will be required in the next three years. Moreover, 3G will also require denser coverage.

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Telecom Infrastructure Sharing  

Telecom Regulatory Authority of India (TRAI) also supported infrastructure

sharing. According to TRAI, Mobile operators will require a large number of towers to

sustain this growth pattern, which will need huge expenditure and time to roll out

services. It is likely to further deteriorate the skyline by erecting more towers. Passive

infrastructure sharing will help reduce the growth of towers.

In another major recommendation, TRAI has sought amendment in the license

condition to allow active infrastructure sharing limited to antenna, feeder cable, Node B,

Radio Access Network and transmission systems. However, the Authority has not

favored sharing of spectrum at this stage. Another major initiative is backhaul sharing.

According to Cellular Operators’ Association of India, erecting one cell site costs

about Rs 30 lakh. “To set up 2.2 lakh more towers in the next three years, an

investment of Rs 66,000 crore will be required,” and therefore, hiving off tower

infrastructure is an Indian innovation. While telecom companies are hiving off their tower

infrastructure to cut capex and opex in the wake of declining average revenues per

user, third-party companies like GTL Infrastructure, Quipo, and Essar Telecom are

setting up independent tower companies.

These measures are especially necessary now. While liberalized markets with

effective regulatory structures have traditionally observed several forms of infrastructure

sharing, including co-location and national roaming, more advanced forms are

emerging. They involve various passive and active network components, provide

significant revenue-generation opportunities for incumbent operators, and facilitate the

development of virtual operators and next-generation service providers. International

experience suggests that favorable regulation and economic incentives have enabled

such developments in infrastructure sharing.

 

 

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Telecom Infrastructure Sharing  

OBJECTIVE 

To explore the technological, financial and marketing aspects of telecom

infrastructure sharing.

SCOPE  Telecom policymakers and regulators must strike a balance between their hope

to offer better services at affordable prices through increased competition and their

desire to create favorable conditions for attracting investments. While some may

perceive strong competition as an inhibitor of investment, others tend to link competition

to investments insofar as without the right investments, service offerings will not develop

as they otherwise would in a competitive state.

Telecom operators’ spending has traditionally been dominated by considerable

investments in technology and network deployment. Given that such investments are

fixed, sunk, and irreversible, they represent a high risk factor. The risk is compounded

by the need, for both fixed and mobile operators, to continuously adopt new

technologies and upgrade infrastructure. While fixed network operators are now

migrating to next-generation networks, most mobile network operators have already

deployed third-generation (3G) infrastructures. Therefore, infrastructure sharing can

reduce this risk for operators by spreading it among several players.

In the long term, competition will rely on infrastructure sharing as a critical tool, or

even a prerequisite, for growth. In response to this reality and the investment risk

associated with infrastructure deployment, policymakers and regulators resort to

different models of infrastructure sharing to meet the following set of imperatives:

• Reduce investment requirements

• Offer a new source of revenues

• Release capital for strategic investments

• Expand investments to less dense areas and meet universal service targets

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• Shift the focus to service innovation instead of network deployment

The currently Indian telecom infrastructure market has only 25% shared towers as

compared to total number of towers hence many new operators are also having huge

scope to expand their network by opting for infrastructure sharing with incumbent

operators and to get benefit of reduced capital expenditure.

3G operators are taking the opportunity to reduce capital and operational

expenditure by sharing infrastructure from the start of the build-out. This is technically

more attractive than joining existing 2G networks since operators, in many markets, are

seeking to use 3G to differentiate their products and services, rather than networks.

Sharing a new network removes the complexity and cost associated with re-planning

existing networks but requires commercial agreement on operations and upgrade costs.

              

  

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Telecom Infrastructure Sharing  

     Chapter II 

 Technological Aspects‐I 

               

        

                               

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Types of network sharing

For the purpose of this paper we have classified sharing broadly into five categories:

• Site sharing.

• Mast (tower) sharing.

• RAN sharing.

• Network roaming.

• Core network sharing.

Passive sharing is usually defined as the sharing of space or physical supporting

infrastructure which does not require active operational co-ordination between network

operators. Site and mast sharing are considered to be forms of passive sharing.

The remaining categories, listed above, are considered forms of active sharing

as they require operators to share elements of the active network layer including, for

example, radio access nodes and transmission. For RAN sharing, MNOs continue to

keep separate logical networks and the degree of operational co-ordination is less than

for other types of active sharing.

Network sharing across these categories may include a number of parties. Whilst

there may be significant commercial and practical hurdles to overcome, there are no

fundamental reasons why multiple operators cannot share networks. For example, up to

six operators share a single site in India. Agreements may concern individual sites, a

number of sites or particular regions. Passive sharing and RAN sharing do not require a

fully merged network architecture and there are examples of unilateral, bilateral (mutual

access) or multilateral agreements.

Site sharing

Site sharing, involving co-location of sites, is perhaps the easiest and most

commonly implemented form of sharing. Operators share the same physical compound

but install separate site masts, antennas, cabinets and backhaul.

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Telecom Infrastructure Sharing  

Figure 1 : Site sharing

In the figure above, the solid line around the equipment and masts represents the

fenced-off compound that the operators will either own or lease. Within this compound

each operator usually installs their own infrastructure separately from that of other

operators. However, they may decide to share support equipment, including shelters,

power supply and air conditioning. This form of sharing is often favored in urban and

suburban areas where there is a shortage of available sites or complex planning

requirements.

Site sharing is the simplest form of infrastructure sharing and is most likely to be

accepted by competing operators. The key challenges are for incumbent operators to

accept the opening of the infrastructure to other players and for new operators to trust

that incumbents will provide them with the appropriate access to sites without deliberate

tactical delays to prevent them from rolling out their networks effectively. Enforcing such

cooperation is a major challenge to regulatory authorities.

Mast sharing

Mast, or tower, sharing is a step up from operators simply co-locating their sites

and involves sharing the same mast, antenna frame or rooftop.

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Telecom Infrastructure Sharing  

Figure 2 : Mast sharing

Figure shows a single fenced-off compound within which operators will install

their own access infrastructure, ranging from antennas to base transceiver station (BTS)

cabinets. However, each operator will install their own antennas onto a shared physical

mast or other structure. The mast may need to be strengthened or made taller to

support several sets of antenna. As for site sharing, operators may share support

equipment. Operator coverage remains completely separate. There are alternative

options available to operators when considering mast sharing. For example, third party

structures such as chimneys and steel power pylons perform comparably to operator

masts in terms of providing the required height and load-bearing capacity. In built-up

areas, rooftops may be shared by several operators. Third party infrastructure

providers, such as Arqiva and Crown Castle, may also enter the market specifically to

provide shared antenna sites to telecoms operators and broadcasters.

RAN sharing

RAN sharing is the most comprehensive form of access network sharing. It

involves the sharing of all access network equipment, including the antenna, mast and

backhaul equipment. Each of the RAN access networks is incorporated into a single

network, which is then split into separate networks at the point of connection to the core.

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Telecom Infrastructure Sharing  

MNOs continue to keep separate logical networks and spectrum and the degree of

operational coordination is less than for other types of active sharing.

Figure 3: RAN sharing

The above figure illustrates how RAN sharing might work between two partner

networks. In this scenario both operators share all the access network elements to the

point of connection with the core network. At this interconnect point each operator then

splits out the traffic from its respective customers on its own core network ring for

processing by its own core network elements and infrastructure. The exact

implementation may vary between different operators depending on the local

implementation.

Included in the access network are:

• Radio equipment.

• Masts.

• Site compounds.

• Backhaul equipment

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Telecom Infrastructure Sharing  

Operators may face challenges in implementing a shared RAN network formed

from existing networks, as their architectures have evolved independently to date. For

example, there may be complications around inter-working of equipment purchased

from different vendors and operational procedures and control mechanisms.

Core network sharing At a basic level, the core network consists of:

• Core transmission ring.

• Switching centre (with the home location register (HLR)).

• Billing platform.

• Value Added Systems (VAS) that represent logical entities and may also form part of

the core network.

The core network may be shared at one of two basic levels, namely the:

• Transmission ring.

• Core network logical entities.

a) Transmission ring sharing

Where an operator has spare capacity on its core ring network, it may be feasible

to share this with another operator. The situation may be particularly attractive to new

entrants who are lacking in time or resources (or desire) to build their own ring.

They may therefore purchase capacity, often in the form of leased lines, from

established operators.

Fixed network operators, such as British Telecom and Cable & Wireless, which

sell capacity on their network on a wholesale basis often provide operators with an

interim mechanism to roll out a network quickly while they make arrangements to

implement their own architecture. However, if both companies use the same joint

transmission and switching core then their services will become more aligned as they

will have the same infrastructure capabilities. Any service, function or process that one

operator implements can be replicated by the other as they have the same

infrastructure capability.

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Figure 4: Core transmission ring sharing b) Core network logical entity sharing

Core network logical entity sharing represents a much deeper form of sharing

infrastructure and refers to permitting a partner operator access to certain or all parts of

the core network. This could be implemented to varying levels depending on which

platforms operators wish to share. A simple example may be sharing the equipment

identity register (EIR) function, which on its own may be expensive but as a pooled

resource between operators becomes more attractive.

Figure 5: core network elements sharing

The benefits for sharing core network elements are not as clearly defined as

those for sharing the access network. It is conceivable that there may be some cost

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Telecom Infrastructure Sharing  

reductions in operations and maintenance but the scale and practicality of these

remains uncertain.

Operators’ focus for network sharing to date has concentrated on elements in the

access network since the cost savings in this area are typically more significant and

better understood.

Network roaming

Network roaming can be considered a form of infrastructure sharing although

traffic from one operator’s subscriber is actually being carried and routed on another

operator’s network. However, there are no requirements for any common network

elements for this type of sharing to occur. As long as a roaming agreement between the

two operators exists then roaming can take place. For this reason operators may not

classify roaming as a form of sharing as it does not require any shared investment

in infrastructure. When roaming agreements come to an end they can be renegotiated

either with the existing host network or another operator with minimal effort and

transitional impact.

Roaming can be further divided into the following

categories:

• National roaming.

• International roaming.

• Inter-system roaming.

a) National roaming

National roaming occurs between operators (that are usually direct competitors)

within the same country code as they provide service within the same geographic region

or within different geographic regions. Agreements permitting, users are allowed to

roam onto a host network if the home network is not present in a particular location.

In the early days of network deployment this meant that operators could compensate for

lack of presence and offer users contiguous coverage and service using the same

handset and SIM. This is particularly useful in areas of low subscriber density where the

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payback period for a dedicated site by each operator may not be justified.

 

Telecom Infrastructure Sharing  

Figure 6: Roaming

b) International roaming

This has similar characteristics to national roaming, but occurs between

operators within different country codes. Users can continue to use their handsets

abroad and receive the same basic voice service and any VAS they subscribe to

(provided that the host network is capable of supporting this).

On an international basis, roaming is complicated by the fact that regulators

dedicated different frequency bands to the same technology in different jurisdictions.

Handsets need to be (and typically are) capable of operating at different bands.

c) Inter-system roaming

Inter-system roaming occurs between networks operating to different standards

and architecture as in the case of 3G and GSM roaming. Inter-system roaming

generally facilitates the introduction of new standards and technologies as it provides a

mechanism for the new platform to offer coverage from launch at a level associated with

a mature network. It helps build revenue quickly and mitigates against any user

perception that the service will not be available to the same level as with established

networks and technologies. Inter-system roaming imposes more challenging

requirements on user terminals and networks as they have to be able to support calls

on both standards and maintain calls when changing between standards

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Telecom Infrastructure Sharing  

     

Chapter III  

Technological Aspects‐II  

 

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Virtualization in telecom network

A virtualized network provides each operator with full independent control of their

own virtual Base Transceiver Subsystem (vBTS), and connectivity to their own Base

Station Controller (BSC) and core network.

Figure 7: Virtualization concept

Wireless operators today are finding that the economics of wireless service can

no longer justify the ownership and operation of ubiquitous networks. There are parts of

the network that must be deployed, due to regulatory build-out requirements or

competitive coverage pressure, where the level of service revenue is insufficient to

support the operation of those network sites. Increasingly, operators are turning to

infrastructure sharing to reduce the cost of network operation at such sites. Passive

infrastructure sharing, where operators share basic site components such as towers,

shelters and electrical power supplies is already commonplace in the wireless industry.

In the last few years various operators have investigated shared active infrastructure the

sharing of active electronic components, e.g., base stations and backhaul transmission

equipment.

Today's traditional shared deployments have necessitated that participating

operators agree upon the same technology, roadmap, and features. The result is

significant loss of competitive differentiation among the operators, discouraging

operators from embracing the technology and leading to fewer service offerings for

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Telecom Infrastructure Sharing  

customers. A new solution to this challenge is virtualization of the radio access network

(RAN), rather than traditional sharing.

Introduction to Virtualization

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Virtualization is not a new technology — it was invented by IBM in the 1970's for

use in its System/370 mainframes, and has experienced a massive resurgence in the

past decade as a means of logically partitioning a single (hardware) machine into

multiple virtual machines. Companies such as VMware have led the way in developing

commercial virtualization technology, while various open source efforts, e.g., Xen, have

created extremely capable virtualization systems. Both Intel and AMD have extended

the basic IA-32 and IA-64 CPU architectures with specific instructions and operating

modes to increase the efficiency of virtualized systems. Figure 7 shows the basic

structure of a virtualized system. The key observation to make is that the role of the

hypervisor in a virtualized system is analogous to the role of the operating system (OS)

in a standard computer system. The hypervisor manages various hardware interfaces,

and provides essential services — protection, translation, multiplexing, resource

management, etc. — to a number of clients. The essential difference between the

hypervisor and the OS is that the OS's clients are application programs, while the

hypervisor's clients are virtual machines. Each virtual machine runs its own OS, the

guest OS, which in turn manages a set of standard applications.

Another difference is the interface structure: whereas the OS provides

application programming interfaces (APIs) to its applications, the hypervisor provides

each virtual machine with a set of virtual devices: network interface, disk, graphics

adapter, etc. Some hypervisors support the use of a standard, unmodified OS as the

guest OS, with virtual devices emulating standard physical devices. Others provide a

guest OS environment replicated from the hypervisor's host OS, but incur much lower

overhead to do so. The hypervisor may also provide a hypercall API that allows the OS

running in a virtual machine to more efficiently invoke certain services of the hypervisor;

such a facility is called para-virtualization.

Virtualization is used extensively in enterprise computing environments to

 

Telecom Infrastructure Sharing  

support the use of virtual machines for various purposes. Data center hosting providers

use virtualization to create a large number of hosted systems on a smaller number of

physical machines, while retaining the ability to manage each hosted system as if it was

a physical machine, i.e., separate disk quotas, network access and traffic management

policies, independent upgrades of OS and applications. Enterprises may use

virtualization to separate logical services — web, email, firewall, etc. — without requiring

a separate physical server for each one. This enables greater security than running all

services within a single OS environment. Finally, virtualization is used by engineers to

boot many different guest OS on a single hardware platform for development purposes,

e.g., testing of new OS-level software, such as device drivers, or investigation of OS

security issues.

Applying Virtualization to Shared Radio Access Networks

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Operators who wish to share active infrastructure, particularly the base station

subsystem (BSS), do so in order to reduce the cost of deploying and operating certain

parts of the network. The challenge they are faced with is the ability to retain

independent management and configuration control, and be able to apply software

technology upgrades that differentiate them from their competitors.

Traditional hardware radio approaches to shared infrastructure require that

operators share a single traditional base station, thus eliminating the ability of each

operator to provide independent feature sets or levels of technology. Furthermore,

traditional base stations were not designed to be shared, and cannot provide fully

independent management and configuration.

A virtualized RAN leverages software radio technology, which implements the

complete base station subsystem (BSS) in software, rather than the traditional hardware

based approach. The key element of the BSS that must be shared is the base

transceiver subsystem (BTS), the radio system that is located at each cell site and

supports radio communications with mobile terminals. A software radio BTS implements

all radio functionality, from physical layer through MAC layer and network layer, in

 

Telecom Infrastructure Sharing  

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software that runs on a standard operating system, e.g., Linux, on commodity off-the-

shelf (COTS) processing platforms. This allows a software radio system to take

advantage of investment in new technologies and open systems, rather than being

limited to a particular radio vendor's own proprietary technologies. In turn, this breaks

the vertical integration business model that operators have been forced into in the past

and instead creates an ecosystem of horizontally-focused component suppliers that can

be integrated into a more flexible and cost-effective solution.

A software radio BTS is much more readily virtualized than a hardware radio,

since the BTS is just a software application. It is possible to construct a virtualized base

station by using standard virtualization technology to create a virtual machine (VM) per

operator, and running an independent BTS application for each operator within that VM.

This ensures that each operator has complete control over their BTS, while

guaranteeing that one operator's traffic, signaling and configuration data are isolated

from other operators.

Figure 8 shows the architecture for a virtualized GSM network supporting three

different operators. In this scenario one of the operators deploys the network and acts

as an anchor tenant, using excess capacity to provide a managed service to the other

two operators in order to reduce the cost of operating the network. Although superficially

similar to a traditional roaming network arrangement, the virtualized network provides

each operator with full independent control of their own virtual BTS (vBTS), and

connectivity to their own BSC and core network.

An alternative model for use of virtualized RAN technology is the neutral host

model. In this case the sites are owned and operated by a company that is not itself a

mobile network operator, thus eliminating any conflict of interest concerns that arise

when the anchor tenant is a competitor of one of the other site operators. Existing tower

companies are natural candidates for neutral host management, and this approach fits

in very well with the current trend towards provision of managed network services on a

charging by traffic basis.

 

Telecom Infrastructure Sharing  

Shared active infrastructure is an essential technology in the mobile network

operator's ongoing efforts to reduce the cost of providing service, particularly in sparsely

populated areas where revenues are too low to make service in those areas

economically attractive. MultiRAN product is a solution that combines software radio

solutions with virtualization technology to provide mobile network operators the cost

savings of shared active infrastructure while allowing them to retain independent

management control and technology evolution.

MultiRAN Virtual Base Station (vBTS) Introduction

Software Defined Radio (SDR) is a concept that has excited mobile operators for

many years, offering benefits such as support for new waveforms through software

upgrades, faster time to market for new network services, and reduced maintenance

costs due to remote upgrades and management. With MultiRAN, has taken its software

RAN solutions to a new level. The flexibility of a software RAN allows virtualization of

the BTS platform. Virtualization enables a single BTS platform to be shared by multiple

mobile operators, reserving hardware resources for each mobile operator using the

system and isolating each virtual BTS (vBTS) from the others running on the platform.

Software RAN – Flexibility for Mobile Operators

Software RAN technology brings tremendous flexibility to the radio access

network (RAN), providing many advantages to mobile operators. Upgrades to the RAN

can be rolled out via software only, rather than through hardware refreshes. As a result,

new features can be pushed to hundreds of sites overnight, rather than over a period of

several weeks or longer. Mobile operators can deploy network features much more

quickly, improving network coverage, speeding time to market and increasing network

capacity, thus resulting in an enhanced mobile user experience.

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For example, if a network operator measures a sudden increase in network traffic

at some sites, they can remotely upgrade the RAN to support higher capacities through

a software upgrade that same day, rather than scheduling a technician to visit each site

 

Telecom Infrastructure Sharing  

requiring the capacity upgrade. This is a tremendous benefit for operators with either a

large number of cell sites, or cell sites in remote and hard-to-reach areas.

The use of virtualization adds another layer of sophistication to the MultiRAN

Solution. Just as enterprise virtualization has made it easier to manage datacenter

assets, reduce the consumption of datacenter resources (floor space, power, etc.), and

simplify software releases through standardization, a vBTS enables operators to share

network infrastructure. Applied to the RAN, virtualization allows a single BTS platform to

be split into multiple virtual BTSs (vBTS), each vBTS supporting a single mobile

operator. Virtualization enables a new form of active infrastructure sharing, with many

benefits to mobile operators and the infrastructure host who maintains the BTS

equipment.

 

Mobile Operator Network Architecture

Figure 8: MultiRAN architecture

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Advantages for Mobile Operators Virtual BTS

Using virtual BTSs (vBTS) allows multiple mobile operators to share a single BTS

platform, reducing the amount of equipment required to support multiple mobile

networks at a single site and enabling mobile operators to share the costs of a network

build out. Virtual BTSs also maintain differentiation between operators, since each

operator directly controls their own network configuration.

Each network of vBTSs connects back to a logically separate BSC for each

operator, permitting the operator to make use of infrastructure sharing with traditional

2G MSCs that are already deployed in their network using standard BSC interfaces.

There is no need for the mobile operator to change existing switching or core

infrastructure.

Infrastructure Sharing

Sharing MultiRAN between multiple mobile operators leads not only to sharing

the BTS platform, but also sharing antennas and backhaul connections. Reducing the

number of antennas per operator at a site leads to lower site lease costs, and reducing

backhaul requirements minimizes the amount of microwave equipment required, or

minimizes monthly costs when leasing bandwidth.

Independent Management

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Each virtual network in a MultiRAN system provides the mobile operator with

independent management and configuration systems. Each mobile operator can directly

control their virtual network configuration, changing items such as broadcast parameters

and handover lists, without needing to work through another mobile operator or the

infrastructure provider. Operators also have direct access to key performance indicators

for the virtual network, allowing the operator to instantly identify and respond to network

issues.

 

Telecom Infrastructure Sharing  

Virtualization

Finally, the virtualization layer provides a layer of protection between all of the

mobile operators. The virtualization layer allocates physical resources to each of the

mobile operators, and prevents the BTS software from exceeding that limit. Not only

does this keep each operator’s data secure, it ensures that any network issue pertaining

to one operator is kept separate from the others.

Advantages for Infrastructure Providers

Figure 9: Infrastructure provider hostel model

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Flexible Deployment Architecture

Many of the benefits that MultiRAN provides to mobile operators are also

applicable to infrastructure providers. The deployment flexibility of MultiRAN means that

infrastructure providers can pursue two models for hosting shared radio access

networks. The first model entails hosting the BTS equipment only, while still giving the

mobile operators direct network access to the virtual RAN. The second model allows the

infrastructure host to provide a fully managed virtual RAN where they ensure the

network meets the service level agreement provided by the mobile operator and

manage the virtual RAN themselves. These models can even be mixed on a single

shared radio access network to best fit the desires of each mobile operator on the

network. Both models provide significant power consumption savings versus running

multiple non-shared networks.

Independent Management Systems

When deployed in the vBTS hosting model, MultiRAN’s support of direct mobile

operator configuration and monitoring of the virtual network helps reduce the

administrative burden for the infrastructure host. The infrastructure host is no longer

required to coordinate multiple configuration changes between all of the mobile

operators hosted on the system, nor does the infrastructure host need to coordinate

software upgrades between mobile operators. Mobile operators can upgrade waveform

software independently and ensure interoperability with the unique core network

equipment deployed by each operator. The infrastructure EMS provides the

infrastructure host with the ability to monitor all of the BTS equipment for all mobile

operators, and also control the resource allocations to each individual operator.

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Technical and environmental Considerations There are a number of technical considerations and environmental benefits that

accompany infrastructure sharing agreements.

Technical limitations to infrastructure sharing a) Passive infrastructure sharing

Passive infrastructure sharing requires the consideration of many technical,

practical and logistical factors although the principle is simple in theory. Any potential

impact must be assessed and fully understood before sharing commences to ensure

that there are no adverse effects on the operation of the site and the supporting network

equipment and systems. Operators must consider items such as load bearing capacity

of towers, azimuth angle of different service providers, tilt of the antenna, height of the

antenna, before executing the agreement.

b) Sites and Masts While new masts can be built taking into consideration the ultimate load-bearing

capacity required, existing masts may not have been designed to cater for the additional

load requirements of service providers who decide to share. Existing masts will have to

be assessed on an individual basis as a mast may be capable of sustaining the

additional load there may physically not be enough space left on the mast to

accommodate extra equipment. If the site is optimally located in the shared network

architecture then it may be viable for the site to be redesigned.

This would be more applicable to masts located in urban city centre sites where

the revenue the site generates justifies the additional investment required. There is also

the consideration of whether an alternative site location can be found and how this

would impact on network performance, in which case it may make more business sense

to keep the existing location and re-build despite the additional cost.

MITSOT  Page 26 

In urban areas and city centres rooftop sites tend to be the dominant form where

the load- bearing capacity of the building and foundation becomes significant. Rooftop

sites offer a limited amount of space to house additional equipment, which again may

 

Telecom Infrastructure Sharing  

require an expensive re-design if sharing is to proceed. Urban sites also impose stricter

requirements on the number of antennas that can be placed due to their aesthetic

impact. This may require operators to choose combined equipment which results in

poorer performance and additional limitations on modifications and network

enhancements.

MNOs who share sites and utilize their own microwave backhaul network will

have to ensure that they can accommodate the necessary microwave equipment on the

tower or mast and still maintain line of site to the next site in the chain or to the hub

point. This is largely a function of height (if the antenna is high enough then it will have a

line of sight over and above the surrounding clutter and terrain) which may restrict the

number of suitable sites for sharing. The operator may of course circumvent this

through the use of fixed line backhaul where this is available. In developing nations or

those with more relaxed planning regulations operators have tended to install much

higher and heavier load-bearing masts than the minimum specification they require.

This provides them with some flexibility in the future for the own evolving network

architecture but also means that the mast is more likely to be of a suitable construction for

sharing.

c) RAN Sharing RAN sharing may have an adverse effect on quality of service (QoS) levels due

to the reduction of signal strength when antennas are combined, although this does not

apply to leading 3G RAN sharing techniques . For example, in India operators felt that

the use of common antenna could pose problems as the strength of the signal may be

reduced by 3dBs by combining the signals. This represents a reduction in output power

and impacts the coverage footprint of the network, which means it may not fulfill the

QoS parameters in some areas. The drop in signal strength not only reduces the overall

coverage footprint but also has a negative impact on the in-building penetration of the

carrier.

This may be of less significance in rural areas where subscribers accept lower in-

building coverage levels, but may have a major impact in suburban and urban areas

where users are more likely to use their handsets indoors. Any significant decay in the

MITSOT  Page 27  

Telecom Infrastructure Sharing  

in-building signal strength as a result of RAN sharing may act to counter the reduction in

sites due to the requirement to maintain sufficient inbuilding coverage. This effectively

means that the operator has to compensate for the loss in signal strength either through

the introduction of new sites or leaving sites in the network that might have been

removed if antenna equipment were not combined. The full impact of this will of course

vary from operator to operator and according to factors such as frequency of operation.

Other factors such as antenna developments will come into play that may mitigate the

negative aspects in the medium and long term.

d) Core Network Sharing Core network sharing poses technical limitations with regards to the technology

platform of the operator and the standards employed by the equipment vendor.

Traditionally 2G networks have been specified and designed on a circuit switched

architecture. GPRS technology was implemented as a mechanism to introduce some of

the advantages of packet switched networks. The more recent 3G networks have been

specified with a more modern IP-based architecture in mind. IP-based technology is

considered a more flexible platform and provides the mechanism for 3G operators to

interwork with other IP-based systems as these develop and become available. Given

the general trend towards IP based technology, the likelihood is that, looking ahead, 3G

networks should be able to benefit most from core network sharing as they already

employ the standards and architectural components required for sharing.

e) Roaming Roaming agreements have been in place almost as long as GSM technology has

been in the marketplace. Roaming does not require any shared infrastructure as such,

but an agreement that allows for an exchange of customer data. There are some

technical requirements to ensure that the information is exchanged in the correct and

timely manner but these are now well understood and easily implemented. The lack of

any serious technical hurdle to roaming is demonstrated by the sheer number of

agreements in place across the globe.

MITSOT  Page 28  

Telecom Infrastructure Sharing  

Environmental impact

The main environmental impact of networks relate to:

• Proliferation of masts.

• Power consumption.

• Handsets.

In this section we look at the impact that infrastructure sharing can have on these

environmental issues.

a) Proliferation of masts One of the most visible environment impacts of networks is the proliferation of

masts. This is the public face of the network and one that is most likely to attract

attention. Paradoxically while the public demand the services provided by networks they

oppose the infrastructure required to deliver the service, due to aesthetic and broader

environmental concerns. The situation is more pronounced in the developed world

where environmental issues receive much higher media and public attention. This

provides operators with the challenging task of providing service while at the same time

addressing the environmental concerns of the public who are ultimately their customers.

# For example, RAN sharing with dedicated carrier or MOCN (Multiple Operator Core

Network) for UMTS900:-

In the situation where two networks with similar coverage characteristics decide

to enter into a RAN sharing agreement, this allows for a reduction in the total site

portfolio of the combined network. The reduction in sites will have a positive impact in

that it will reduce the number of towers and masts in the environment. However the

reduction is on the premise that the networks have significant areas of overlap. If the

operators should have networks such that the coverage is complementary then this will

not produce the saving in sites and the impact on mast proliferation would be minimal.

Operators who share masts whilst maintaining separate networks are restricted

to the number of masts they can share due to minimum vertical and horizontal

separation requirements for antennas. Even if the mast has the required load bearing

capacity it may not provide sufficient spacing to accommodate the antennas. This

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Telecom Infrastructure Sharing  

situation is likely to improve as antenna technology advances and new technologies that

better facilitate mast sharing become available. The military forces (which are often

ahead of civilian technology) already have technology available to fit multiple antennas

in close proximity on vessels such as battle ships. These systems are being adapted to

allow commercial companies to benefit from the same technology, helping them reduce

the number of masts they require by being able to share smaller and more restrictive

towers.

b) Power consumption

Like any other form of infrastructure in the modern world, mobile networks

require power to operate. National operators often have to cover large geographic

regions and install thousands of sites to provide the services required of them both from

a commercial and a legal point of view. Operators have to keep their networks running

on a continuous basis 24 hours a day, 365 days a year, regardless of utilization.

Demand for service may drop to zero during night time hours on certain sites but

operators have no option to switch the site off during these hours as they cannot predict

subscriber movements. As a function of their size and operating requirements,

networks consume large quantities of power with all the associated carbon footprints.

One report from Actix, a company specializing in software solutions for mobile

operators, suggests that networks consume 61 billion kWH of energy per year with an

average site responsible for 10 tonnes of carbon emissions per year.

Although this might appear to paint an environmentally hostile profile we should

put this into a global perspective before drawing any adverse conclusions. Mobile

networks account for a mere 0.12% of primary energy use as compared to 23% used

for travel and transport. Advances in chip technology and the processing power of

servers and electronic systems in general mean that the amount of equipment required

to crunch the same amount of data continues to reduce, with the associated reduction in

energy consumption. Equipment such as Mobile Switching Centres and Base Station

Controllers which used to fill several equipment cabinets and take up large amounts of

floor space, have now reduced to one or two cabinets depending on the manufacturer.

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This not only results in a direct power saving in the amount the actual network

element consumes but may also reduce the peripheral power consumption, such as air

conditioning.

Operators typically ensure that critical systems have a back up mechanism to

ensure continuity of service and business operations. In some cases this means having

a duplicate system available for activation if the primary system fails. However, for time-

critical systems or those with high financial impacts the backup system may need to be

on hot standby or parallel running. As network technology continues to improve this may

be a potential area where power saving could be realized, if systems become inherently

more reliable and reduce the need for back-up or standby systems. While technology

may help reduce the power consumption of individual elements of a network, this will be

offset by increases in the number of network elements as the network continues to grow

capacity and expand into new areas.

There is a growing industry in green technology that specializes in producing

energy from renewable sources or with zero or reduced carbon impact. Such

technologies include solar power, wind power, wave power and bio fuels. Operators

should be in a position to benefit from these technologies as the amount of power they

can generate continues to improve. Motorola has already successfully trialled a

combined solar and wind powered base station in Namibia, which not only reduces the

environmental impact of the site but also makes it more feasible for operators to deploy

sites in remote regions by negating the need for traditional power supplies or

maintaining a fuel generator.

c) Handsets

There are an estimated 3 billion mobile phone subscribers worldwide, all of

whom require handsets to make and receive calls. This number is likely to grow

significantly in the coming years as markets such as China, Indian and Africa continue

to develop. Manufacturers working together with operators constantly develop new

phone models that they use to acquire new customers, as well as to entice existing

customers to upgrade.

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According to reports from Gartner, global mobile phone sales reached 251

million units in the third quarter of 2006. This produces a significant impact on the

environment both in terms of the manufacturing process and the effects of disposal at

the end of the product life cycle. Although network operators are not responsible for the

manufacturing process they do have a part to play in the disposal of products. In 2006,

a group called ESPOO was created as part of a European Commission pilot project

comprising mobile manufacturers, network operators, suppliers, recyclers, consumer

and environmental organizations. The group was led by Nokia with the aim of reducing

the environmental impact of phones through improvements in performance and raising

consumer awareness and participation in take-backs (reverse logistics) and recycling.

Handsets that are discarded carry valuable metals in addition to toxic elements.

Belgian company Umicore specializes in reclaiming precious metals such as silver,

copper, platinum and gold from handsets and other electronics using a environmentally-

sensitive process. However, according to Umicore’s estimates, the company and its

competitors received only 1 % of all handsets discarded globally in 2006. In the

developed world many mobile phones are disposed of when the user upgrades to a new

model even though the phone is fully functional. Operators, together with other

stakeholders, can set up schemes to encourage users to recycle their phones as and

when they decide to upgrade, thus reducing the impact of network services on the

environment.

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Telecom Infrastructure Sharing  

     

Chapter IV  

Financial Aspects (costing)  

 

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Sharing of telecom infrastructure

Among telecom service providers is becoming the requirement and process of

business in the telecom industry where competitors are becoming partners in order to

lower their increasing investments. The degree and method of infrastructure sharing can

vary in each country depending on regulatory and competitive climate.

 

 

                               

Figure 10: Development approach 

 Telecom Infrastructure

 Basically a cell site consists of electronic (active) and non-electronic infrastructure.

• Electronic infrastructure includes base tower station, microwave radio

equipment, switches, antennas, transceivers for signal processing and

transmission.

• Non-electronic infrastructure includes tower, shelter, air-conditioning

equipments, diesel electric generator, battery, electrical supply, technical

premises and easements & pylons that account for nearly 60 percent of network

rollout costs..

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Telecom Infrastructure Sharing  

 Infrastructure Sharing

There are multiple possible options of sharing amongst telecom service

providers. However this sharing also depends on telecom regulatory and legislation.

• Passive Infrastructure sharing is nothing but sharing non-electronic

infrastructure at cell site. Passive Infrastructure is becoming popular in telecom

industry world wide.

• Active sharing is nothing but sharing electronic infrastructure.  

• Spectrum-sharing concept is based on a lease model and is often termed

‘spectrum trading’. An operator can lease a part of its spectrum to another

operator on commercial terms. Though this mechanism, along with that of

MVNOs, exists in the US, Europe, Singapore and Australia.  

• Base station sharing is prospective while each operator: maintains control over

logical Node B so that it will be able to operate the frequencies assigned to the

carrier, fully independent from the partner operator and retains control over active

base station equipment such as the TRXs that control reception/transmission

over radio channels. Radio network controller and core network are not shared

here.  

• Site sharing includes antennas and mast; this may also hold Base transceiver

station (BTS), Node B in UMTS context and common equipments such as

Antenna system, masts, cables, filters and shelter.

• Antenna sharing shares an antenna and all related connections (coupler,

feeder cable), in addition to passive radio site elements.  

• RNC (Radio Network Controller) sharing represents maintaining logical

control over the RNC of each operator independently.  

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Telecom Infrastructure Sharing  

• MSC and Routers sharing or backbone sharing includes sharing switches

(MSC) and routers (SGSN) on the operator's fixed network.  

Benefits for all

With passive infrastructure sharing, operators are expected to save close to 30

percent on capex and opex when it comes to passive infrastructure management

(mainly towers). Right now, sharing among operators is limited to two in most cases,

whereby tower companies are aiming at an average of 2.5 to 2.7 carriers per tower.

Furthermore, only 30 percent of sites are being shared–tower companies expect it to

take this number higher with a focused approach.

Gandhi insists, “The sharing of passive infrastructure will allow service providers

to focus on their own core sales/marketing areas. This will also free up management

time at the carriers. Passive infrastructure sharing will allow operators to defer their

tower-related capex investments into opex lease rental payments over an extended

period of time. Existing towers can also be sold and leased back, thereby creating new

sources of cash, which can be invested in radio network expansion and distribution.” He

feels that operators outsourcing passive infrastructure will benefit from a quicker

network rollout.

With multiple operators and dense coverage needs, acquisition of sites, with all

necessary governmental approvals, is getting tougher. Furthermore, ascertaining legal

ownership of sites in towns is a stumbling block to faster rollouts. In India, one of the

additional incentives to owning passive telecom infrastructure is the subsidy being

provided under the Universal Service Obligation (USO) fund for developing telecom

infrastructure in rural areas. The USO fund has around Rs.7,500 crores and companies

building network infrastructure in rural areas are subsidized through this fund.

As operators expand their networks into semi-urban and rural areas, there will be

an increase in capex. This is due to higher costs of land development, security and

insurance costs, power shortages and increased use of diesel generator backups,

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Telecom Infrastructure Sharing  

unclear land ownership and expensive backhaul connectivity costs. Hence passive

infrastructure sharing will significantly lower the capex .

 Financial effects & benefits

    •      Lower Cost  

• Cost split up amongst multiple Operators  

• Built-in Operational efficiency due to focus on passive infrastructure  

• No revenue sharing fees for infra-sharing revenue  

•       More Free Cash Flow  • As the Infrastructure is funded by Essar, thus optimum use of

Funds for other expansion needs of Telecom Operators

•       Faster Time to Market • Guarantees faster time to market as the sites are already deployed

• For new sites, Operator can have better focus on passive

infrastructure creation leading to speedy rollout

•       Hassle-free Management  

• The Operator can concentrate on Active Network & need not Focus

on the Maintenance & deployment of Passive Infrastructure.

• Manpower saving

• Free up Management bandwidth for core activities.  

   Financial risk      Financial risk is normally any risk associated with any form of financing. Risk is

probability of unfavorable condition; in financial sector it is the probability of actual return

being less than expected return. There will be uncertainty in every business; the level of

uncertainty present is called risk.

   

MITSOT  Page 37 

 

 

Telecom Infrastructure Sharing  

Investment related

Depending on the nature of the investment, the type of 'investment' risk will vary.

High risk investments have greater potential rewards, but also have greater potential

consequences.

A common concern with any investment is that the initial amount invested may

be lost (also known as "the capital"). This risk is therefore often referred to as capital risk.

If the invested assets are being held in another currency, there is a risk that

currency movements alone may affect the value. This is referred to as currency risk.

Many forms of investment may not be readily salable on the open market (e.g.

commercial property) or the market has a small capacity and may therefore take time to

sell. Assets that are easily sold are termed liquid: therefore this type of risk is termed

liquidity risk.

Business related

The risk that a company or project will not have adequate cash flow to meet

financial obligations; thus causing the business to file for bankruptcy.

Financial risk is the additional risk a shareholder bears when a company uses

debt in addition to equity financing. Companies that issue more debt instruments would

have higher financial risk than companies financed mostly or entirely by equity.

Bilateral barter can depend upon a mutual coincidence of wants. Before any

transaction can be undertaken, each party must be able to supply something the other

party demands. To overcome this mutual coincidence problem, some communities had

developed a system of intermediaries who can warehouse and trade goods. However,

intermediaries often suffered from financial risk.

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Telecom Infrastructure Sharing  

Whilst higher risk normally implies higher overall rewards, this is not always the

case. For example a high risk mortgage client may be required to pay a higher interest

rate on their mortgage repayments in order to be accepted as a bank's customer.

However, this higher mortgage rate will in itself increase the risk to the bank that the

customer cannot meet their interest payments, further increasing the risk.

This circular risk problem can lead to markets not existing for high risk borrowers. The

2007/8 sub-prime crisis may have some links to this argument. Higher interest rates for

high risk borrowers make the borrowers even less likely to be able to pay back the loan,

further increasing the default risk.

 Market risk

It is the risk that the value of a portfolio, either an investment portfolio or a trading

portfolio, will decrease due to the change in value of the market risk factors. The four

standard market risk factors are stock prices, interest rates, foreign exchange rates, and

commodity prices. The associated market risk are:

• Equity risk, the risk that stock prices and/or the implied volatility will

change.

• Interest rate risk, the risk that interest rates and/or the implied volatility

will change.

• Currency risk, the risk that foreign exchange rates and/or the implied

volatility will change.

MITSOT  Page 39 

• Commodity risk, the risk that commodity prices (e.g. corn, copper, crude

oil) and/or implied volatility will change.

      

 

Telecom Infrastructure Sharing  

 Cost Structure     

                                 Figure 11: Cost structure    Capital expenditures   

MITSOT  Page 40 

(CAPEX or capex) are expenditures creating future benefits. A capital

expenditure is incurred when a business spends money either to buy fixed assets or to

add to the value of an existing fixed asset with a useful life that extends beyond the

taxable year. Capex are used by a company to acquire or upgrade physical assets such

as equipment, property, or industrial buildings. In accounting, a capital expenditure is

added to an asset account ("capitalized"), thus increasing the asset's basis (the cost or

value of an asset as adjusted for tax purposes). Capex is commonly found on the Cash

Flow Statement as "Investment in Plant Property and Equipment" or something similar

in the Investing subsection.

 

Telecom Infrastructure Sharing  

For tax purposes, capital expenditures are costs that cannot be deducted in the

year in which they are paid or incurred, and must be capitalized. The general rule is that

if the property acquired has a useful life longer than the taxable year, the cost must be

capitalized. The capital expenditure costs are then amortized or depreciated over the

life of the asset in question. As stated above, capital expenditures create or add basis to

the asset or property, which once adjusted, will determine tax liability in the event of

sale or transfer. In the US, Internal Revenue Code §§263 and 263A deal extensively

with capitalization requirements and exceptions.[1]

Included in capital expenditures are amounts spent on:

1. acquiring fixed assets

2. fixing problems with an asset that existed prior to acquisition

3. preparing an asset to be used in business

4. legal costs of establishing or maintaining one's right of ownership in a

piece of property

5. restoring property or adapting it to a new or different use

6. starting a new business

         

MITSOT  Page 41 

                    Graph 1: CAPEX worldwide 

 

Telecom Infrastructure Sharing  

CAPEX investment represents 20%—30% of total cost of ownership for mobile

operators, yet this crucial cost function directly affects 70%—80% of the OPEX. This

highlights how important it is for operators to understand the state-of-the-art of the next

generation network, so as to make intelligent infrastructure investment decisions.

Meanwhile, network infrastructure vendors need to understand the spending behavior of

their customers (operators) if they are to produce solutions that add value. This study

highlights the critical market drivers and the latest trends influencing capital expenditure

investments by mobile operators worldwide. It examines the key elements of a mobile

network that require CAPEX investment, and analyzes the differences in priorities

based on the mobile industry’s development in different regions. The report also

assesses the technological aspects of each mobile network component by examining

vendors’ state-of-the-art innovations, so as to offer the reader a clear picture of the

steps required to make the transition from one evolution to the next. ABI Research has

examined the historical trends in mobile operators’ CAPEX investments, and breaks

down the long-term forecasts for mobile CAPEX by geographical region, as well as by

technologies based on services, mobile technologies and components.

  The problem with the telecom industry is (as another poster pointed out) their cost

accountants have gotten so used to cooking the books to fool the government, they do

not know what the truth is anymore, and they certainly are not going to speak it if they

ever do figure it out. The truth is: a cost of long haul DWDM fiber optic transport today is

so low on a voice channel-basis it may as well be zero. But revenue is not zero, so logic

would say money can be made. Note I said logic, not some accountant.

Excess competition was the problem, and was due mainly to equity fueled

companies (public and private) all chasing a finite market segment. Every one of them

had to garner market share from the entrenched competition. Excess competition forced

the rates to go to below what most had assumed in their worst case business plans.

Today CAPEX is zero, because those same companies are going bankrupt

and/or are selling their networks to the few survivors at 10 cents or less on the dollar.  

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Who needs new equipment? In truth, it is easy to sell components at low prices, but

very hard to make quality components at low cost.

Price - cost = margin. It's a killer for service providers and component companies too.

Graph 2: CAPEX-OPEX status  OPEX   

An operating expense, operating expenditure, operational expense,

operational expenditure or OPEX is an ongoing cost for running a product, business,

or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or

providing non-consumable parts for the product or system. For example, the purchase

of a photocopier is the CAPEX, and the annual paper, toner, power and maintenance

cost is the OPEX. For larger systems like businesses, OPEX may also include the cost

of workers and facility expenses such as rent and utilities.

In business, an operating expense is a day-to-day expense such as sales and

administration, or research & development, as opposed to Production, costs, and

pricing. In short, this is the money the business spends in order to turn inventory into

throughput. Operating expenses also include depreciation of plants and machinery

which are used in the production process.

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In throughput accounting, the cost accounting aspect of Theory of Constraints

(TOC), operating expense is the money spent turning inventory into throughput. In TOC,

operating expense is limited to costs that vary strictly with the quantity produced, like

raw materials and purchased components. Everything else is a fixed cost, including

labor unless there is a regular and significant chance that workers will not work a full-

time week when they report on its first day.

In a real estate context, operating expenses are costs associated with the

operation and maintenance of an income producing property. Operating expenses

include

• accounting expenses

• license fees

• maintenance and repairs, such as snow removal, trash removal,

janitorial service, pest control, and lawn care

• advertising

• office expenses

• supplies

• attorney fees and legal fees

• utilities, such as telephone

• insurance

• property management, including a resident manager

• property taxes

MITSOT  Page 44 

• travel and vehicle expenses

 

 

 

 

 

 

Telecom Infrastructure Sharing  

OPEX for Airtel & Idea 

  

                        

  Graph 3: Airtel Opex  

                         Graph 4: Idea Opex

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Telecom Infrastructure Sharing  

CAPEX Vs OPEX   

                                 Improvement measures in current OPEX       

                                         Table 1: Opex Analysis 

MITSOT  Page 46 

 Expected costing consideration

 

Telecom Infrastructure Sharing  

  

       Reducing costs through sharing

As Indian companies fan out into the smaller towns and villages they must steel

themselves for lower average revenue per user figures. Reducing their costs would the

only alternative to ensure that they preserve their margins.

The Essar group itself has an independent tower company called Essar Telecom

and Tower Infrastructure Ltd. Currently, this company has 600 towers leased out to

operators and plans to achieve 3,000 towers by December 2007, said officials.

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Telecom Infrastructure Sharing  

SREI Infrastructure, another independent tower company, plans 5,000 towers

through its group company Quipo Telecom Infrastructure Ltd. Another independent

tower company is GTL. Reliance Communications and Bharti Airtel are in the process of

spinning off their infrastructure activity into separate businesses.

We feel that even 25-30% success in active infrastructure sharing has the

potential to reduce tenancies by 12-15%. This would have a negative impact on the

business case of passive infrastructure providers and the future valuations. To

compensate for the drop in revenue, passive infrastructure players would need to

leverage on their skilled manpower and look at alternate offerings beyond tenancy like

active infrastructure management, RF and transmission planning, etc.

 

                                                       Clearly, it is time for passive infrastructure players to be prepared for newer

business models. Firms not prepared for models beyond tenancy could see their

revenues not meeting projections, leaving the investors a worried lot.

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Telecom Infrastructure Sharing  

     

Chapter V  

Marketing Aspects ‐I  

  

          

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Telecom Infrastructure Sharing  

Abstract

Network infrastructure sharing and outsourcing is finding strong acceptance with

mobile operators around the world. While operators in the developed markets of

Western Europe have already moved on to advanced active infrastructure sharing and

outsourcing, operators in developing markets are beginning to realize the potential of

passive infrastructure sharing and outsourcing. Consequently tower sharing and

outsourcing are gaining increasing acceptance across these markets as an effective

way to cut down coverage costs, while reducing the time-to-market.

These initiatives have already seen significant traction in India, and are poised to

make their impact felt in the Middle East and Africa (MEA). Tower sharing offers

significant potential for cost savings for both incumbents and new entrants. At the same

time, sharing/outsourcing is accompanied by risks such as reduction in strategic control

and potential for information leaks. Regulators face the challenge of ensuring a level

playing ground for all operators with no threat of cartels. Our analysis presents specific

approaches to tower sharing/outsourcing for incumbents and new entrants. Incumbent

operators need to focus on direct sharing of towers with other operators in urban areas.

However, in rural areas, they could look at divesting their tower assets into a joint

venture company with other incumbents and unlocking value in the process. New

entrants need to lease towers directly from incumbent operators in urban areas, and

partner with independent tower companies in rural areas. Regulators need to ensure

that a broad and transparent framework is built for fair pricing, identification of priority

areas, and resolution of disputes arising from tower sharing/outsourcing.

Introduction

Operators across the world, and particularly so in developing markets, face

challenges in sustaining margins with declining ARPU. Population distribution patterns

in developing markets complicate the situation since access to telecom services vary

significantly between urban and rural areas. Operators in these countries need to

balance the cost of operations in congested and saturated urban setups with the costs

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Telecom Infrastructure Sharing  

of new network rollouts in other areas. In this context, tower sharing offers a compelling

proposition for savings costs and reducing time-to market.

Estimates indicate that towers constitute almost 50% of the total capital

expenditure (CAPEX) for an operator2. Figure 1 shows the evolution cycle of network

assets ownership, depicting the scope for tower sharing and outsourcing in developing

markets.

Many operators in developed markets have moved on to phase IV in the

evolution cycle, where they share both active and passive network elements to save

costs, in some cases bypassing the intermediate phase of sharing only tower

infrastructure. On the other hand, in emerging markets with low penetration levels,

operators are faced with the dual challenge of maintaining margins, while ensuring rapid

rollout to keep pace with the growth in subscriber numbers. In such locations, cost

savings from tower sharing and outsourcing offer a compelling proposition for operators.

Estimates indicate that tower sharing could help operators in India and the Middle East

achieve total savings of US$4 billion and US$8 billion3 respectively in the next five

years. Such savings result from the benefits of having reduced capital expenditure

(CAPEX) and operating expenditure (OPEX).

In this paper, we focus on the benefits and challenges faced by operators in

developing markets in the areas of passive network sharing, particularly the sharing and

divesting of tower assets. We also offer a set of actionable recommendations for

operators in these high-growth markets  

 

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Telecom Infrastructure Sharing  

         

           Figure 12: Evolution Cycle of Network Asset Ownership 

 Market Developments, Benefits and Challenges

Market Developments in Tower Sharing

The mobile industry has seen significant activity in the recent past in the tower

sharing/outsourcing space. Multiple mobile operators, across both developing and

developed markets, have entered into tower sharing agreements, and more appear

likely to follow suit. Mobile operators have typically followed a phased approach when it

comes to the adoption of tower infrastructure sharing/outsourcing initiatives. Figure 2

illustrates these approaches along with examples of operators in developing markets

who have implemented them.

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Telecom Infrastructure Sharing  

Overview of Approaches to Sharing Passive Infrastructure 

                            

Figure 13: Sharing approaches

Benefits of Tower Sharing/Outsourcing

Tower sharing and outsourcing agreements between mobile operators and tower

companies offer both OPEX and CAPEX benefits for incumbents and new entrants

depending on the sharing model.

Benefits of Tower Sharing and Outsourcing under Different Models

                         

 

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Telecom Infrastructure Sharing  

Key trends in telecom infrastructure sharing and management

The single biggest reason to adopt sharing is to lower the cost of deploying

broadband networks to achieve widespread and affordable access to ICTs. Developing

countries can leverage the technological, market and regulatory developments that

have led to an unprecedented uptake in mobile voice services to promote widespread

and affordable access to wireless broadband services and IP-based national fiber

backbones, as well. All sharing practices and infrastructure sharing, in particular – are

integral parts of a competitive regulatory framework. Infrastructure-sharing regulations,

whether mandatory or optional, are usually included in a country’s interconnection

framework, although they are occasionally contained in operators’ licensing

agreements.

Passive and active infrastructure sharing

Infrastructure sharing takes two main forms: passive and active. Passive

infrastructure sharing allows operators to share the non-electrical, civil engineering

elements of telecommunication networks. This might include rights of way or

easements, ducts, pylons, masts, trenches, towers, poles, equipment rooms and related

power supplies, air conditioning, and security systems.

These facilities and systems all vary, of course, depending on the kind of

network. Mobile networks require tower sites, while fibre backhaul and backbone

networks require rights of way for deploying cables, either on poles or in trenches.

International gateway facilities, such as submarine cable landing stations, can be

opened for collocation and connection services, allowing operators to directly compete

with each other in the international services market.

MITSOT  Page 54 

Access to physical ducts, masts/poles (in the case of power transmission lines),

and rights of way are key potential passive network elements for encouraging the rollout

of national fibre infrastructure through sharing. This has two aspects, one relating to

cost and the other affecting speed of action. National governments, municipalities and

state-owned enterprises frequently charge considerable sums of money for rights of

way that allow operators to carry out physical trenching of ducts

 

Telecom Infrastructure Sharing  

Active infrastructure sharing involves sharing the active electronic

Network elements – the intelligence in the network – embodied in base stations

and other equipment for mobile networks and access node switches and management

systems for fibre networks. Sharing active infrastructure is a much more contested

issue, as it goes to the heart of the value-producing elements of a business. Many

countries have restricted active infrastructure sharing out of concern that it could enable

anti-competitive conduct, such as collusion on prices or service offerings.

Infrastructure-sharing regulation and policy must address two broad issues

that are often viewed as the stumbling blocks to speedy roll-out of national

telecommunication infrastructure:

• Opening up access to “bottleneck” or “essential” facilities, where a single

dominant infrastructure operator provides or leases facilities.

• Promoting market investment in deploying high-capacity infrastructure to

unserved or underserved areas.

The role of government

Government has a key role to play in facilitating the most effective use of

infrastructure assets, identifying parts of the country where there are gaps, and getting

coverage extended to them. Moreover, governments, together with regulators, can

establish effective regulatory frameworks and regimes that promote effective use and

sharing of networks. Designing a regulatory framework may depend on whether the

national backbone provider competes with other service providers for end users (and

therefore has every incentive to block competitors) or whether the backbone provider

does not serve end users (and therefore has every incentive to sell as much capacity as

possible to those who do). In the former case, the regulatory response could be to treat

the backbone network as an essential facility, including regulating prices for access as

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Telecom Infrastructure Sharing  

well as establishing uniform collocation and connection terms for all market players

seeking access to the backbone.

Entry of new players and the launch of 3G and Wi-Max services impact the sector

        

Indian Telecom Companies Create World Record

As per statistics made available on April 22, 2009, Indian telecom industry

clocked the highest subscriber addition in a month by adding 15.87 million subscribers

in March, 2009. The authorities said that the entry of new players in the telecom sector

along with Reliance Communications (R Com) starting its GSM services, pushed India

to create record for subscriber addition in a month. It is worth mentioning in this regard

that India set a world record in January 2009 by adding 15 million subscribers, the

highest ever monthly addition in any country.

The latest data released by the Telecom Regulatory Authority of India (TRAI)

showed that while the wireless (GSM, CDMA and fixed WLL) segment witnessed the

addition of 15.64 million users, the wireline segment saw an increase for the first time in

two years with addition of 2,30,000 to its subscribers base. The fixed wireline segment

subscriber base has been on the decline for the past few years, especially in the rural

sector, where consumers are opting more for the wireless system.

The wireless subscriber base stood at 500 million at the end of Nov 2009 as compared

to 456.74 million in the august 2009. With its foray into the GSM space, R Com led

subscriber growth in the wireless segment with the addition of 3.02 million subscribers

in Dec 2009 to take its wireless subscriber base to 92.66 million. Bharti Airtel and

Vodafone Essar added 2.8 million subscribers each during the month to take their

subscriber base to 110 million and 97.76 million respectively.

Scope of 3G Infrastructure Sharing

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Telecom Infrastructure Sharing  

While our 3G licensees are unlikely to look to infrastructure sharing as a means

to alleviate financial burdens, infrastructure sharing could be a means to ensure faster

rollout of 3G networks and services. Given the current economic downturn, 3G

operators in Singapore may wish to consider some form of infrastructure sharing now to

manage costs while rolling out their own full networks later. There may however be

competition concerns arising if infrastructure sharing were to limit consumer choice

should infrastructure sharing result in one single network. It is unclear if sharing

amongst competitors could result in operators losing their ability to differentiate their

services; for example, the larger the extent of sharing, it may be that each licensee

could have less control over quality of service (QoS).

For example: 

a) How is telecom making business more competitive? The telecom sector represents one of the fastest growing sectors in the Indian

economy. Launch of 3G services by leading operators will boost collaborative

computing, IPTV, video and voice multi-casting, which will enhance co-ordination

between distributors, dealers, service centers and consumers to a greater extent.

Currently, we are using multi-point videoconferencing across all our regional locations

and branches using MPLS connectivity with a central hub at corporate office. The use of

3G will help and optimize bandwidth costs and quality of video/voice transmission.

Another example on the application side, we at LGEIL developed CSNET (web based

application) which provides platform to integrate communication and co-ordination

between dealers, authorized service centers (ASC), call centers and consumers. 3G

infrastructure will strengthen mobility of applications ensuring greater collaboration and

exchange of information on real-time basis.

MITSOT  Page 57 

b) What are the key trends in enterprises communications? The key trends in enterprises communications include cloud computing and

cloud based services, which will be an important part of any large enterprise's IT

infrastructure strategy moving forward. The top five technologies that are going to make

 

Telecom Infrastructure Sharing  

a mark in the future are-cloud computing, virtualization, communication enabled

business processes, mobility, and software as a service (SaaS).

c) Wireless has grown rapidly in the past few years. What issues and challenges have cropped up, especially in terms of network security and management? Proliferation of wireless has been phenomenal in the last few years, creating new

business opportunities, but it has posed increasing security risks as well. Wireless

networks are insecure; they are prone to attacks from outsiders. Bluetooth enabled

devices are a threat to wireless networks.

Status of infrastructure development in the rural areas

 

Telecom for rural areas in India

Over 750 Million people live in the ~ 600,000 villages of India, where the tele-

density is < 2%, while the urban privileged contribute to >30% tele-density. If the

objective of achieving 250 Million subscribers by 2010 has to be realized, it is imperative

that rural India is adequately and effectively covered. The challenge however is a more

aggressive cost-effective approach than urban India to lower CAPEX and OPEX.

As a first step the country has moved into a passive infrastructure sharing

regime. However this still calls for multiple base stations and radiating elements. If the

processes of a conventional Base Station could be emulated in software, we could

achieve disruptive cost advantages with a technology that is:

• Cost-effective to justify RoI in a rural segment where ARPU is expected to be ~

INR 100 - 120 per sub

• Less capital intensive than a traditional BTS solution but still robust for harsh

environments

• Flexible enough to facilitate easy deployment & management

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Telecom Infrastructure Sharing  

• Lending itself to sharing of active infrastructure

Take a wide swath of 450 MHz spectrum and sell it off in multiple chucks of at least 10

MHz each, under special license terms for rural areas, to anyone who is interested the

special license terms to include:

• No telecom taxes for at least 15 years — after all the government is trying to

promote rural communications.

• No restrictions on foreign investment — welcome anyone who wants to invest in

rural India.

• No restriction on the technology employed — GSM, CDMA, OFDM, WiMAX,

proprietary or something that hasn’t been invented yet. Let operators mix and

match in any way that makes sense for them and let them evolve what they are

doing as technology and circumstances evolve.

Market Drivers

• Triple Play

• Next Generation Networks (NGN)

• Convergence

• Consolidation

• Internationalization

• Outsourcing

Triple Play

The Telecom market is a dynamic market, currently driven by getting end-user

(consumer) market share with attractive Triple-Play offerings (combination of Voice,

Video and Data/Internet). All traditional players from the Voice, TV/Video or Internet

world, are adopting this Triple-Play model to protect their revenues, thereby creating a

highly competitive playing field. The end user’s demand for more bandwidth (speed),

increasing reliance on mobility services, and the end users’ assessment of cost versus

performance, are the drivers in this dynamic market.

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Telecom Infrastructure Sharing  

NGN

NGN’s will allow networks to cost effectively support a new suite of sophisticated

services by building on core competences related to traditional transport services. In

addition, a unified and consistent NGN approach will help reduce costs by eliminating

the inefficiencies of current service-specific, proprietary, and non-reusable solutions.

NGN will also reduce the time to market and life-cycle costs of offering new services.

NGN’s will enable operators to deploy advanced services, allowing them to remain

competitive as well as expand their capabilities to enter new markets. The bottom line is

that, in addition to their wholesale transport business, public network operators should

(and must) pursue Next Generation Service Architectures to offer added-value services.

Figure 14: NGN concept

Convergence

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The trend in countries with a developed Telecom market is clear. Traditional

Telecom operators have started to offer audio-visual programming and internet access.

Cable TV operators are rolling out a variety of Telecom services, including voice

(telephony). Cable modems are deployed to provide high-speed Internet access.

Broadcasters are switching over to program bundles, pay per view and experiment with

digital transmission.

 

Telecom Infrastructure Sharing  

Business support systems and customer relationship management (CRM)

architecture are at the threshold of major change. Vertical integration by Operators

allows for Service bundling, whereby tracking of customer usage and profiles is aimed

at rewarding customer loyalty.

In the not too distant future customers would settle for nothing less than an

economic and efficient single-point of contact for all communication needs. These

include various technologies of communication (such as the land line, wireless access

(incl. Wireless in the local loop, WLL) and Internet) and a `single-window' where all

information pertaining to these services could be obtained instantly. Services include:

POTS (Plane Old Telephone Service); 2G and 3G Mobile services; Internet; IP/Data

services; Broadband and Backbone services. For this reason Technology providers,

Media and Telecom service providers all need to move to the multimedia arena.

 

Figure 15: Convergence scenario 

MITSOT  Page 61 

Consolidation

Driven by internationalisation, focus on growth and costs efficiencies,

consolidation takes place. Operators that are aiming for the business market, where

outsourcing of CT (Communication Technology) is a growing trend, will need to offer

more managed CT services and therefore need System Integration skills. Operators

 

Telecom Infrastructure Sharing  

without a triple-play offering need to develop this soon in order to keep their position in

the market and prevent churn. Operators will focus more on the international market as

international communication is perceived as attractive business. The national market

will consolidate to only a few service providers per country (volume). The number of

virtual operators will increase (special interests user groups).

Internationalisation

Most key players are positioning themselves to play in the International Market.

The convergence of Telecom services to IP (Internet Protocol) and the adoption of

International standards, have removed the National boundaries of technologies. The

open borders of the European Union are fuelling international traffic. End-users, either

residential or business, are crossing borders more and more frequently. In this highly

competitive market cost optimisation, volume, differentiation of offerings and selling

value to the business market is key. The Telecom market used to have a decentralised

structure and local players where able to make their own strategy-, technology-, market-

and purchasing decisions. This has changed to a centralised model, where strategic

market and technology decisions are made at corporate or competence centres.

The future demand-supply outlook

The biggest challenge for operators in striking sharing and outsourcing deals is to

find the right balance between competition and cooperation. Sharing a network could

likely lead to significant losses in opportunity to compete on the basis of network quality

and coverage for incumbents whereas a standalone approach may prove detrimental to

the cost structure in the long run. Operator fear of erosion of competitive advantage due

to tower sharing recently came to the fore in Canada. Despite the regulator mandating

tower sharing under reasonable circumstances, the incumbents have been extremely

reluctant to share their towers with a new entrant in the market.

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Telecom Infrastructure Sharing  

     

Loss of Strategic & Operational Flexibility

Alignment on a mechanism for identification of potential cell sites, cost-sharing

mechanisms and the creation of a governance model will prove challenging in a joint

venture between multiple operators. Furthermore, agreement on operational priorities,

co-ordination between operations teams and overcoming technological implementation

issues will also act as hurdles given the differing operational models and targets

involved.

Long lock in tenures

The long-term nature of sharing agreements holds the possibility of a substantial

loss in operational and financial flexibility. For instance, the typical tenure for

agreements in India is fifteen years as in the case of Swan Telecom (Etisalat) and

Reliance Communications owned RTIL20 and in some cases as long as twenty years

as with that of Telenor with Quippo and Tata Teleservices21. Such long locking periods

may heighten tenant risks in terms of restricting the ability to adapt to changing market

and regulatory conditions.

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Telecom Infrastructure Sharing  

Risk of information sharing

For new entrants, entering into agreements with incumbent-owned tower

companies is fraught with the risk of possible leakage of critical business information to

the parent company. With sharing of staff as well as operational templates, company

specific information which may be proprietary to the tenant may end up with the parent

operator potentially compromising the efficacy of business decision making.

Regulatory Challenges

The primary challenge for regulators lies in the prevention of cartels and

anticompetitive behavior. Incumbent operators may get into agreements which in effect

could create duopoly environments that keep out new entrants. Regulators also need to

ensure that the high demand in developing markets does not lead to unrealistic pricing

of tower services. Regulators would need to ensure presence of an effective costing

mechanism that would encourage uptake while simultaneously allowing existing

operators to recoup investments.

Furthermore, regulators need to strike a balance to ensure that regulatory levies

and taxes do not disincentivize the industry. Regulators would need to set up arbitration

mechanisms to resolve compliance related issues and disputes among operators that

flow from setting up complex tower sharing agreements

                 

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Telecom Infrastructure Sharing  

                       Chapter VI 

 Marketing Aspects ‐II 

 

 

          

MITSOT  Page 65 

 

Telecom Infrastructure Sharing  

Business Model for Passive Telecom Infrastructure sharing

Business operate owned (BOO) model:- The annuity driven business model will

have long-term contracts with primary anchor operator co-locating other telecom

operators. The duration of these contracts would range from 5-20 years. It would ensure

fixed income growth over the period of years. The third party infrastructure sharing

would be more effective as telecom operator's competition will not hamper co-operation

and high leverage of assets would ensure early revenue streams and consequently the

ability to finance rapid roll-out. An operator would have to pay approximate Rs 45,000

per month as rent for the tower and would be allowed to fix his own antennae and radio

network depending on the Radio frequency requirement in that particular area. The first

tenant on the shared site would get 35% discount and the second tenant would get

around 65%. Maximum five operators would be able to share a single site. If five

operators share a single site, it would almost become free for them. Depending on

number of operators sharing the same cell site infrastructure for housing their

electronics, effective cost of cell site for each operator reduces by 30-40%

Figure 16: Telecom infrastructure

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Telecom Infrastructure Sharing  

Provide shared infrastructure services to telecom and BPO players on a BOO

model

Annuity driven business model

Long term contracts with primary anchor operator co-locating other telecom

operators

5-20 years contracts

Stable and growing revenue

Predictable and growing free cash flow

Low level of maintenance capex

Significant operating leverage and consistent EBITDA growth

New Trends In the Market for infrastructure sharing:

• Passive Sharing

• Active Sharing

Passive Infrastructure Sharing:

Passive sharing is usually defined as the sharing of space or physical supporting

infrastructure which does not require active operational co-ordination between network

operators. Site and mast sharing are considered to be forms of passive sharing.

For the purpose of this paper we have classified sharing broadly into four categories:

• Site sharing.

• Mast (tower) sharing.

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Telecom Infrastructure Sharing  

1. Site Sharing:

Site sharing, involving co-location of sites, is perhaps the easiest and most

commonly implemented form of sharing. Operators share the same physical

compound but install separate site masts, antennas, cabinets and backhaul.

2. Mast (tower) sharing:

Mast, or tower, sharing is a step up from operators simply co-locating their sites

and involves sharing the same mast, antenna frame or rooftop.

ACTIVE INFRASTRUCTURE SHARING:

Active Infrastructure Sharing is the sharing of electronic infrastructure & facility. It

includes sharing of Base Transceiver Station (BTS) / Node B, spectrum, antenna,

feeder cable, Radio Access Network (RAN), microwave radio equipment, billing

platform, switching centers, router, Base Station Controller (BSC) / Radio Network

Controller (RNC), optical fiber / wired access and backbone transmission network,

database etc.

• RAN sharing.

• National Roaming.

1. RAN SHARING

RAN sharing is the most comprehensive form of access network sharing.

It involves the sharing of all access network equipment, including the antenna,

mast and backhaul equipment. Each of the RAN access networks is incorporated

into a single network, which is then split into separate networks at the point of

connection to the core. MNOs continue to keep separate logical networks and

spectrum and the degree of operational coordination is less than for other types

of active sharing.

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Telecom Infrastructure Sharing  

2. National Roaming : RAN sharing is the most comprehensive form of access network sharing.

It involves the sharing of all access network equipment, including the antenna,

mast and backhaul equipment. Each of the RAN access networks is incorporated

into a single network, which is then split into separate networks at the point of

connection to the core. MNOs continue to keep separate logical networks and

spectrum and the degree of operational coordination is less than for other types

of active sharing.

Benefits Of MVNO:

MVNO market models, its characteristics, advantages of MVNO culture and the

reasons for its success in other countries and examines the likely impact of this trend on

the Indian Telecom industry. the Department of Telecommunications (DoT) has given

the nod to MVNO business in India with some ground rules such as no MVNO operator

can do business with more than one incumbent operator i.e. Airtel, Vodafone etc. There

is no clear reason why the government is taking all the telecom-related decisions in

such a hurry. Already the Indian telecom industry is experiencing competitive pressures

due to the introduction of Mobile Number Portability (MNP) the implementation of which

is coming up in this year, and the government will distribute new licenses in all circles.

• Having a good market recognition or branding in place e.g. Virgin group

• Have a good sales and distribution network e.g. Virgin Airlines

• Capability to offer bundling with existing services e.g. Tesco UK

MITSOT  Page 69 

• Incumbent operators in the telecom market e.g. Bharti India, Reliance GSM (not

yet started)

An example of MVNO in India is Virgin Mobile (although it is not legally MVNO as

DoT has stated). After researching the India market and stating that ‘Current Indian

 

Telecom Infrastructure Sharing  

operators do not have plans for youth and they are not targeting them’, Virgin Mobile

launched its services, targeting a specific demographic—the youth.

Success and failure

Can the MVNO model be successful in India? There is no clear ‘yes’ or ‘no’ answer for

this but let us examine the factors which are driving MVNO success stories globally:

• Maturity of the telecom market in respective country (based on teledensity)

• Existence of Mobile Number Portability (MNP)

• Existence of 3G services

• Incumbent working as partner with MVNO rather than as a wholesale supplier

• Consolidation of the telecom market

• Current charges of services for the end-user

Maturity of the market in a country gives the direction whether the incumbent

operator will build the partnership with a MVNO or just complete the obligation written

by the regulator. As the incumbent operator knows, the cost of acquiring a customer is

still low in comparison to what it is in a saturated market, so the operator will surely try

to acquire the customers on its own by targeting that segment.

Benefits of active Sharing:

MITSOT  Page 70 

Changes in data demand growth and availability of new technologies like LTE is

having implications on the telecom industry’s structure, competition and sources of

competitive advantage. In addition, due to increasing competition, network operators

are witnessing faltering profit margins. Service revenue growth is expected to be less

than 1.2% up until 2014. In such harsh economic conditions, operators are now

increasingly looking for innovative ways to increase operating profits, reduce their total

cost of ownership and create shareholder value. In order to achieve the above

objectives, many in the industry believe that operators should master the value

discipline of "operational excellence" by embarking on a network sharing strategy. The

prime objectives of network sharing must not only be to realize Capex and OpEx

 

Telecom Infrastructure Sharing  

savings but also to offer highest level of network quality to the customers of all sharing

partners. round 70% of operators have used sharing to their advantage in forms such as

site sharing, co-location and national roaming in the liberalized and emerging markets.

Our Research suggests that:

For the majority of operators, network sharing will become a critical strategy to

survive in the market. This will help them to expand 3G coverage and make utilisation of

the OpEx savings in number of other areas such as LTE and IMS. By 2015, as many as

90% of operators across the globe will implement network sharing of some form.

Benefits of Passive Sharing:

Passive telecom infrastructure, towers has taken an altogether different role in

the last one-and-a-half years. Telecom companies, which rushed to set up towers to

cope with the explosion in the number of subscribers, have now realised that it’s better

to share the infrastructure. For large players who have a pan-India footprint, it means a

new source of revenue, while for those expanding nationwide, it means lower capex and

opex, as well as faster rollout of services.

Example:

In view of stated importance of passive infrastructure, Reliance Communications,

which is the country’s second largest mobile telecom company, became the first to

demerge its tower operations, christening it Reliance Telecom Infrastructure Ltd (RTIL).

Bharti Airtel, Tata Teleservices and Idea Cellular followed suit.

Active RAN Sharing:

The global savings due to the combination of OPEX (OPerational EXpenditure)

and CAPEX (CAPital EXpenditure) from active infrastructure sharing can reach $60

billion in a period of five years. The study also indicates that operators can save a

minimum of 40 percent. Additionally, the operators can also save from passive site

sharing.

MITSOT  Page 71 

 

Telecom Infrastructure Sharing  

It is significant to note the difference between active and passive sharing. Active

sharing comprises of antennas, antenna systems, backhaul transmission system along

with the base station equipment, whereas passive sharing includes tower mast or

pylons, cables, physical site or rooftop, shelter cabinets, power supply, air conditioning

and alarm systems. In comparison, passive sharing tends to be safer, in spite of the

greater cost-saving potential of active sharing. Europe-wide sharing agreement between

Vodafone and O2, “O2 and Vodafone are not sharing base stations. The agreement

mostly concerns other elements of base station sites: it is largely passive sharing,” Kaul

added.

Reduction of CAPEX and OPEX: The growth in wireless mobile subscribers in last one year has been phenomenal

and over 7 million new mobile customers are being added every month. Due to

intensive growth, intra-site distance of base units are reducing drastically and the

formation of such cluster of base units opens a new opportunity of sharing the

infrastructure which could be passive as well as active. The benefits or pay off are listed

as under-

• To reduce the capital expenditure. • Quick rollout of the network and thereby inflow of revenue. • To reduce the operating cost. • To improve the city skyline. • Optimum utilization of national resources and hence improved economic efficiency.

Reduction in Time and Rollout in Cost Reduction:

Apart from huge investments needed to build fresh infrastructure the time taken

to roll out could be a major bottleneck in the achievement of 500 million subscribers by

2010.The country would require about 3.3 lakh towers by 2010 against the present one

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Telecom Infrastructure Sharing  

lakh towers in order to meet this target and even if the target is achieved, it will only be

about 50 per cent of the tele-density with major gaps in the rural areas. Passive

infrastructure sharing means sharing of physical sites, buildings, shelters, towers, power

supply and battery backup and is permitted under the licenses.

Competition set to intensify further with market Liberalization:

The Indian mobile sector is an intensely competitive industry, featuring 10 mobile

operators, of which four, namely Bharti Airtel Limited, Reliance Communications

Limited, Vodafone Essar Limited and BSNL, together account for almost three-fourths of

the entire mobile market share. This is also partly on account of the fact that these four

operators have their presence in a larger number of circles as compared with other

players. With licenses being granted to some of the existing operators for new circles

and also to new entrants, competition is expected to intensify further.

Graph 5: Market share (Operators)

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Graph 6: Market share (infra providers)

Market shares of public and Private Players : 

 

Both fixed line and mobile segments serve the basic needs of local calls, long

distance calls and the international calls, with the provision of broadband services in the

fixed line segment and GPRS in the mobile arena. Traditional telephones have been

replaced by the codeless and the wireless instruments. Mobile phone providers have

also come up with GPRS-enabled multimedia messaging, Internet surfing, and mobile-

commerce. The much-awaited 3G mobile technology is soon going to enter the Indian

telecom market. The GSM, CDMA, WLL service providers are all upgrading themselves

to provide 3G mobile services.

Along with improvement in telecom services, there is also an improvement in

manufacturing. In the beginning, there were only the Siemens handsets in India but now

a whole series of new handsets, such as Nokia's latest N-series, Sony Ericsson's W-

series, Motorola's PDA phones, etc. have come up. Touch screen and advanced

technological handsets are gaining popularity. Radio services have also been

incorporated in the mobile handsets, along with other applications like high storage

memory, multimedia applications, multimedia games, MP3 Players, video generators,

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Camera's, etc. The value added services provided by the mobile service operators

contribute more than 10% of the total revenue.

Competition Safeguards

Incumbents and new entrants may reach certain market-share thresholds that

would present them with substantial market power or even dominance, which in turn

would allow them to squeeze out smaller players; competition safeguards protect the

interests of smaller players and new entrants.

The marketing strategies for capacity sharing & service sharing Telecom operators’ spending has traditionally been dominated by considerable

investments in technology and network deployment. Given that such investments are

fixed, sunk, and irreversible, they represent a high risk factor. The risk is compounded

by the need, for both fixed and mobile operators, to continuously adopt new

technologies and upgrade infrastructure. While fixed network operators are now

migrating to next-generation networks, most mobile network operators have already

deployed third-generation (3G) infrastructures. Therefore, infrastructure sharing can

reduce this risk for operators by spreading it among several players.

Reduce investment requirements Investment is spread over the operators sharing their infrastructures rather than

being sustained by only one operator. Optimized investment will contribute to better

sustainability of telecom operators and will justify higher investments in the long term,

given the lower risk. Telecom equipment vendors estimate that sharing may reduce

infrastructure costs for operators by as much as 40 percent.

Offer a new source of revenues.

In liberalizing markets, incumbent operators could generate significant revenues

from infrastructure sharing, which in certain cases can exceed 15 percent of operators’

total revenues.

Release capital for strategic investments

MITSOT  Page 75 

Spinning off the network into an independent company allows incumbents to

focus on customer facing activities while releasing cash for new strategic investments.

 

Telecom Infrastructure Sharing  

Decrease the barriers to market entry for new players When infrastructure sharing is enforced, markets become significantly more

attractive to new players. Such players can enrich competition while investing

effectively.

Shift the focus to service innovation instead of network deployment By alleviating the pressure of network deployment from a financial and an

operational perspective, infrastructure sharing allows operators to turn their attention to

improved innovation, better customer service, and eventually better commercial

offerings and healthier competition.

Expand investments to less dense areas and meet universal service targets.

Infrastructure sharing helps operators undertake network expansion in rural

areas, using the savings generated by investing less in denser areas. This also has an

important policy dimension, given its significant contribution to meeting preset universal

service targets.

Optimize the use of scarce national resources, namely rights of way Infrastructure sharing in its simpler forms will lead to better use of scarce national

resources, such as rights of way, and in its more complex forms will allow a better use

of spectrum.

Reduce negative environmental impact Although environmentalists show limited support for telecom network

deployment, infrastructure sharing typically receives the backing of many conservation

groups because less network buildup means fewer negative environmental impacts.

Estimating the Savings

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Telecom operators generally appreciate infrastructure sharing due to the cost

savings it generates. Case studies illustrate the potential savings in different markets: In

India, for example, an estimated 240,000 towers are needed over the next three years.

Analysis indicates that capital expenditure savings could reach US$4 billion if operators

achieve double tenancy on deployed sites by 2010. Finally, in one fixed-network sharing

case, multiple cost components would be affected and optimized if two or more

operators share their network. Set-up costs could be reduced by as much as 40

percent, and utilization costs could be reduced by 20 percent.

 

Telecom Infrastructure Sharing  

Conclusion

The growth in wireless mobile subscribers in last one year has been phenomenal

and over 7 million new mobile customers are being added every month. Due to

intensive growth, intra-site distance of base units are reducing drastically and the

formation of such cluster of base units opens a new opportunity of sharing the

infrastructure which could be passive as well as active.

The benefits or pay off are listed as under-

• To reduce the capital expenditure.

• Quick rollout of the network and thereby inflow of revenue.

• To reduce the operating cost.

• To improve the city skyline.

• Optimum utilization of national resources and hence improved economic efficiency.

Infrastructure-sharing regulation has proven to be a critical lever contributing to the

growth of the telecom sector. Operators should closely examine the economic benefits

and develop their internal positions on the subject. Regulators, on the other hand, should

encourage infrastructure sharing and issue necessary policies to ensure effective

adoption and alignment by competing operators.

Both fixed and mobile operators should consider infrastructure sharing as a

medium to save costs and focus more attention on customer-facing activities, in which

innovation and differentiation are the main competitive advantages. In the longer term,

traditional operators could leverage infrastructure sharing as a new vehicle for growth.

This could be achieved by structurally separating all or part of their network assets or

spinning out network provider companies.

Telecom operators and traditional operators will be faced with a strategic choice:

Concentrate on high-value retail business or focus on wholesaling facilities services.

Regulators should carefully consider what infrastructure-sharing forms to mandate.

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Telecom Infrastructure Sharing  

Passive network components are more commonly shared and are considered a good

starting point for infrastructure sharing obligations. Many obstacles prevent operators from

growing the number of passive components in their networks—such as high property

prices and continuously increasing construction costs—and it is becoming increasing

difficult to obtain permits to erect towers and masts. This approach can be facilitated by

encouraging the use of professional tower- and site-management companies as trusted

independent entities to manage such infrastructure on behalf of operators in the market.

Regulators should introduce necessary safeguards and enforcement tools. To

ensure compliance and successful adoption of infrastructure-sharing obligations,

regulators should access and communicate the overall benefit of infrastructure sharing

and ready themselves to resolve eventual disputes

Sharing of active infrastructure elements poses numerous challenges to telecom

operators.

• It needs to be tested and commercially deployed to make sure that the traffic of

players is properly managed.

• Whether it is possible for active infrastructure sharing solutions to share

equipments with frequencies ranging from 800 MHz to 2100 MHz seamlessly.

• Going forward, active infrastructure sharing between multiple operators can also

lead to concerns related to asynchronous network expansion.

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Telecom Infrastructure Sharing  

BIBILIOGRAPHY 

 

 

• www.trai.com 

 

• www.dot.org 

 

• www.telecomwatch.com   

 

• www.telecomtiger.com 

 

• www.ictregulations.com 

 

• www.ictregulationtoolkit.org  

• www.voicendata.com  

• www.economictimes.indiatimes.com  

• www.communicationstoday.co.in  

• www.vanu.com   

• www.gtllimited.com  

• www.quippoworld.com/quipo‐telecom.html  

• www.industowers.com  

• www.americantower.com  

• www.tower‐vision.com  

• www.nokiasiemensnetworks.com  

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• www.ericsson.com 

 

Telecom Infrastructure Sharing  

 • www.huawei.com 

 • www.alcatel‐lucent.com 

 

MITSOT  Page 80