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Chapter I
Research Overview
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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.
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.
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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.
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 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.
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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OBJECTIVE
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
• Expand investments to less dense areas and meet universal service targets
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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.
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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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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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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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MNOs continue to keep separate logical networks and spectrum and the degree of
operational coordination is less than for other types of active 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.
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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.
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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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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
payback period for a dedicated site by each operator may not be justified.
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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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Chapter III
Technological Aspects‐II
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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.
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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customers. A new solution to this challenge is virtualization of the radio access network
(RAN), rather than traditional sharing.
Introduction to Virtualization
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.
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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.
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.
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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.
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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.
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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
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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
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.
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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.
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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.
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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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
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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.
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.
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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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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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Chapter IV
Financial Aspects (costing)
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Figure 10: Development approach
Telecom Infrastructure
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Infrastructure Sharing
• 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.
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• MSC and Routers sharing or backbone sharing includes sharing switches
(MSC) and routers (SGSN) on the operator's fixed network.
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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unclear land ownership and expensive backhaul connectivity costs. Hence passive
infrastructure sharing will significantly lower the capex .
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.
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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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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.
• Commodity risk, the risk that commodity prices (e.g. corn, copper, crude
oil) and/or implied volatility will change.
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Cost Structure
Figure 11: Cost structure
Capital expenditures
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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]
Graph 1: CAPEX worldwide
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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.
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.
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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
• travel and vehicle expenses
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CAPEX Vs OPEX
Improvement measures in current OPEX
Table 1: Opex Analysis
Expected costing consideration
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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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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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Chapter V
Marketing Aspects ‐I
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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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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.
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Figure 12: Evolution Cycle of Network Asset Ownership
Market Developments, Benefits and Challenges
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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Overview of Approaches to Sharing Passive Infrastructure
Figure 13: Sharing approaches
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.
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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.
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
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Active infrastructure sharing involves sharing the active electronic
that are often viewed as the stumbling blocks to speedy roll-out of national
telecommunication infrastructure:
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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well as establishing uniform collocation and connection terms for all market players
seeking access to the backbone.
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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:
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.
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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.
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:
• Less capital intensive than a traditional BTS solution but still robust for harsh
environments
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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
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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.
Convergence
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.
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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
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
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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 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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Risk of information sharing
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.
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Chapter VI
Marketing Aspects ‐II
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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%
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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
• Passive Sharing
• Active Sharing
For the purpose of this paper we have classified sharing broadly into four categories:
• Site sharing.
• Mast (tower) sharing.
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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.
• RAN sharing.
• National Roaming.
1. RAN SHARING
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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.
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operators do not have plans for youth and they are not targeting them’, Virgin Mobile
launched its services, targeting a specific demographic—the youth.
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 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.
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
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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.
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.
Example:
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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.
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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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.
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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.
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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
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.
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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.
Telecom operators and traditional operators will be faced with a strategic choice:
Concentrate on high-value retail business or focus on wholesaling facilities services.
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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.
• 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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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
• www.ericsson.com
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• www.huawei.com
• www.alcatel‐lucent.com
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