LTE: SHARING THE BURDEN NETWORK STRATEGIES
LTE BUSINESS MODELS
High expenditure levels to deploy LTE networks, including spectrum and backhaul costs, could force more operators to consider network sharing. By Ken Wieland
M
obile operators could make considerable savings by sharing the LTE network burden,
following the example of 3G agreements last year between T-Mobile and 3 in the UK and Telefonica and Vodafone throughout Europe. But they will need to choose their partners carefully if they are to balance those savings with commercial success in the long term. Already there are signs some operators
are looking to cut LTE costs through network-sharing arrangements. In April 2009 Telenor formed a joint venture with Tele2—net4mobility—to roll out LTE infrastructure together in Sweden; commercial services are scheduled to start this year (see box p.9). Then in June this year Polish mobile operators Orange and P4 (Play) confirmed they are plan- ning to form a joint-venture company to bid for LTE spectrum in the country’s upcoming 2.6-GHz auctions. The Polish regulator is selling just two frequency blocks, each too large to be used by a single operator, indicating that some form of network sharing is likely. The attraction of partnerships is clear:
the cost of rolling out networks while at the same time maintaining 3G and GSM assets can make business models tricky. According to US research company Maravedis, LTE infrastructure capex alone will reach US$14 billion globally in 2015, while Infonetics Research forecasts the LTE infrastructure market will reach $11.4 billion worldwide by 2014 (see chart right). The amount that operators could save
through network agreements depends on the level of sharing. But one analyst company, Analysys Mason, calculates that operators jointly rolling out a new-build LTE network of 2,500 sites, in a developed economy, will typically realise 30% in capex savings over a five-year period if they enter an arrangement to share radio access networks (RANs). In addition, they will achieve an annual 15% opex reduc-
6
tion by year five, it estimates. Yet despite the lure of significant cost
savings, some operators are wary about the idea of LTE network sharing. Tommy Ljunggren, VP for mobility services at TeliaSonera, which launched the world’s first commercial LTE services in Stockholm and Oslo last December, emphasises there is much more to consider than cost savings before putting pen to paper on a network-sharing deal. “You have to have a shared goal and a
shared vision of network development with your partner, as well as the same ambition levels,” he says. “We looked at doing an LTE network-sharing deal with Tele2 [Sweden], but they didn’t meet our prerequisites.” Nevertheless, Ljunggren doesn’t rule
out future LTE network-sharing deals in any of the other markets in which the operator has a presence, including Denmark, Finland and Norway. “Finding the right partner is key to
making a network-sharing agreement work,” says Frédéric Pujol, a wireless expert at research and consulting firm Idate. “Ideally, they need to have the same size and the same strategy in terms of deploying the technology, as well as have agreement on suppliers. It has to be a long-term commitment.” Operators most suited to partnering with each other in a particular
Worldwide LTE infrastructure market 12
• E-UTRAN (FDD/TDD macrocell eNodeBs) • Evolved Packet Core
6
geographical market may well turn out to be close competitors. Both will need to have similar ideas about network coverage and site density if, as Pujol suggests, they are to have any chance of coming up with a common LTE network rollout plan and strategy they can stick to in the long term. In fact, it is the potential for longer-
term cost savings that could prove to be most attractive to operators. “Capped capex and operational efficiency are the key drivers for network sharing,” says Stéphane Téral, a principal analyst at Infonetics Research. “LTE operators don’t want to replicate the 2G and 3G story in today’s environment, which is character- ized by increasing [traffic] usage but diminishing returns.” The design of LTE lends itself more
easily to network sharing at the active level—including base stations and anten- nas, for example—than 3G networks. That’s good news for operators, because the potential cost savings from active sharing are much greater than passive sharing of sites and tower masts. According to ABI Research, operators that carry out sharing of active network elements could enjoy at least 40% additional savings in capex and opex over a five-year period compared to their counterparts striking only passive site-sharing deals. That could equate to as much as US$60 billion in extra savings for operators globally, says ABI Research. One reason why LTE is more suited to
0 2010 2012 2014 Source: Infonetics Research
active sharing is that it is a flat all-IP network architecture, which means there are fewer network elements to deal with than 3G. LTE RAN interfaces also allow interoperability with multiple cores simultaneously. “3G suppliers retro-fitted infrastructure and standards to allow active sharing,” says Ricky Watts, CTO at Aircom, a mobile equipment and services provider and network consultancy. “With LTE, active sharing is built-in from the
www.totaltele.com July/August 2010
Revenue in $US billions
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36