Network sharing may be a necessity in a 5G world
As capacity and coverage demands skyrocket, communications service providers may need to consider new ownership models to keep costs in check.
5G networks are proliferating around the globe as communications service providers (CSP) make the transition to the next-generation of networking technology. But the high costs associated with deploying 5G — from the vast number of cell sites needed to backhaul capacity requirements —are triggering a new wave of interest in network sharing.
However, network sharing with 5G does have some added challenges that didn’t exist with previous generations of wireless air interface technologies such as 3G and 4G. Non-standalone 5G, for example, relies on the underlying 4G network core, making it more complicated to share the 5G network without also sharing the 4G network.
In addition, regulatory agencies around the world, which once shunned network sharing because of fear of minimizing competition and promoting price fixing, are starting to see the benefits of having pervasive 5G coverage in rural areas and other less-populated places. They are also seeing the benefits of faster 5G deployment.
According to consulting firm McKinsey, by sharing both active and passive network equipment, service providers have been able to reduce the total cost of ownership of their networks by up to 30 percent while also improving network quality.
Different types of network sharing for 5G
Many experts believe that network sharing will become a necessity for most CSPs that are faced with soaring 5G deployment costs. Typically, network sharing is broken into two categories: active and passive. Passive network sharing refers to the sharing of physical sites, such as buildings, power and tower sites. This is considered the simplest form of network sharing because operators can fairly easily share sites and still maintain their autonomy and strategic competitiveness. But the cost savings associated with passive network sharing is more limited as well.
Active infrastructure sharing refers to the active layer of the network such as the radio access network (RAN), which consists of antennas, transceivers, base stations, and backhaul networks and controllers. When active infrastructure sharing occurs and is combined with the sharing of the core network but dedicated spectrum is used by each operator, this is called multi-operator radio access network (MORAN). However, when the RAN, the core network and spectrum are all shared, that is referred to as multi-operator core network sharing (MOCN).
But the advent of 5G may create an opportunity for a third type of network sharing because the network is being architected differently. For example, with 3G and 4G networks, network sharing occurred in the RAN because the core network was centralized. With 5G, the RAN baseband processing is now virtualized, and the core network and the applications are distributed and can run on the network edge or in the cloud. Because of this, CSPs have the opportunity to save on hardware and software costs by sharing cloud infrastructure. This could be limited to the sharing of network function virtualization infrastructure (NFVi) and management and orchestration (MANO) or it could include some or all of the network functions.
Cutting 5G network costs
In general, the more parts of the network that are shared, the more complex the arrangement but also the greater the cost savings. According to consulting firm McKinsey, by sharing both active and passive network equipment, service providers have been able to reduce the total cost of ownership of their networks by up to 30 percent while also improving network quality.
And that cost saving becomes even greater when network sharing is done with a greenfield network because it allows operators to avoid network consolidation costs. McKinsey estimates that the cost of a small cell deployment can be reduced by up to 50 percent if three different operators share the same network. The other advantage of sharing small cells is that it reduces potential roadblocks from municipalities that don’t want an excessive number of small cells deployed in urban corridors.
“I believe there will be no region of the world where we will not see network sharing. As we move forward with new technologies there will be more and more benefits to bringing these resources together.”
Hans Kohlmeyer, Head of Nokia Canada Center of Excellence
5G network sharing deals proliferate
Infrastructure sharing among network operators has increased significantly from 2008 when there were about twelve publicly announced network sharing arrangements to 2014 when there were more than 120 network sharing deals, according to consulting firm Coleago. And the scope of these types of network sharing deals has also increased from primarily passive sharing to sharing of spectrum along with RAN or MOCN-type deals.
In some cases, operators with existing 4G network sharing agreements are extending the scope of their arrangements to include 5G. For example, Canadian operators Bell and TELUS have had a successful network sharing arrangement that they initiated in 2008 when they decided to share their 3G and 4G RAN in different parts of Canada. The move allowed them to upgrade their networks more quickly and better compete with Rogers Communications. The two firms have now extended that network sharing arrangement to include the deployment of 5G.
“Thanks to the large aggregated spectrum asset, the agreement allows them to offer the best user experience across urban and rural Canada with an optimized CAPEX and OPEX,” said Emmanuel Neilz, chief technology officer of Nokia Canada. “With RAN sharing they can have much better coverage even in less profitable areas.” Neilz noted that RAN sharing is handled differently by different operators. Some outsource the tower to a third party but still deploy radio assets. Others actually share the radios as well as the towers.
Other operators that may not have shared assets before are doing so as part of their 5G deployment plans. Chinese operators China Telecom and China Unicom have a network sharing arrangement in which they collaborate on 5G base stations and other network infrastructure. And China Mobile and China Broadcasting Network Corp. recently inked a network sharing deal in which the two will build and share a 5G network and collaborate on products and services too. Greenfield networks also present an opportunity for network sharing.
Dish Network, which is building a greenfield 5G network in the U.S. has shown some interest in network sharing. The company has started on that path with its deal with Amazon Web Services (AWS) in which Dish will host its RAN and mobile core in Amazon’s public cloud network. One of the big advantages of this is that Dish believes it can save time and money by leveraging the public cloud to meet its coverage goals and fulfill its FCC spectrum commitments. Dish has to cover 20 percent of the U.S. population with its 5G network by June 2022 and 70 percent of the U.S. population by June 2023.
This type of partnership with a cloud provider could be a hint at what may happen in the future with network sharing. According to Hans Kohlmeyer, Head of Nokia Canada Center of Excellence, there could be future scenarios where a tower owner partners with a cloud provider and then the tower and cloud computing resources are collocated and used by service providers. Even so, the majority of network sharing arrangements seem to occur in Europe, where operators have a smaller number of customers and must share the costs of upgrading their networks with other operators to make their businesses financially viable.
For example, U.K. operators Vodafone and O2 Telefónica UK announced in July 2019 that they will share 5G radio antennas and other “active” network equipment on approximately 2,000 sites. The two companies said that by sharing their network in these areas they will be able to more rapidly and cost effectively deploy 5G. But Vodafone and O2 also agreed to keep their assets separate in densely populated areas such as London where the vast number of subscribers makes it possible to expand the network and still be profitable.
Spaces such as airports could be treated as a shared network
U.S. not embracing network sharing
The U.S. has been slow to embrace network sharing but there are some signs that may be changing. The large Tier 1 operators in the U.S. have always touted their network coverage as part of their marketing messages to consumers, which is why some experts say it’s difficult for those operators to do any type of network sharing and still differentiate their services.
However, Michela Venturelli, analyst with Analysys Mason, says that there are ways for operators to maintain their differentiation even when they share networks. For example, operators could increase their focus on customer service and customer experience or cross-sell with other products, such as a fixed-wireless offering. She also recommends operators establish strategic partnerships with other players such as cloud companies or utilities and provide service bundles.
Nevertheless, smaller, regional U.S. operators seem more interested in passive network sharing. US Cellular is already making some moves in this direction. During the company’s first quarter earnings call with investors, CEO LT Therival said that US Cellular, which still owns all of its towers, signed a master lease agreement with Dish Wireless.
Therival declined to provide specifics about the deal, such as how many sites Dish will use, but said that the company is looking at other possible partnerships. And those partnerships could be for more than just sharing tower space but also for other “passive” assets such as backhaul, cell site shelters and power too. “We’ve got assets at those towers in the form of generators and shelters and backhaul, and we’re willing to share that with our partners if the economics make sense,” Therival said.
Neutral host for infrastructure sharing
Besides CSPs sharing networks, there is another type of network sharing that is referred to as the neutral host model. In this model, public areas, convention centers or airports are treated as a shared network. This is often referred to as a Single Wholesale Network (SWN) and this type of network could be built with some type of private-public partnership in which the network is operated by a neutral host and multiple parties use the network.
In some areas of the world, governments have called for an SWN as a way to speed the deployment of 5G. In the U.S., for example, the Department of Defense (DoD) is looking for ideas on how it might use its spectrum for a domestic 5G network. While the U.S. wireless industry for the most part has shunned the idea of a nationalized 5G network, some service providers seem open to there is the possibility of some sort of partnership where the DoD’s spectrum would be used for a network and that network would be shared with the U.S. military. Tower companies also have hinted at playing some sort of neutral host role where they build the infrastructure and the network is operated by others.
The soaring costs of spectrum coupled with the need for more pervasive network coverage is forcing CSPs to consider new types of business models as they enter the 5G era. The key for CSPs will be to balance their business interests with the complexity and high costs of 5G and still maintain their brand identity.
It’s likely that network sharing will become an essential component of 5G and a critical part of 6G networks when those are deployed in the next decade. “I believe there will be no region of the world where we will not see network sharing,” Kohlmeyer said. “As we move forward with new technologies there will be more and more benefits to bringing these resources together.”