To Share Or Not To Share?

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To Share Or Not To Share? Business aspects of network sharing for Mobile Network Operators Frank Berkers, Gijs Hendrix, Ioanna Chatzicharistou, Thomas de Haas

Dominik Hamera EIT+ Wrocław, Poland [email protected]

TNO Delft, The Netherlands {frank.berkers, gijs.hendrix, ioanna.chatzicharistou, thomas.dehaas}@tno.nl Abstract—Radio spectrum and network infrastructure are two essential resources for mobile service delivery, which are both costly and increasingly scarce. In this paper we consider drivers and barriers of network sharing, which is seen as a potential solution for scarcity in these resources. We considered a full sharing scenario for a Mobile Network Operator using the Business Model Canvas method, and concluded that options for technological differentiation may be limited which in turn leads to increased competition between existing players. Keywords-Network sharing; implications; mobile operators; business modeling; Business Model Canvas

I.

network

INTRODUCTION

Network sharing is as old as mobile communication; however in most countries regulators have initially been trying to restrict sharing to stimulate competition in the mobile market. Because of increasing data traffic and limited options for extending deployed networks, Radio Access Network (RAN) network and spectrum sharing are perceived as potential methods for upscaling network capacity and availability. This has led to a loosening of sharing restrictions by market regulators. In this paper we look at the implications for the business model of a Mobile Network Operator (MNO).

important to mention that sharing can bring consolidation a step closer for the parties involved. In this paper we look at the business aspects of an advanced sharing scenario, from the viewpoint of an MNO. We review the possible consequences that RAN and spectrum sharing have on different aspects of the MNO’s business model, and discuss the considerations and viability of full sharing between MNOs. We compare this analysis to recent developments, and provide an overview of recent developments in network sharing in Europe. This work has been performed in the framework of the European research project SAPHYRE, which is partly funded by the European Union under its FP7 ICT Objective 1.1 - The Network of the Future (see [1] for more details). II.

SCOPE

A. Literature review Resource sharing is a broad concept that can be defined in many ways and approached from different perspectives. In this chapter we provide a brief overview of relevant literature. 1) Infrastructure sharing

Network sharing has obvious benefits from a mobile operator perspective, but also some concerns such as end to end network quality control and lack of technical differentiation. The current state of technology allows operators to realize even the most advanced sharing scenarios. However this may lead to market consolidations which in turn may have uncertain effects in terms of the future of the mobile market. Europe is one of the most developed mobile markets in the world, where the average number of mobile providers with own infrastructure is 4 per country. We think that network sharing might lower this average significantly.

Infrastructure sharing is the use of the same part(s) of infrastructure by two or more operators on negotiated terms ([19]). As far as the physical dimension is concerned, infrastructure sharing can be divided into passive and active sharing ([2]; [5]; [7]; [9]; [14]) depending on the infrastructure elements that are shared. Passive sharing does not require active co-ordination between the different network operators, examples are site and/or mast sharing ([9]). Active infrastructure sharing is the sharing of the active elements or the intelligence of the network.

An important strategic advantage of sharing is the acquisition of scale. Another way to achieve this is consolidation. Instead of sharing a network, one party could acquire another and their customers and/or operations would be merged, which leads to similar advantages and is usually restricted by market regulators. Because of these restrictions and the effects on the market dynamics, we consider consolidation as out of scope for this paper. However, it is

Some authors refer only to infrastructure sharing (for instance [7]) and consider spectrum sharing as a form of active infrastructure sharing while other authors ([9]) do not. For this study, radio spectrum sharing is taken to be another category of sharing different from infrastructure sharing. Chanab et al ([7]) assert that there are three different forms of sharing and their variations. The main sharing forms are site sharing, network sharing and spectrum sharing. Their variations include the

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MVNOs, national roaming and the tower companies. ABI ([2]) recognizes several forms of sharing that differ with respect to how deep they reach into the network. Site sharing, RAN sharing, national roaming and common shared network are the identified sharing categories. Another infrastructure sharing categorization is made by Lefevre ([14]) who identifies site sharing as the sharing of different passive elements while active sharing includes extended site sharing, RAN sharing, the core network sharing and backhaul sharing. According to Forge et al. ([9]), there are five categories of infrastructure sharing namely site sharing, mast or tower sharing, RAN sharing, core network sharing and network roaming. For this paper we consider RAN sharing, as described by Forge et al. ([9]), while excluding core network sharing and network roaming. The main reason why we choose to exclude the core network is that core network sharing can be considered one of the deepest sharing categories, which does not leave enough room for service differentiation. Concerning network roaming, we choose to exclude it because in this case there is no actual resource sharing. 2) Radio spectrum sharing Radio spectrum sharing can be defined in many different ways. According to Chanab et al ([7]), radio spectrum sharing can be materialized by introducing market mechanisms (a.k.a. spectrum trading). However, radio spectrum sharing can also take place on a technical level without the need for radio spectrum trading. According to Prasad et al. ([18]) “radio spectrum sharing is the use of the same frequency band by different RANs or services, either with coordination or possibly without any coordination between the systems, with emphasis on the spectrum access schemes and methods”. According to Peha ([17]), spectrum sharing arrangements can be categorized as being based on coexistence or cooperation and as sharing among equals or primary-secondary users. In the case of spectrum sharing based on cooperation, all the devices (even those that belong to different administrative authorities) communicate with each other to avoid interference. In the case of spectrum sharing based on coexistence, devices try not to create interference without the existence of explicit signaling ([17]). When sharing takes place among equal users (known also as the “commons” model), the spectrum is shared and no one is given clear priority while in primary-secondary users sharing, primary users hold the exclusive rights through licensing and constitute the primary system that has priority over the secondary users, who can transmit opportunistically under the condition that they do not create interference with the primary system. 3) Drivers and barriers for infrastructure sharing Drivers for infrastructure sharing One of the most important drivers for network sharing is cost reduction. The potential for cost savings is highly dependent on the adopted sharing category. Estimated savings in case of site sharing are 5-15% of the CAPEX for 3G network rollout ([15]). In case that a deeper sharing category is implemented like RAN sharing the estimated savings are 40-50% of the

RAN cost in the early phase of network development and 10% of the RAN cost in the phase that the network matures ([8]). Another driver for the network operators is the fact that sharing can create an extra revenue stream for the network operators that provide the infrastructure ([9]). Infrastructure sharing can be a way for the license holders and network operators to meet their regulatory commitments and an effective option for upgrading 2G mobile services to 3G mobile communications and broadband wireless access technologies ([14]). Network sharing enables license holders to reap economic benefits by launching more value added services. This is very important especially in cases of limited cash flow and for the license holders that do not own any infrastructure. It can also reduce the delays and hurdles for site acquisition. Site sharing is the simplest sharing category. By co-locating sites, network operators increase the chances of acquiring the required sites especially in multi-operator environments. In addition, it facilitates coverage of remote areas and increase of capacity in congested areas by acquiring access to locations of strategic importance ([9]). Apart from the previously mentioned sharing drivers for the network operators, the reduction of investment risk is another driver ([5]). Network operators invest large amounts in network and technology development. With network sharing, the investments can be shared and the risk is spread among different actors. Barriers for infrastructure sharing Even though there are many drivers for different actors to engage in infrastructure sharing, there are also some barriers. For network operators, infrastructure sharing might create interoperability problems and finding the right combination of network operators can become a difficult task ([2]). It can create great inter-relatedness of one or more network operators. High inter-relatedness means higher exposure of each network operator’s financial situation to his partners. If one partner is not able to meet his cost sharing commitments then the position of the other partner will be weakened ([2]). Another barrier for the network operators is the fact that sharing can lead to long term loss of their competitive advantage and non-optimal long term investment decisions ([2] ). Network operators that do not depend on infrastructure sharing for service delivery but have solid financial backing and eventually manage to build their own infrastructure can use this competitive advantage of infrastructure possession in order to increase their market share. Additionally, resource sharing might lead network operators to focus on a service level and not on the network infrastructure itself, a fact that can eventually create head to head competition with internet leaders ([11]). The loss of the network operators’ ability to differentiate their services can be another important barrier for them to adopt resource sharing ([12]). The possible cooperation with competitors could also be considered as a barrier ([7]).

4) Drivers and Barriers for radio spectrum sharing Drivers for radio spectrum sharing The main driver for radio spectrum sharing is the increase in spectrum utilization. Spectrum utilization with the existing radio spectrum allocation regime is very low. It is estimated to be less than 17% in urban areas and 5% elsewhere ([2]; [4]). By increasing spectrum utilization, new wireless products and services can be introduced into the market and higher data rates can be achieved, something that is desired by many actors ([17]). Service providers will be able to launch services with higher data rate demands; end users will have access to more services; equipment and handset providers will be able to introduce new product ranges into the market that are designed for high data rate services, and service and spectrum regulators will achieve the provision of more high data rate services and higher spectrum utilization respectively. Another driver for the radio spectrum license holders, in case that radio spectrum trading is introduced, is the extra source of revenue that is created (especially if the demand for radio spectrum access from the service providers is high). Even though the current radio spectrum allocation system of command and control serves its role, there are some doubts whether it will be able to do so in the future. The possible inability of the system to deliver the required services to its end users is based on the expected worldwide population increase for the coming 25 years that will inevitably lead to a massive expansion of services that use radio frequency and the introduction of new types of services that require much wider bandwidth to support richer content ([9]). According to Peter Resavy, the demand for mobile broadband will surpass the spectrum available to meet it in mid-2013 ([12]). Barriers for radio spectrum sharing One important barrier for radio spectrum sharing is the interference issues that might arise if new and less solid radio spectrum sharing technologies are adopted. This barrier refers to the service providers because it is closely related to the QoS that they deliver. Another radio spectrum sharing barrier for the spectrum license holders that also deliver services is the fact that radio spectrum sharing can cause the loss of their competitive advantage, as spectrum license holders share a valuable and scarce resource that it is not easily accessible from other potential service providers. B. Scope of this paper After defining infrastructure and radio spectrum sharing and presenting important resource sharing drivers and barriers, the broadness of the resource sharing concept has become apparent. We have seen many different drivers and barriers, but these are not considered jointly or in interaction. In this paper we attempt to do just that. We want to define the scope of this paper and state some important considerations that determine the rest of our analysis.

For this paper, with the term resource sharing we mean full RAN and radio spectrum sharing. In other words, the passive parts of the network infrastructure (site and tower), the active RAN and the radio frequencies are shared and the air resources are dynamically allocated. The core network and the OSS/BSS are not shared, while the switching and the interconnections are handled by each network operator separately. Another important aspect that narrows down the scope of this paper is that any constraints with respect to technology or current regulation are not taken into account. III. A.

BUSINESS MODEL ANALYSIS

Methodology

In this section, a comparison is made between a generalized current business model of a network operator and its business model in the full sharing scenario. For this comparison we use the Business Model Canvas (BMC) as designed and described by Osterwalder et al. in [16]. By using the BMC we can obtain a qualitative impact analysis in the MNO business domain. These are the steps we have followed: •

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Analysis of the current business model of an MNO using the Business Model Canvas. Because the objective of this analysis is a comparison with the full sharing scenario, some parts and details are omitted. Delta analysis of the effects of the full sharing scenario on all aspects of the business model and brief impact assessment, based on the authors’ experience and opinion. Overview and summary of most important findings.

A discussion on recent developments in network sharing in Europe, and an overview of the implications of this analysis are provided in the next chapters. B. Business model analysis Figure 1 shows the Canvas with analysis of the current business model of a Mobile Network Operator, and effects of the full sharing scenario on different aspects of the business model. These effects are discussed in more detail below. Key Partners Suppliers • Vendors: infrastructure consolidation may lead to vendor/equipment swaps within the vendor portfolio of an operator, increasing the number of equipment vendors in its network. From a technology point of view, a more heterogeneous multi-vendor infrastructure is more difficult to maintain, however this is not a major problem for operators, as it isn’t in current practice. A lower number of networks may have a significant impact on the infrastructure market (equipment vendors & constructors) itself. Overall

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impact of sharing on MNO business in this field: medium. Value-added services: introduction of shared RAN may significantly increase network capacity. Shared RAN makes it possible to introduce new, capacity demanding services such as video streaming, mobile camera’s and M2M connectivity. Overall impact on MNO business: medium. Constructors: lower number of sites and constructions will lead to operator savings on constructor spending. Overall impact on MNO Business: small. Outsourcing partners: outsourcing partners may consolidate their operations to provide better services at lower cost in countries where outsourcing is broadly practiced. Outsourcing consolidation may lead to headcount reduction. On the other hand a shared RAN may very well trigger outsourcing in countries where outsourcing is less practiced. Overall impact on MNO Business: high.

Partners • Other MNOs: mainly competitors in a non-sharing situation, the sharing parties become important partners in the full-sharing scenario. Overall impact on MNO Business: significant change of roles. • Roaming: roaming agreements with foreign operators are typically bilateral and specific to MNOs. They are subject to business considerations rather than technical considerations. Overall impact on MNO Business: small. • Interconnect & data exchange: effects limited because core networks remain separate. Overall impact on MNO Business: small. • Integrators: integrations in shared environment are expected to be more complex and require higher level of control. Overall impact on MNO Business: small.

Key Activities • Network operations: a new shared network that adds to the legacy network requires different operational roles and increases the total network operations. Complexity can be reduced if the shared network is operated by a third party. In case of sharing of existing networks, consolidating network operations can provide savings. Overall impact on MNO Business: increase of complexity. • Service delivery: the fulfillment organization is mostly unaffected due to the limited relationship with the RAN network. Overall impact MNO Business: small. • Customer Care & Billing: activities remain separate. Sharing might provide an interesting upside, however

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this is beyond the scope of this analysis. Overall impact on MNO Business: small. Capacity management: capacity management and allocation is a difficult subject in a shared network. It requires both solid agreements as well as effective control. It causes both complexity as well as direct dependencies on other operators’ performance. Overall impact on MNO Business: high. Life Cycle management: shared RAN network development is subject to multi-lateral decisions, increasing complexity and potentially slowing down development dynamics. Overall impact on MNO Business: high. BCM/security management: sensitive data is exposed between parties and may be at risk of disclosure. Strategic planning is more complex. An operator can be strongly affected by other operators’ failure in a shared RAN. Overall impact on MNO Business: high.

Key Resources • RAN sites: overall site count reduction due to combining grid of multiple MNOs. This effect is limited due to remaining of legacy networks. Sourcing sites from the installed base of multiple MNOs benefits the radio plans of new networks, network capacity, and speed of rollout. Merging and sharing of legacy networks could provide further cost savings. Overall impact on MNO Business: positive on cost and positive for efficiency • RAN equipment and backhaul: due to sharing of equipment and potentially backhaul in the shared network, the amounts and cost of equipment reduces. Overall impact on MNO Business: cost decrease (in comparison with unshared networks). • Frequency: costs can decrease due to more efficient use of air resources and potentially higher spectral efficiency. Overall impact on MNO Business resource: decrease of frequency use and costs. • Core networks: remain separate however connected to shared RAN. Implementation of some advanced network optimization platforms may be more attractive if compared to implementations in separate networks. It may lead to additional operational benefits. Overall impact on MNO Business: small. • OSS/BSS: remains separate. Overall impact on MNO business: small. • Quality of network: due to shared investment and significant coverage planning of shared network, quality of network potentially is better. However this is likely to be negatively impacted by network sharing/consolidation activities in case of sharing existing networks. Less end-to-end quality control and spread of responsibility may lead to reduced quality, coverage and accessibility in shared network. Overall impact on MNO Business: more control required.

Figure 1. Analysis using Business Model Canvas. Picture used under Creative Commons License, see [14] or www.businessmodelgeneration.com for more information.

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Capacity: capacity of shared network is higher but its management and expansion more complex. Overall impact on MNO business: higher capacity available, more control required. IT services: activities remain separate. Overall impact on MNO Business: medium. HR, Finance, etc: activities remain separate. Overall impact on MNO Business: small. Size of customer base: increased risk of churn for each operator may follow from the network sharing/consolidation activities and its (potentially) negative impact on network quality. This might particularly affect larger parties in asymmetrical consolidation. Overall impact on MNO Business: effort needed to avoid churn. Technology portfolio: introduction and triggering of new technology might be more complex and time consuming due to a longer process of acceptance, justification and testing. Overall impact on MNO business: reduced flexibility.

Value propositions • Voice: a shared RAN with separate core networks still provides some room for differentiation on voice services, but in general the physical layer of the network will be hardly differentiated. Overall impact on MNO Business: proposition remains, differentiation decreases. • Data access: Shared RAN offers higher capacity for data services at lower cost, including streaming, mobile camera’s and M2M connectivity. Overall impact on business MNO: increase of data usage. • Quality & performance: as part of the value proposition, there is no room for differentiation between operators on this aspect because the technology layer is shared. Overall impact on MNO Business: less differentiation. • Price: may reduce due to less technical differentiation and parties have similar RAN operation costs. Different pricing mechanism might be introduced to account for the shared RAN cost allocation mechanisms (e.g. traffic based), or to retain differentiation to the end-user. Overall impact on MNO Business: potential decrease of prices. • Capacity & Coverage: quality will likely increase but equal access means less differentiation. Overall impact on MNO Business: very much depends on current positioning in this field. • Brand: a strong technology associated brand might be negatively impacted due to equal comparisons with other sharing parties. Effect may be opposite for small operator with weak technology position. Overall impact on MNO Business: depends on brand values. • Personal/corporate flexible offers: data plans and value add services remain in the operator specific domain. Overall impact on MNO business: small.

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VAS & content: provides a potentially interesting area for differentiation. Still high differentiation due to separate core networks, possibility of increase in VAS & content services due to increased network capacity. Overall impact on MNO Business: potentially more strategic focus.

Customer Relationships • Operational excellence: as RAN costs are the same for all parties, an MNO focusing on this relationship will find the option to differentiate on cost and process efficiency to be reduced, although overall profitability depends on the total of their activities, on customer base and service portfolio. Overall impact on MNO Business: limitedly affected. • Product leadership: network quality disappears as an important component in product leadership... Overall impact on MNO Business: this strategy is significantly affected. • Customer intimacy: this relationship is not affected by RAN sharing, but with the options limited in the other categories customer intimacy may become an increasingly pursued strategy. Overall impact on MNO Business: not affected and might be more widely pursued. Channels • Direct web/store: remains separate, unaffected by network sharing. Overall impact on channel: small. • Indirect web/store: buying power of reseller may increase because of decrease in differentiation, but channel might also be under pressure because of smaller margins throughout the chain. Overall impact on channel: depends on the buying power of the channel. • Integrators: unlikely to be affected. Overall impact on channel: small. • MVNOs: less differentiation can increase buying power of MVNO, but channel itself will likely remain unchanged. Overall impact on channel: small. Customer Segments • Consumer & SME: less differentiation in value propositions potentially results in higher customer acquisition and retention costs. Churn rates are likely to increase. For multiplay customers this effect will be smaller than for single play customers, because of the complexity of the relationship with the customer. Overall impact on MNO Business: higher churn rate anticipated and more focus on value add services and multiplay offers. • Corporate: because of the decrease in quality differentiation this segment can also be subject to increased churn rates, but this will most likely happen in the longer run. Overall impact on MNO Business: limited.

Revenues • Subscription: no differentiation on network quality can lead to pressure on subscription fees (increased competition). Overall impact on revenue: possible decrease. • Data/voice volume based pricing: also possibly reduced because of increased competition (because of less differentiation). Overall impact on revenue: possible decrease. • Value added services: better utilization of network resources may create additional room for services like M2M, which will have positive impact on operator income. Overall impact on revenue: possible increase. • Data/voice roaming: remains stable. Overall impact on revenue: small. • Interconnect & data exchange (terminating): effects limited because core networks remain separate. Overall impact on revenue: small. Cost Structure • Network costs (CAPEX & maintenance OPEX) • RAN: reduction of location lease, power consumption, maintenance, design and optimization, increase of spending on capacity management, quality control, advanced vendor features, other interoperator issues. Overall impact on cost item: decrease. • Core, OSS/BSS: remain separate and independent; however some additional investments may be required due to sharing structure. Overall impact on cost item: possible increase. • IT, Services platforms: consolidated and jointly operated potentially leads to large cost savings. Overall impact on cost item: decrease. • Staff & Overhead: potential reduction of operation organization, which is however limited due legacy; the sales organization remains unaffected. Here, sharing & consolidating legacy network can provide cost savings. Overall impact on cost item: small. • Customer costs: because of decrease in differentiation between operators, acquisition and retention costs are likely to be higher. Overall impact on cost item: increase. • License: sharing spectrum, the increase of spectrum utilization and a higher spectral efficiency reduce spectrum cost, particularly for new spectrum acquisitions, however effect is limited in case of legacy sharing when operators are not giving up their current channels. Overall impact on cost item: decrease.

C.

Main insights

When we look at the total effect per aspect of the business model as defined in the BMC, we obtain the following results: Aspect of BMC Key Partners Key Activities Key Resources Value Propositions Customer Relationships Channels Customer Segments Revenues Cost Structure

Total effect Small, main difference is relationship with sharing parties. Negative, caused by increase in complexity and risk and retaining of legacy. Mixed, with positive effects likely strongest, mainly in site and frequency cost reduction. Positive effects in data capacity, VAS and content, and negative effects due to decreasing differentiation. Negative for product leaders, positive for others. Customer intimacy will become more important. Relatively unaffected, unknown effect on indirect channels. Negative for larger parties, as less differentiation can lead to more competition. Negative effects on subscription fees and volumes, positive effect on VAS revenue. Mainly positive, because of reduced RAN, IT and License costs. Possible increase in customer costs, and core network adaptations. Sharing legacy provide additional cost savings potential.

Overall, there are a few consequences of the full-sharing scenario that stand out as most important. First of all, sharing leads to less differentiation, particularly in network quality where there is no differentiation at all. Especially for single play users this may lead to increased churn because of increased customer buying power, and a more difficult position for cost and product leaders. This effect is largest for larger parties in sharing agreements, because these parties tend to focus on operational excellence, which could imply that incumbent MNOs have a smaller incentive to enter into network sharing. Furthermore, sharing implies less control and increased dependency; all renewal and expansion (and shrinking) is now depending on others. Legacy is a serious hurdle, because it ties MNOs to their currently owned sites. Abandoning previous investments is not a real option. Also, legacy is legacy not only because there’s something newer; it is also legacy because there are still customers representing value on the platform. Sharing should lead to cost cuts, particularly in RAN location costs, and IT & Services platform costs. Increase in spectral efficiency reduces the need for spectrum acquisition,

which can present a substantial cost reduction in the future. However, these cost reductions are potentially offset by a rise in customer acquisition and retention costs. With respect to the mobile market, sharing and consolidation might negatively affect the competiveness in the long run, while market entry barriers for new players are high: necessary investments for network rollout are large, and network rollout is a difficult and time consuming process. Only parties with a large existing customer base have the turnover to justify such a substantial investment whereas smaller parties may not.

IV.

RECENT MARKET DEVELOPMENTS

One of the first in the World, a large scale consolidation and 3G RAN sharing project is almost at its completion in UK. The MBNL which is a 50/50 joint venture company owned by T-Mobile UK and 3 UK is operating a joint 3G network for both operators. Both networks operate in separate bands and are connected to independent core networks while the RAN infrastructure and site locations are shared. Many operators worldwide are considering LTE network sharing with other market players. An example of this is an ongoing LTE project in Sweden, where Telenor and TELE2 have decided to build one LTE network and share their spectrum. They have founded a 50/50 percent joint venture under name Net4Mobility, which will manage the jointly built network. This is an infrastructure and spectrum sharing case in the 900MHz and 2,6GHz bands. Because of the possible cost savings, both companies have committed to not only nation wide LTE coverage until end of 2013, but also up to 50% extension of legacy GSM network coverage. This case is an example of how sharing may lead to faster and wider deployment of new access technology. However, the possible impact on the future of the mobile market in Sweden has not yet been fully analyzed. The Polish mobile market is one of the most challenging in Central Europe. Due to rising competition in Poland and a global trend to lower operational and deployment costs, two Polish mobile operators have declared their intention to build a shared LTE network in the 2,6GHz band. Orange Poland and Play have requested an antitrust approval for a joint venture company which could participate in a forthcoming 4G tender. Technical plans have not been released at the time when this article was written. One of the interesting aspects of this 4G tender is a regulatory plan to release frequency band of 35MHz in single block. The Polish regulator is eyeing at this consolidated deployment as one of the possible ways for fast 4G deployment. However, theoretically consolidation may lead to lower competition in the market and even a full merge between large Orange and small Play. It might be too early to evaluate the current worldwide market for shared network deployments. Currently it is possible to differentiate two major streams of projects: sharing and consolidation of existing 3G networks, and jointly build new LTE networks. It's obvious that both types of sharing may have

an impact on legacy networks which will not be covered by the sharing agreement. This is something which needs to be carefully considered as long as the majority of traffic is carried by those technologies. V.

CONCLUSIONS

Network infrastructure and spectrum sharing is seen as one of the possible remedies for mobile operators' shrinking profits and dramatically rising data traffic. At the same time the mobile industry is heading into Long Term Evolution networks, which will likely be the global standard of mobile communication for the next decade. Building shared networks promises to lower capital investments and risk, and increase rollout speed, whereas operational cost savings tend to be the key driver for sharing of existing mature networks. In this paper we discussed the effect of a full sharing scenario on the business model of an MNO, using the Business Model Canvas. We saw that the resulting limitation of technological differentiation leads to increased competition among existing operators. Furthermore, positive cost reduction effects of sharing of new technology can be compromised by the presence of legacy technology, because MNOs will have to manage both shared and legacy networks. Because legacy technology is typically associated with little differentiating power, considering sharing scenarios including legacy seems worthwhile from a business perspective (but typically is less so from a technical point of view). As network sharing has a negative impact on technical differentiation and differentiation in value propositions (leading to an increase in competition and thus reducing pricing levels) more focus is expected to be put on value added services and customer intimacy. At the same time, opportunities for cost- and product leaders are reduced. The upside of savings on investments and operations should be compared with the effect of lower revenues and potentially higher customer retention costs. Network sharing has an impact on the entire market and might provide a competitive advantage for MNOs who share versus those that do not share networks, although the impact will depend on the (relative) size of players in the market. Non-sharing MNOs do not benefit from cost savings, while facing revenues under pressure. Because sharing can well be considered a pre-phase to consolidation, it may alter the market structurally. If the cooperation necessary to make network sharing work leads to further combinations of activities, a sharing partnership might eventually lead to a merger or acquisition of one party by another. The tendency for increasing competition is then reduced by consolidation (a potential subsequent step after sharing). Even though this effect is considered out of scope of this article, this potential effect will be an important concern for regulators and might also be a strategic consideration of parties in the market. The overall impact of sharing on a particular MNO will very much depend on the strategy it currently pursues and on its current position in the market. However, it will depend even

more on the sharing strategy the MNO pursues in the footlight of sharing tendencies of its competitors.

VI.

REFERENCES

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