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By Rick Perera (IDG) -- At this time a year ago, Europe was abuzz over the plans of high-flying telecommunication operators to roll out 3G (third generation) wireless networks, with their promise of high-speed data transmission and nifty multimedia functions. Today those same companies are limping financially. Having shelled out billions of dollars for UMTS (Universal Mobile Telecommunications System) licenses in major European markets, they face problems raising the money needed to build those networks. One idea making the rounds is that multiple operators could share the same infrastructure. There's no reason four companies, for example, should build four separate sets of transmission networks in a given country. Why not build fewer base stations, masts, and antennas, as long as there's enough capacity to handle everyone's customers? Why not indeed? Because, say advocates for telecommunication users, too cozy a relationship between different operators can lead to less competition, and ultimately to higher prices for users.
"A serious concern of users is that (European Union) Directorate General Competition has documented a tendency amongst the operators to show collusive behavior. Network sharing appears to be both a further example and a means to yet more of that behavior," said the International Telecommunications User Group (INTUG) in a statement. By and large, everyone agrees that sharing the sites where transmission antennas are set up -- from rooftops to church towers to lampposts -- is a good idea, given rising costs, political opposition to more clutter of the landscape, and unresolved questions about the potential health hazards of wireless phone signals. It's sharing the electronic gear placed on those sites that starts to raise questions. "Right now there are some 18,000 mobile telephony antennae sites in the U.K., two-thirds of which are shared," said David Harrington, director general of the Communications Management Association (CMA), a group of U.K. business communication users, in an e-mail response to a reporter's questions. "The estimate is that a further 9,000 will be needed for 3G in the next two years. The industry very much wants to share locations, because planning laws and health fears in the U.K. are making it increasingly hard to find new sites ... However, once you begin to talk about sharing antennae then you're in a different ballgame, involving electronic, rather than real estate, infrastructure sharing -- which might or might not be seen as being anti-competitive." It's up to regulators to draw the line, of course -- and they insist their primary concern is protecting consumers. In sparsely-populated Sweden, for example, license conditions allow operators to share infrastructure outside major metropolitan areas, while building separate networks in the cities of Stockholm, Gothenburg and Malm. But some observers say watchdogs in Germany and the U.K., where the license rules explicitly forbid network sharing, are relaxing their grip, in part out of a sense of guilt over the huge sums their governments raked in for 3G licenses last year. "I think the regulators have a slightly bad taste in their mouth because they extorted these really high license fees and their pet telcos now can't afford the services," said telecommunication analyst Bernt Ostergaard of Giga Information Group Inc. "One of the ways the carriers can meet the cost is to have this infrastructure sharing. Personally, I am very, very doubtful about the strategy, and I don't think they are giving us the whole truth here." The new head of Germany's telecom regulatory agency Regulierungsbehrde fr Post und Telekommunikation (RegTP), Matthias Kurth, raised eyebrows recently when he seemed to suggest license terms requiring each operator to build its own infrastructure could be relaxed. Kurth sees a "certain responsibility" to "help where we can," he said in an interview published in the newspaper Die Welt. RegTP technicians are currently checking where network elements can be shared without violating the terms of the licenses, he added. RegTP is expected to issue a ruling on the question by next month. "Obviously we're interested in network sharing," said one German wireless executive, on condition of anonymity. "The costs could be reduced as much as 40 percent." RegTP "has realized there's a possibility they may have to share sites as a result of the huge cost of acquiring licenses and rolling out network," said telecommunication analyst Paolo Pescatore of International Data Corp. "So I think the German government has realized that operators need a hand, but ultimately it has to benefit consumers." RegTP spokesman Harald Drr hotly denied the agency has softened its stance on network sharing; it is simply a matter of clarifying existing rules, he said. "It's absolutely not the case that we'll change the licensing terms. What we're doing at the moment is answering questions that the license holders have posed to us -- on the basis of the existing license conditions." Asked whether he could confirm that any license holders have sought the right to share electronic facilities, Drr would only say, "None of them have made any statement publicly to that extent, and I won't make any public statement on that count either." German media have reported that 3G license holders E-Plus Mobilfunk GmbH & Co. KG and Mobilcom AG are in talks about sharing UMTS networks, after E-Plus announced arrangements to share its second-generation GSM (Global System for Mobile Telecommunication) capacity with two holders of German UMTS licenses, MobilCom Multimedia GmbH and Group 3G, a consortium of Sonera Corp. and Telefnica SA. The sharing will allow the two providers to offer its customers GSM and GPRS (General Packet Radio Service) service in areas of the country where its UMTS network does not extend, E-Plus said. Asked about the alleged plans for UMTS sharing, E-Plus spokeswoman Catrin Glcksmann said, "No comment." She added, however, that concerns about collusion between operators "are completely groundless, because one of the goals is that, however we cooperate, there will be independent operators, where each offers its own products and services and they compete on attractive products and prices. The danger doesn't exist at all." Other license holders, including Deutsche Telekom AG subsidiary T-Mobil International AG, don't like the idea that the rules might be changed part way through the game. "There have been license regulations that have been known (since the time of the license auction last July and August), that clearly indicate every network operator has to have its own network. We think this is a regulation that should be enforced," said T-Mobil spokeswoman Andrea Vey. "Nevertheless, where it makes economic and environmental sense it might be reasonable for example to share sites," she added. But, she stressed, "We think long term it's an absolute must that there be differentiation between operators." An official at Vodafone Group PLC, which operates wireless services across Europe, including the U.K. and Germany, refused to comment on the record, calling infrastructure sharing "a touchy subject." The U.K. regulator, Office of Telecommunications, or Oftel, has had its share of inquiries from operators about the ground rules for network sharing, and published a set of guidelines meant to clarify the issue earlier this month. "Any infrastructure sharing arrangement would have to comply with the license terms," said an Oftel spokeswoman. "We'd look at any proposals on a case-by-case basis. Our main concern would be to check that the benefit to consumers would outweigh any potential disadvantages that could be brought about by the lessening of competition by any sharing of networks." Ostergaard is suspicious about the argument that network sharing will save money. "When the carriers say that infrastructure is really heavy on their investments, then I have to ask: why? Because I don't see infrastructure as nearly as large a component as the license fee, or indeed as the cost the users have to pay for terminals. The infrastructure is not the big cost item." Research in the U.K., he said, indicates the cost of GPRS network infrastructure is about $3.5 billion, he said. "If you break it down to cost per user, it might be around $100 per user. The phones are going to cost about $200, the license per user is about $500. They're focusing on the lowest-cost item." Network sharing, he said, is less about reducing costs than about reducing competition. "It makes eminent sense: if they can share the infrastructure, they close ranks." |
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