The case for sharing 3G infrastructure - Industry Trend or Event

Telecommunications, Jan, 2001 by Matthew Secker

LONDON -- Crown Castle International, an independent owner and operator of shared wireless communications and broadcast infrastructure, has claimed that sharing 3G infrastructure could help an operator reduce its network costs by as much as [pound]1 bn ([epsilon]1.64 bn).

"If you take Vodafone as an example, they paid [pound]5.96 bn ([epsilon]9.78 bn) for licence B in the UK," says Jonathan Davies, director of finance for Crown Castle International. "This represents [pound]102 (E167) per population. If you assume that Vodafone will have a 50 per cent market penetration of 3G, and a 20 per cent market share, Vodafone will have a 3G licence cost of over [pound]1,000 ([epsilon]1,640) per subscriber. This is a major challenge for operators, because they will have to convert new services into new revenue streams," says Davies. "But it's not all bad news. Our research shows that there are factors which may mitigate these high costs."

Crown Castle claims that operators can do this by utilising existing network infrastructure and sharing maintenance resources. Davies advises operators to compete only at the services level and not over infrastructure. "Duplication of investment at the network facilities level does not promote efficient allocation of resources," argues Davies. "One standalone UK network, for example, might cost over [pound]2.8 bn ([epsilon]4.6) to construct with a [pound]450 m ([epsilon]738) per year operating cost. A shared network can significantly reduce this number. For example, if you assume that there will be ten million subscribers by 2007 and a 98 per cent coverage for 3G in the UK by mid 2008, we have calculated that shared 3G infrastructure could save licence A or B holders as much as [pound]1 bn ([epsilon]1.64 bn) each."

By basing its findings on existing shared 2G networks and forecast projections, Crown Castle claims that licence A and B holders in the UK can make a saving of [pound]850 m ([epsilon]1,394 m) in infrastructure expenditure, and a saving of [pound]150 m (epsilon]246 m) in operating costs -- similar savings can also be made in other European mobile markets according to Crown Castle.

What's more, as the argument goes, this will have a significant impact on the 3G business plan as UK operators can break even in 2008 -- an estimated year and a half earlier than operators with unshared networks.

"Of course Crown Castle would say that shared 3G infrastructure is a good idea because that is its speciality," says Nigel Deighton, research director, Gartner Group. "But it is true to say that a shared infrastructure will mean that operators can get to market quicker -- and the sooner they do, the better for them and their shareholders."