Outsourcing: the in word for 3G operators - Industry Trend or Event

CommunicationsWeek International, Oct 23, 2000 by Joanne Taaffe

Outsourced networked services, including switches and basic station facilities, could third generation operators' time, money and staff.

Outsourcers are coming to the rescue of third generation (3G) mobile network operators. Any 3G operators who are pressed for time, staff and money will be offered outsourced network services, running from radio frequency planning to backhaul.

Crown Castle International Corp (CCI), of Houston, Texas, the services of which cover most aspects of designing, building and operating mobile networks, hope that the roll-out of 3G will boost demand for managed cell-site colocation and create a new market for shared 3G mobile switches and base stations.

But analysts say that even though operators' minds are now turned to developing new business models, they should not neglect their core business. "Network operators would do best to develop value-added services [with an eye to spinning them off], while retaining full control of the network," said Philip Taylor, senior analyst, wireless mobile, at Yankee Group Europe, of Watford, England.

Operators may, however, be able to gain cost reductions through outsourcing aspects of their network construction without losing control, he added. "Colocation is going to be key," said Taylor.

Whereas second generation operators may now share cell locations, they do not share equipment, said Mark Dismorr, director of engineering services, telecoms, at Warwick, England-based Crown Castle U.K.

Some mobile equipment manufacturers are developing 3G switching equipment and base stations that will enable the sharing of 3G switches and base station facilities, he said.

Cell site management and colocation could reduce the cost of network buildout, help allay environmental concerns over a proliferation of ugly cell sites and provide access to prime locations in areas where the number of desirable sites is limited, especially in cities. Sharing switching equipment and base stations between operators could reduce costs even further.

Savings

CCI, whose European customers are in the United Kingdom, claim that 3G operators could save hundreds of millions of pounds through a combination of site colocation, shared backhaul, shared infrastructure and outsourced maintenance over a large number of sites.

Outsourcing the planning, building and running of a network, and sharing switching equipment, is a relatively new model for many global systems of mobile (GSM) operators, who in the past have competed on the basis of network coverage.

"They like to compete on coverage," said CCI's Dismorr. "But they're really competing on quality of service, service offerings and tariffing."

Whether 3G operators bite, however, depends on what they consider to be their core business.

"We would look after the site," said Dismorr. "All [the operator has] to do is get customers on to that network... and collect call data records from the switch."

However, once 3G operators have built up a healthy customer base for their services and are beginning to feel a squeeze on capacity, then efficient network operation may once again become a differentiating factor.

"[Currently] the focus on network operation is purely on cost reduction," said Henry Harrison, mobile analyst at Schema Limited, of London. "Once capacity becomes an issue, network operation could be a source of competitive advantage."

Market share

CCI acknowledges it is unlikely to win an entire national market for its services. GSM operators would be able to extend their existing cell sites to accommodate 3G switches and therefore would need fewer new sites than new entrants.

However, CCI's shared equipment would have to be interoperable with the rest of an operator's network.

"They're never going to sell 100% of an operator's site needs," said Schema's Harrison.