With news last week that Telstra has begun switching on its 5G technology, Australia seems set to be using the fifth generation of mobile technology before the end of the decade. However, new research from Axicom suggest the path to 5G may be a shared one.
The report, How shared infrastructure costs offers carriers a way forward for 5G, contends the considerable cost requirements of 5G infrastructure may make it necessary for mobile operators to go Dutch on 5G investments.
- Download the full report: How shared infrastructure costs offers carriers a way forward for 5G
While sharing mobile infrastructure is not commonplace in Australia – Telstra competes largely on its network reach and quality for example – there are several examples in the research of overseas operators teaming up to deliver services for a mutual benefit and unique 5G challenges may mean it is prudent to do so.
The notion is more appealing for Australian operators with regulation mandating that the valuable 5G spectrum be more evenly divided than was the case with previous generations of mobile technology.
Costs to bear and share
According to the Axicom research, the signs are that “5G will have a bigger impact on the cellular industry and those it serves than any of the earlier ‘Gs’”. However, 5G will “require massive investments”, according to the report, which cites McKinsey predictions of network-related capital expenditures increasing by up to 60 per cent by 2025.
5G will require a lot of new infrastructure. Things like small cell towers, base station transceivers, data centres and optical fibre. Each requirement expensive and a significant upgrade from existing infrastructure.
With considerable potential for 5G use cases but significant upfront costs, Australian operators would be well served to learn from other examples of infrastructure sharing, according to the report.
Where sharing has worked
McKinsey and Company describes 5G network sharing as a “key lever to reduce cost and make 5G deployments feasible”. Noting this claim, the Axicom report reveals several instances where mobile network infrastructure has been shared in the past.
Chief among them is the example of Brazil’s four largest mobile operators teaming up, in two separate agreements, to deliver coverage in areas hosting football matches during the 2013 Confederations Cup and the 2014 World Cup.
Regulators allowed the deal under the proviso it would improve regional coverage and would not harm competition, according to the report. The partnerships improved operational efficiencies and allowed operators to deploy infrastructure in smaller regional areas, according to the report.
One of the agreements, between operators Vivo and Claro, was so successful that the shared approach to cell sites more than double from the initial agreement.
“Today, the shared network of Claro and Vivo covers 5.6 million people in rural areas. From the government’s perspective, the benefits were twofold: first, it accelerated the provision of mobile services; and second, it increased service level competition,” GSMA reported.
“The deal effectively increased competition by bringing two operators to areas where otherwise there would only be one — the economic potential in these areas being too low for a second operator to enter the market deploying new infrastructure.”
By 2017, the agreements produced 4G coverage in 309 Brazilian cities, according to the Axicom research, which also cited instances of successful infrastructure sharing in China and South Korea.
In South Korea, 5G infrastructure costs are being shared through a government led initiative which is expected to save over one billion dollars over the coming decades, according to the South Korean ministry.
There are salient lessons here for Australian operators, according to the Axicom report. But minimising or sharing costs will not be the sole determined of success and 5G market leaders will likely be the ones who are most creative and customer centric, according to the research.
About the author
Andrew Birmingham is the director of the Which-50 Digital Intelligence Unit of which Axicom is a corporate member. Our members provide their insights and expertise for the benefit of the Which-50 community. Membership fees apply.