Thursday, 12 March 2009

Does network sharing make sense in a mobile broadband world?

Today saw yet another twist in the ongoing network sharing saga in the UK. Speculation is rife that Vodafone will soon announce that it is tying up with O2, forgoing its existing deal with Orange, who are allegedly looking to join up with T-Mobile and 3's MBNL project.

We can speculate on the reasons for changing partnerships. Possibly O2 was conscious of being the only one at the party without a date and so realised that some serious flirting was necessary to ensure it didn't go home alone. Alternatively, maybe they're conscious of 900MHz refarming and are realigning to accommodate that. The issue for me is whether the logic of network sharing is destroyed by the growth of mobile broadband.

In a voice/SMS-oriented market, network sharing makes total sense. MNOs want to cut costs and they've not really competed on network coverage for years. One operator's 99% population coverage is much like another's. So it makes sense to pool resources and compete where they can differentiate, e.g. propositions, price, customer service etc. This is particularly true in mature markets where growth opportunities are limited and there is significant pressure on cost.

In a mobile broadband market this is turned on its head. The service is so commoditised that network coverage and capacity are critical elements in the value proposition and MNOs must seek to differentiate themselves. If they are all using the same network(s) this becomes impossible.

The question is: can any single operator build up their network to such an extent that they build an unassailable lead over their competitors? It seems unlikely. The competition is unlikely to give up the chase. The capacity arms race will continue. As a result it will be very difficult to actually develop an effective differentiator. This limits the appeal of keeping a stand-alone network, particularly as network sharing will bring significant benefits in network economics.

So the conclusion must be that even with the growth of mobile broadband, network sharing is a logical choice.


  1. A logical result of this is that we don't need multiple networks anymore. One network farming out all the spectrum could be/would be more efficient. ;-)

  2. Well, pretty soon there will only be one bank, owned by the government, so why not mobile too?

  3. I'm curious how you reconcile "Orange are allegedly looking to join up with T-Mobile and 3's MBNL project." (Managed by Ericsson) and "Orange has outsourced the running of its U.K. mobile networks to Nokia Siemens Networks"

    That souns like you're mixing up NW Sharing and site sharing which are 2 completely separate issues with regard to operator independence!

  4. I see what you mean. I've rather over-simplified the situation to introduce the topic I wanted to discuss: the validity of network sharing at all.

    What's for certain is that the future will consist of a complex web of different inter-related agreements between MNOs seeking to reduce their costs without forgoing their ability to differentiate.