RANsharing: opportunity or threat?

RANsharing could be the next generation of infrastructure sharing, unlocking even greater capex and opex efficiencies than tower sharing. In order for the adoption of RANsharing to progress as swiftly as possible, every stakeholder should benefit from those efficiencies.

For example, independent tower companies have paid US $billions to acquire passive infrastructure from MNOs. The success of the towerco business model is predicated on tenancy ratio and tower cash flow growth. If antennas are to be shared instead of multiple antennas added to towers, where does that leave the towercos? This article explores different RANsharing business models, and seeks a win-win scenario where MNOs, towercos and equipment manufacturers all benefit from active infrastructure sharing.

There are different architectures, defined and ratified by 3GPP, representing varying degrees of active infrastructure sharing.

• Multi Operator RAN, or MORAN, is a simple scenario without spectrum sharing

• Multi Operator Core Network, or MOCN, is a scenario in which both spectrum and RAN are shared

• Gateway Core Network, or GWCN, is where the both the RAN and the core network are shared

Active RAN sharing technology has already been standardised by 3GPP and commercial implementations have been successfully launched to exploit real cost savings and optimised coverage and capacity performance. For example, Analysys Mason supported an MNO to examine different RAN sharing models in Asia. Analysys Mason undertook TCO analyses of different technologies to define a costed business case and a technical implementation plan, leading to the creation of a RAN share joint venture between two established MNOs. This RANsharing joint venture has been running successfully for circa 12 months.

Antenna and radio technology has progressed rapidly in the last few years, such that a single antenna can be multi-band or broadband, so a single unit can serve 700MHz to 2.6GHz spectrum. While engineers report that such antenna can be tough to fine tune and optimise performance, if the operator implements Software Defined Radio (SDR) within the NodeB or eNodeB, then they can dynamically allocate spectrum across multiple bands to multiple service providers therefore cost-effectively maximising the usage of what can be scarce and costly pooled spectrum.

Not all telecommunications regulators permit active equipment and spectrum sharing. In situations where there would be a monopolistic RAN share market situation, then regulatory instruments may have to be put in place to manage competition effectively. An analogy can be made with the copper access networks of incumbent fixed network operators where regulators have mandated accounting and/or physical separation of vertically integrated PTOs and introduced regulated pricing for wholesale access services e.g. BT Openreach in the UK and Chorus in New Zealand.

An almost 30 year old legacy of fragmentation in European mobile markets can make some stakeholders reluctant to explore RANsharing. However, European operators faced with flattening ARPUs in highly penetrated markets with minimal subscriber growth and forced investment to satisfy burgeoning data traffic demand are motivated to explore any strategy that can unlock significant cost savings potentially including RANsharing despite historical inertia.

In contrast, operators may be more willing to collaborate and engage in RANsharing in Africa. In Africa the prime incentive is again cost savings as well as the additional benefit of cost-effective and rapid coverage gains, but this time motivated by a need to make mobile communications more affordable and drive penetration rates by economically serving more low ARPU subscribers.

Especially in an emerging market context, where many cell sites are on unreliable grids or located off the grid, every kWh of load on a site matters. As base stations are updated with more power efficient next generation technology e.g. shared RAN, and dynamic power control, networks become more energy efficient, and sharing active network can have a multiplying effect on those efficiencies through power scale economies.

In a RAN sharing scenario single physical antennas can be shared by multiple service providers. In order to futureproof themselves against RANsharing, towercos should adopt a business model driven by usage, for example, the number of service providers using a tower, not only driven by the physical space those service providers need. Other physical design factors that need to be considered are the increasing use of tower mounted remote radio units that provide the MNOs with the benefits of reduced power and/or increase coverage as well as any typical tower mounted combiners, power amplifiers and the potential removal of point-to-point microwave equipment as fibre backhaul develops.

TowerXchange spoke to one African towerco which defines a tenant as “a standard amount of space and a standard amount of power.” This seems to be the prevalent approach; rental rates are defined by a standard configuration of equipment, with a rate card for non-standard configurations according to which specific equipment is hung on the tower, or it can be determined by a combination of wind load and vertical height. At the recent TowerXchange Meetup Americas, towercos spoke of adding frequency-specific language to their contracts, ensuring each additional tenant pays a monthly lease whether hanging new equipment or sharing existing antennas.

If they can agree mutually beneficial contractual terms with MNOs, towercos could become even more investible as a result of RANsharing as the load and space required on a tower is obviously less for a one shared antenna than for having three to four antennas doing the same job, freeing up finite capacity to sell to broadcast, Wi-Fi and ISP tenants.

Ensuring strict compliance with the agreed configuration of a cell site has always been an issue, whether between tenant and tower owner, or between tower owner and landlord, so mechanisms must be put in place to protect the tower owner from unauthorised RANsharing. One typical approach is to have a schedule in the tenancy agreement which governs access rights and processes, and site visitors (service provider) may have to be accompanied by the site owner (towerco), while there should already be strict guidelines to avoid wind loading or other design rule constraints. Towercos now need to be vigilant to ensure that the NOC is aware of which active equipment, as well as passive equipment, is on any given site. It is usually possible to tell whether an antenna is shareable by its physical appearance, but remote monitoring may be another option.

There seems to be no standard approach to lease pricing in the event of RANsharing, indeed there is no standard model towerco-tenant ‘industry best-practice’ contract, which would provide transparency in terms of what is acceptable and would bring mutual commercial and operational benefits to the towerco and service provider.

The motivation to transfer infrastructure assets from MNOs to towercos and their investment partners is clear when your consider, firstly, the immediate cash release for the MNO and secondly the differing RoI horizon expectations for each party. While specialist infrastructure investors readily incorporate towers into a mindset that typically invests in transport and mining infrastructure, and might calculate RoI over anything from 10-25 years, MNOs will seldom deploy capital unless the RoI horizon is within 3-5 years.

Analysys Mason recently conducted a project on behalf of mobile operator group to develop the business case and operational model to establish a green field towerco. The project considered the potential synergies of augmenting the business of an already established fibre-based wholesale service provider by offering a portfolio of managed active network services as well as traditional towerco services. However the challenge was to identify a complementary investment profile to add shareholder value and define the operational demarcation between the two entities considering the different technical skill-sets needed and customer requirements.

This illustrates that different investment models are attractive to different stakeholders and skill sets are not easily transferable between active and passive operations. In recent years MNOs have tended to move away from long-term investment opportunities by either setting up separate infrastructure entities, as in the Indian mobile telecommunications market, or by divesting infrastructure altogether through a sell and lease back arrangement to independent towercos that have a longer term investment view.

One other option for MNOs to minimise cost and to improve quality is to outsource, typically to the leading equipment vendors such as Ericsson and Huawei. In the last 18 months Analysys Mason has supported the strategy to outsource the network management of fifteen MNOs in both Africa and South America.

Assuming the towerco retains ownership of tower assets and that there’s a shared active RAN, with the established trend toward outsourcing managed services, could the shared RAN be outsourced to equipment vendors? And if O&M on passive and active equipment is subcontracted to the same local firms, how does it add value for a new layer, making another margin, to be added to the ecosystem? And what should be the dynamic between equipment vendors, towercos and service providers? Does the OEM become the de facto anchor tenant, and in cases of shared antenna equipment, sometimes the sole tenant? If everyone is seeking to decrease costs yet make some margin, efficiencies must be shared so there is an incentive for all parties to engage in RANsharing.

Marco Cordoni, a Senior Partner at Analysys Mason with considerable experience of advising MNOs and towercos on tower transactions and strategy, will be speaking at the TowerXchange Meetup Africa, taking place on October 20 and 21 in Johannesburg.