At the TowerXchange Meetup Asia, The Future Network held a panel focussed on breaking down barriers when it comes to extending coverage into rural areas cost effectively. From new business models and technologies to changes in regulatory frameworks and financing, we examine the steps that need to be made in order to bring connectivity to the unconnected.
The pressure being felt by MNOs globally is widely documented; data usage continues to grow exponentially thus necessitating increased investment in networks, capex costs continue to increase, competition from OTT players and new market entrants is on the up introducing further pricing pressures and all the while revenues continue to decline.
Whilst rural coverage needs to be improved, MNOs lack investible dollars and those investible dollars they do have usually get more bang for their buck in urban areas. The demand for data is there in rural areas, but a viable business model still needs to be developed; APRU in rural areas is lower and due to the remote nature of sites, opex costs tend to be higher. With the lack of specialised low cost base stations, capex costs remain high and backhaul remains a challenge with fibre not being present and microwave being costly. A host of different business models are starting to be developed which gives the impression that we are on the cusp of a breakthrough in delivering low cost rural coverage, but regulatory issues still need to to be ironed out and business models honed before wide scale deployment becomes a reality.
Sharing is fundamental to achieving cost effective rural coverage and towercos are experts at this. In the case of rural environments, the deeper the sharing the better, with sharing at the RAN level being important to achieve the desired economics. RANsharing requires close cooperation between MNOs and also requires a shift in mindset from regulators as third parties become more closely involved in the management of the active side of the network.
Sharing of spectrum represents a step further in achieving new cost synergies but there has, to date, been a lot of push back from the regulators. Whilst regulators cite that their raison d’etre is to drive towards an improved communications service to all in the country, one cannot overlook the fact that spectrum represents a valuable revenue source for them. To enable spectrum sharing introduces anxiety amongst regulators who fear a cut to a major source of income. To what extent the regulator is incentivised to enable spectrum sharing remains in question.
Lower cost technologies are required to compliment sharing and bring further reductions to rural network rollout. Whilst the major OEMs may not offer low cost solutions, the potential exists to go directly to the component manufacturers to access lower cost technologies. Facebook represents one such party which has eschewed the conventional products on offer and has developed their own routers and switches in a bid to adopt a more cost effective solution. Whilst many lack the R&D capabilities of an entity such as Facebook, their strategy serves as a valuable lesson to look outside the standard solutions and suppliers in the market. By making a fundamental change in the infrastructure used, observers believe that savings of 40-50% can be achieved.
As well as the technologies for rural coverage needing to be cheaper, it is important that they are simpler than many of their counterparts used in urban markets. When it comes to rolling out macro urban networks you will often find that you have a core network engineer, a RAN engineer, microwave experts and various other parties. In order to keep costs down for rural deployment, one must use local service providers rather than larger players and their thicker profit margins. Where you have been able to employ several experts to rollout a macrosite in an urban area, the rollout of a microsite in a rural setting becomes a lot more cost effective when only calling upon the services of one expert.
Achieving rural coverage cost effectively also requires companies to think outside of the box and examine innovative solutions which look very different from those that we have become accustomed to in a traditional mobile setting. In the case of public safety networks, one such solution has been the use of balloons which are tethered by a single cable. Inside the balloon there is the base station, core network and everything that is required to power the unit. The balloon works like a satellite and feeds back to the core network. Whilst not all solutions will be successful, and the business model remains as important as the technical capability, creative ideas will help to drive towards innovative solutions.
Designing rural networks that will stand the test of time requires a thorough grasp of next generation architecture requirements. Users that are coming online for the first time today have a very different mindset to those who have enjoyed connectivity for a number of years. Connectivity is viewed through the lens of social media and as such, there is an argument that WiFi could serve as a suitable alternative to GSM and its expensive spectrum. Whilst the suggestion scares MNOs, it is a discussion that needs to be had and a dynamic that needs to be understood. Keeping in mind the way that different users see connectivity, and how that is going to evolve, needs to be carefully ingrained in a rural connectivity strategy. MNOs as we know them today may not be the key players in years to come; already we are starting to see an emergence of white label wholesale players delivering connectivity over WiFi under a model where content providers pay.
In addition to looking at infrastructure sharing and innovative technology and business models, consideration also needs to be given to how the rollout of rural networks should be financed with lower cost financing available if you look in the right places. Social impact investors, whose KPIs are based on metrics beyond just financial returns may offer one such lower cost of capital. Enabling connectivity and the benefits that it brings to rural communities ticks one other box when it comes to the qualities that investors are looking for. Annually, over $150bn of development finance is spent on issues such as healthcare and education. MNOs need to improve their dialogue with such development finance institutions and look for solutions that bring both economic and social benefit to communities whilst providing commercial returns to the business.
Finding a solution to the rural connectivity problem is multi-faceted and one that requires creative thinking and pioneering business models. The Future Network, in cooperation with TowerXchange, looks forward to facilitating the interaction and stimulating the dialogue that is essential to driving forward real progress in the field.
