One gigabit per second at fixed locations for all users and 100% 5G population coverage by 2030 are the goals the European Commission (EC) has set so the continent achieves digital transformation. Delivering on this goal will require significant investments at a time when telco valuations are low – how can the sector attract the necessary capital? In light of recently raised concerns about the financial situation of the telecoms sector, revenues, investment capabilities, and the attractiveness for investment in conventional mobile network operators, how can the wider digital infrastructure industry enable the required investment. An esteemed panel formed of representatives from the European regulator (BEREC), the European Wireless Infrastructure Association (EWIA), and four multi-country towercos debated the latter at a policy session at TowerXchange Meetup Europe 2024.
Addressing some of the sector challenges
Reducing network deployment costs, like civil engineering as well as administrative costs, is addressed by the Gigabit Infrastructure Act (GIA). The regulation which was passed at the end of April 2024 while TowerXchange Meetup Europe was taking place replaces the 2014 Broadband Cost Reduction Directive, and seeks to accelerate the roll out of advanced high-speed networks across Europe and encourages the shared use of existing infrastructure. Attempting to set some rules and providing opportunities including for towercos (but also providing some constraints to them according to many), the GIA will come into effect in 2025-26 in the different member states.
According to Vantage Towers and ATC Europe the benefits that the GIA brings for towercos include new access rights regarding utility networks (electricity, gas, and water assets). However, the GIA’s actions predominantly benefit fibrecos and not towercos. While new access rights to public authorities’s buildings improve towercos’ access to rooftops in urban areas, this creates new access obligations for towercos and regulated access conditions and access prices, which towercos see as constrains. According to the towercos present, regulating access conditions to network infrastructure, which is the core of towerco day-to-day business operations, affect towercos’ business case and investment capabilities.
Towercos agreed the GIA having a big potential to speed up permitting to help them reduce time to market with the so-called tacit approval mechanism with a four-month deadline, but it doesn't solve all related issues that are associated with permitting procedures. Towercos will still need to deal with local issues when it comes to historic buildings and environmental aspects as it’s out of the GIA scope and that will continue.
Being highly dependent on local state-level enforcement, will still be in towercos’ hands to deal with local authorities as they’ve done it so far.
In terms of encouraging investment, ATC Europe shared that towercos increase the investment capacity of the European digital sector, which is necessary to achieve the EU connectivity objectives. In acquiring towers, towercos create a capital release so that MNOs have more resources and more time to devote on ensuring coverage and increasing network quality. In addition, towercos bring other advantages, such as contribution to different stakeholders’ sustainability objectives and agendas. And they also help achieve the densification required for 5G.
Wireless Infrastructure Group (WIG) stressed that the towerco business model is a much better understood and a much more prevalent model now. Towercos offer efficiency by having a higher tenancy ratio than MNO-controlled towers which means more connectivity. Although the benefits are better understood now, WIG stressed that there is no need to regulate towercos as that will stifle future investment.
Working towards common EU connectivity objectives
On stage BEREC acknowledged the two main ways towercos support the EU’s connectivity objectives. The first, operationally, is offering passive infrastructure sharing and all the benefits that come with it. Second, financially, towercos increase the valuation of the carved-out assets, and in this way, they inject capital into the sector and enable a reduction of leverage.
Towercos see themselves as enablers of Europe’s digital transition. Following from their business model, being neutral hosts and having infrastructure sharing at the core, leads to fewer resources and energy being used, and so a lower total cost, agreed ATC Europe from the stage. All these show that until 2030, which coincides with the European Union's connectivity deadline, towercos will be major contributors to energy efficiency and to a saving of up to four million tons of CO2.
However, BEREC’s Spanish representative Jordi Canadell pointed out that there are limitations on the impact of towercos because towercos are driven by the mobile operators. The demand for coverage and densification is driven by the demand expectations of MNO network planners. MNOs are the ones who finally choose the coverage and the densification of the networks and if they do not see a return on investment they will hold back investment. Towercos lowering the cost of deployment helps, but towercos cannot influence consumer demand and willingness to pay.
There are risks. Theoretically, if new network deployment by a neutral host robs an operator of the opportunity to win business by offering a better network, that could bring to a desensitisation of operators to demand: they would stop deploying and densifying because competition on quality is no longer sustainable. In the future, in case of potential unreasonable conditions, it will be important for operators to be able to constrain these unreasonable conditions. The regulator suggested this could be solved by other towercos competing or by self-initiating of infrastructure building, something which we have not seen yet.
Next steps
The GIA aims to remove the existing fragmentation and harmonise policy implementation among the EU member states.
When discussing implementation of the GIA as it becomes reality by the end of next year, towercos have asked policymakers not to overburden the companies in certain areas such as sustainability, reporting and other areas. To come along with smart regulation, not to over enforce, and not to fix what's not broken. They’ve stressed towercos don't need to be price regulated because their incentive is to share their assets.
Towercos request that one-size-fits-all solution should not be taken for the different companies taking part in fulfilling the Digital Decade targets. With EU’s 27 member states, there are 27 plus permitting regimes due to national as well as municipal and regional legal frameworks.
BEREC acknowledged it will participate in the process of implementing GIA by providing guidelines together with close cooperation with the European Commission.
Some of the key elements are coordination of civil works because that makes deployment easier. Not only allow investment return of investment risk taken but also make it easier for deployment. Depending on the national circumstances, cost allocation and third-party access will also be considered. In addition, reducing bottlenecks not only on street level but also inside buildings is what will also be worked on by regulators.
Criteria for dispute resolutions will be included in the guidelines that BEREC will work on for the coordination of civil engineering works.
