UK: There´s a Light in the Darkness…

Last Updated: 28 October 2002

Because the telecoms sector is best served by a predictable environment, licensing conditions should not be changed. This was the sentiment expressed by the European Commission back in June and whilst not everyone agrees with it, it is clearly a view shared by the German telecoms regulator, RegTP.

Licensing requirements

Whilst a number of national regulatory authorities have changed the conditions for 3G licences - in Spain and Switzerland, for example, the date for roll out has been put back, and in Italy the length of the licence has been extended - RegTP announced on 27 August that the conditions upon which 3G licences were issued in Germany will remain unchanged notwithstanding that the price paid in Autumn 2000 for Germany's six 3G licences has obviously contributed to the financial pressure which operators now find themselves under.

This will not be good news for the smaller 3G incumbents in Germany, E-Plus and O2. Where Vodafone's D2 and Deutsche Telekom's T-Mobil stand on the issue is less clear. Both originally opposed the "weakening" of any licence requirements, although Vodafone now appears to stand in splendid isolation as T-Mobil has decided to embrace the concept of infrastructure sharing. This change of heart followed RegTP's announcement of "interpretative guidance" of the licensing terms last year. This suggested that infrastructure sharing in Germany was not out of the question provided that networks remained "logically separate" from one another.

Infrastructure sharing

Infrastructure sharing has been the most significant safety valve through which even the less flexible regulators have taken the opportunity to release the pressure on operators. The European Commission has itself encouraged a more flexible approach with its preliminary approval at the end of August of the arrangements to share 3G infrastructure costs in Germany and the UK between O2's parent company, mmO2 and T-Mobile. The co-operation will involve sharing new and existing base stations, masts and antennae, and offering bilateral roaming on 3G networks in both countries. The operators will share an estimated saving of around Ł3 billion. No doubt O2 would like to forge a similar alliance in order to share the cost of constructing a 3G network in Ireland, the most likely partner being Vodafone. However, that operator has until now suggested that it has no plans to share infrastructure anywhere.

Implications of T-Mobile/mmO2 deal

Albeit in the form of a preliminary ruling subject to third party comment, the Commission has delivered something positive for 3G operators amidst the gloom currently enshrouding the industry. The Commission's stance on the T-Mobile/mmO2 deal acknowledges that the sharing of 3G network elements should result in significant cost savings for the operators and lead to quicker 3G roll-out, greater network coverage and offset some of the potential environmental problems caused by the necessary infrastructure for 3G. The Commission is aware that network sharing arrangements are under preparation in a number of EU countries and clearly favours such arrangements provided that there remains sufficient competition in the market to ensure that consumers have their fair share of benefits. The Commission has indicated that its competition directorate has been briefed to deal with any notified cases involving 3G infrastructure sharing on a priority basis.

The T-Mobile/mmO2 deal is the first infrastructure sharing proposal to be notified to the Commission and as such provides a useful benchmark for future deals. The arrangements for both Germany and the UK involve site sharing and the mutual provision of the national roaming facilities. The agreements also provide for the sharing of the radio access network but the Commission has reserved its position on this aspect until the operators decide whether or not to proceed with this closer co-operation. The agreements do not relate to 3G downstream services which will be provided to consumers, with respect to which the parties remain entirely independent of each other.

The Commission's preliminary view is that the agreements would be eligible for negative clearance under Article 81(1) and/or an exemption from the cartel prohibition under Article 81(3). The Commission is satisfied that any restrictions on infrastructure competition involved in the co-operation are compensated both by faster network roll-out leading to increased services competition and by other benefits such as the limitation of the environmental impact, as less infrastructure will need to be deployed. Neither agreement is exclusive and both generally allow third party site sharing and national roaming subject to limited exceptions. In addition, safeguards are in place to limit the exchange of sensitive information between the parties.

Network elements

Whilst with this decision the Commission has not pronounced on every aspect of network sharing, it is interesting to note that in a 10 September press release announcing its preliminary approval (IP/02/1277), the Commission ranks the network elements that may be shared between operators by the increasing degree to which the network is shared, or to put it another way, the decreasing degree of independence retained by the operators. Presumably this ranking therefore also indicates the decreasing acceptability of infrastructure sharing elements as follows:

  • site sharing, which ranges from sharing individual mast sites up to grid sharing (requiring a uniform layout of networks), and may include site support infrastructure, such as site support cabinets (SSC);
  • base stations (Nodes B), antennas and radio network controllers (RNCs), also known as radio access network (RAN) sharing, i.e. the initial transmission equipment;
  • core networks, including mobile switching centres (MSCs) and various databases, i.e. the intelligent part of the network;
  • the radio frequencies.

National roaming appears to raise fewer concerns since this merely involves the operators using each other's network to provide services to their own customers rather than sharing network elements as such. Following the period for third party comment the Commission's final decision "can be expected rapidly". In the meantime, the implications are that the Commission draws the line on permissible sharing of network elements just above what it describes as the intelligent part of the network.

The content of this article is intended as a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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