Sharing 3G Infrastructure -- and Pain

The German government has approved a proposal to allow telecoms to pool their costly resources. Much easier said than done

Mobile operators hoping to cut costs by sharing infrastructure for new third-generation (3G) wireless networks may soon end up sharing some headaches as well. A June 5 decision by the German telecom watchdog, RegTP, could add an entirely new level of complexity to a market already complicated enough -- technically as well as financially.

In a startling about-face, the German government has agreed to allow the six owners of 3G licenses to share not only sites and towers but also radio-access technology -- the most expensive component of a mobile network. By using the same equipment -- such as transceivers, which send and receive signals, and radio network controllers -- the operators hope to trim their infrastructure buildout costs by as much as 40%. Estimates for constructing the infrastructure run as high as 50 billion euros.

"We are not changing the license conditions, nor are we backtracking on network competition," German regulator Matthias Kurth said in Bonn. "We just want to take advantage of new developments in radio-access technology that would allow sharing of infrastructure without operators having to relinquish control of their operations or divulge commercially sensitive customer data."


  3G services, to be rolled out in Asia and Europe over the next three years, will allow mobile-phone users to surf the Web, view video clips, and download large data files at speeds about 30 to 40 times faster than current digital phone technology. The prospect of tapping into this new high-speed mobile data market, projected to top $300 billion in revenues by 2010 according to industry group the UMTS Forum, has prompted telecoms in Europe to spend more than $140 billion on licenses alone.

Against this background, Germany's decision would seem to ease the financial burden of the debt-ridden operators. It may -- but not without some effort. Companies will need to satisfy rigid conditions set by the government. For instance, any sharing of radio base stations and network controllers will require separate management of transmission, reception, and control signals. That, in turn, will require sophisticated technology that doesn't exist. Vendors say they'll need at least a year to develop it, and then there's the question of how well it will work.

What 3G operators don't need now is more complicated technology. Calling problems forced Japan's NTT DoCoMo to announce in May it was delaying commercial service by at least six months. Managing power consumption in base stations, warns Virtyt Koshi, senior analyst at Ovum Ltd. in London, could be equally tricky, particularly for video service. "Depending on the level of interference, a video call could use all of the energy in [a cellular area]," he said. "So whose customers get served?"


  Another challenge: How to share equipment, if most operators are buying gear from different vendors? Infrastructure sharing, experts agree, works best if everyone is using the same equipment. "I think this could be a real stumbling block for operators, especially those receiving vendor financing," says one government official who wished not to be identified. "I don't think they're going to have a lot of flexibility."

If these headaches weren't enough, Europe's largest mobile operator, Vodafone, has threatened to sue governments that allow infrastructure sharing. And there you have it: Costly litigation providing the final component for the perfect telecom migraine.

By John Blau in Bonn

Edited by Douglas Harbrecht

    Before it's here, it's on the Bloomberg Terminal.