25% cost of ownership reductions by sharing RAN and backhaul with another partner
Mobile operators in the more economically-challenged European countries will not be able to make "massive" LTE deployments unless the economics of rollout and operation are radically changed, according to Eduardo Duato, CTO of Orange Spain.
Those changes include a shift to active RAN and backhaul network sharing, as well as new deployment models from the vendors.
Duato said that even though LTE is 100% more spectrally efficient, and is 30% cheaper in total cost of ownership than 3G, it is still not cheap enough to enable operators to invest with confidence in "massive" rollouts.
"The the trick of LTE is that if you are going to try to monetise LTE services, it's very unfortunate but you have to do a massive investment. It doesn't work to do only Barcelona and Madrid. We keep doing calculations on how to monetise this service. Mobile broadband revenues are falling faster than costs, there is continuous margin reduction, signalling traffic is a fixed fee. We need co-operative architectures to reduce the impact," Duato said.
One solution that Duato floated is to deepen current network sharing initiatives beyond passive site elements to actual active RAN and backhaul sharing. Duato estimated that two operators sharing the RAN and backhaul networks on a 50-50 basis could each save 25% of the TCO of the LTE network.
"My demand to this audience, if we are going to bring this technology quicker to the users, is that we all try to work out new and efficient ways of rollout. We need help on this rollout from those in administration and the equipment suppliers to support new features that make the rollout possible" Duato said.
One of the reasons for Duato's call is his view that predictions of LTE data revenues are too aggressive for a market like Spain. An Ovum forecast of 7m LTE users in Spain by 2015, and 14.7 m by 2016, was "over-optimistic", he said.
"It has been forecast that LTE be 25% of total data revenues by 2016. But here in Spain growth it is not that good, in fact it is very bad, so we forecast that in spite of the money we have paid for frequencies and the possibility for refarming, the growth is not that good."
Duato added that operators will not be able to extract any more cost reductions from equipment suppliers ("They are already in dire straits") or from the fabled OTT providers ("We have to be realistic it will be almost impossible, even though we may attempt to profit from OTT services"). That only leaves operators' own processes as a potential source or margin improvement – hence the need for network sharing.
He was less impressed by claims that LTE would bring operational savings. ""We are not so confident about the cost of operations, because we have heard this several times before and in fact things always seem to get more complicated for the operator," he added.
Asked by InformaTM head of research Mark Newman if Orange would consider handing back spectrum as a result of being allowed by the regulator to share networks, Duato said the operator would consider spectrum pooling, amongst operators – especially in rural areas. "In urban areas, we need all our spectrum," he added.
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