Single 4G network makes sense

OPINION: One of the highlights for the ICT industry this year was surely the launch of two new mobile networks, XT and 2degrees.

Competition in the $2 billion mobile market has become increasingly fractious as more operators and resellers seek a share of a shrinking but still very profitable pie.

Consumers have been bombarded with special offers and promotions. There have been claims and counter-claims over whose network is the biggest, fastest and most robust.

It seems hard to imagine that amid the rivalry, consideration could be given behind the scenes to doing away with competition between mobile access networks and building a shared 4G network that could be jointly owned by the three carriers. But it makes perfect sense.

From an economic perspective, a single shared network could deliver more value for less than three same-technology networks. Not only could the same mobile coverage be provided using fewer, short cellsites, but the improved contention ratio would mean radio spectrum could be used more efficiently – equating to faster average connection speeds.

In addition to reduced visual pollution, a shared network would require less power to run, reducing carbon emissions. Mobile phone companies would still be able to offer their own pricing and services, and the risks to innovation are few.

Up until now, investment in the industry has been driven by a game of leap-frog, as standards in the mobile industry have yet to settle. Telecom had to invest $574 million in XT because the CDMA technology it had previously relied on was becoming the "Betamax" of the mobile world. Vodafone was forced to invest more in its network as XT was jumping to the latest iteration of UMTS technology.

But from 2013 in New Zealand, and earlier overseas, carriers will converge on 4G technology LTE, using spectrum that will be freed up by the closure of analogue television. 4G networks will essentially be the same and are unlikely to require significant further investment for 10 or 15 years. As and when it is time to move off 4G, it will be to a new common-standard dominant overseas – whether or not LTE networks are shared. The challenges are regulatory. If the carriers club together to build a shared network, how would the joint venture be prevented from charging a monopoly rent? On what terms should other retailers be able to access the infrastructure?

These issues are not insurmountable, especially if regulators were empowered to regulate directly for the outcomes that would need to be achieved.

Sharing – and doing more with less – has been a theme in the industry this year. The recession has encouraged a form of pragmatism that will hopefully not fall by the wayside as and when the upswing comes.

- © Fairfax NZ News