Page 78 - Trends in Telecommunication Reform 2016

alternative network is being deployed. In fact, the separate joint ventures. There also may be
very threat of that strategy being used may deter benefits to bringing in third-party involvement
competitors from co-investing in the first place. – for example, either a third investor or an out-
sourced management company. The success of the
In some markets, regulators have mandated towerco model is partly due to the neutrality that
network sharing in fixed networks. Planning and an unrelated third-party management company
environmental regulations can also drive network can provide. Neutral or independent governance
sharing/co-investment by reducing the amount of means that a subset of decisions may be entrusted
passive infrastructure that can be built. This will to the joint venture or independent manager
increasingly be the case in urban areas for tower without requiring negotiation between the sharing
structures – but also potentially for underground parties. The need to reach agreement with the
deployment, as well. other operator over investment and deployment
issues is likely to consume time and generate
disputes that may threaten the success of the
2.4 Obstacles to Network Sharing venture.

Reasons why there is not more network sharing
and co-investment 2.4.2 Partner selection

Despite the apparent cost reductions and other Having a compatible sharing partner will alleviate
benefits of network sharing and co-investment, it’s some of these concerns. The selection of a
worth considering why they don’t happen more compatible partner involves considering whether
often and why many of them don’t seem to last. the prospective partner has the same strategies
The commercial dynamics of sharing are complex, for network deployment and investment. This
and governments looking to encourage or provide is particularly the case with mobile network
incentives for sharing arrangements need to keep sharing. When two mobile operators have similar
in mind the various obstacles, which are explored networks, neither party is likely to have a material
in the following sub-sections. advantage over the other in entering into the
arrangement. If a large operator and a new market
entrant are considering a network sharing deal,
2.4.1 Loss of independence however, there can be real difficulties in reaching
agreement on key issues such as valuation and
By definition, a sharing arrangement means allocation of benefits.
an operator will no longer have full control
over network strategy and investment. A fully
independent network operator can dictate the 2.4.3 Difficulty in reaching agreement
direction of its network development, roll-out
strategies and vendor choices. Network sharing It is never easy to reach agreement on a network-
involves ceding some of this control, in return for sharing deal with a competitor, due to the healthy
the benefits that are available. This sometimes distrust that each management team has of the
manifests itself in concern that the sharing other. Shareholder support can be important in
partner (who is also a competitor) will stymie new getting a sharing deal across the line, including
competitive developments in the shared network incentives for management to put in place and
that the other operator wishes to make. For a then implement the arrangement.
sharing deal to succeed, the operators must reach
agreement on where full independence needs to A network sharing deal will often involve
be maintained, where agreement is required with transferring existing assets into a joint
the sharing partner, and where operational control venture structure (or to a third party) and
may be ceded. decommissioning some sites. Disagreement over
asset valuations in such cases is one of the main
Concerns over loss of independence mean that reasons why non-green-field network-sharing
neutral or independent oversight is critically deals do not proceed. Negotiators also need to
important in network-sharing transactions. This resolve transfer pricing issues and service levels
is one reason why parties often create new, for ongoing services, as well as vendor strategy.

60 Trends in Telecommunication Reform 2016