Open Access LTE Network: Intriguing but not without Pitfalls
However, such a network or small number of such networks would necessitate tackling and resolving satisfactorily a number of complex regulatory, policy, and business issues, some of which are reminiscent of the era before market liberalization. The success of such initiatives from the perspective of mobile customers will depend upon the application of intelligent and enforceable incentives and constraints on the behavior of the wholesale and retail players.
The best outcome would be realization of the potential benefits of mobile broadband technology deployed in wide channel bandwidths with healthy competition at the services level. The worst case would be a bureaucratically and inefficiently managed wholesale operator, passively or actively colluding with a handful of large services providers, thereby succeeding in stifling innovation at the services layer and leaving customers with no or few competitively differentiated offerings.
The idea of an open access or entirely wholesale LTE network is being entertained in a variety of markets from Kenya to the US. Interest in this extreme form of mobile network sharing is being stimulated by the scarcity of spectrum and the notably greater efficiency, i.e. higher capacities of emerging OFDMA-based mobile broadband technologies, of which LTE will be the most widely exploited, when they are deployed in much wider channel widths than previous generations of mobile systems.
There is an argument that at the level of mobile network infrastructure there is a natural monopoly or oligopoly in which only a small number of distinct networks can be economically justified. The attractiveness and justification for this finding is reinforced by a focus on ensuring competition at the level of services, which is after all what customers care about more than the details of the platform or platforms on which these services are delivered.
An additional technology development just emerging with substantial further improvements on the horizon that further increases the benefits of an operator having access to large amounts of spectrum (i.e. fewer operators within the spectrum allocated to mobile services) is carrier aggregation, both intra- and inter-band.
When – or if, since it faces a number of technical hurdles – carrier aggregation is fully commercialized, it will enable an operator to achieve significant benefits in terms of peak capacity, quality of service via load balancing, and efficient use even of some relatively small slivers of spectrum it may have acquired over the years.
Thus the combination of LTE and carrier aggregation (the latter applying to HSPA+ as well as LTE) in the context of rapidly rising demands for mobile capacity for broadband services and applications may create unassailable economic and performance advantages for an operator with access to amounts of spectrum that are substantially larger than its competitors.
It may be unreasonably difficult or even impossible for spectrum-poor competitors to overcome these advantages no matter how superior they are to the spectrum-rich operator in other aspects of the business. Regulators may therefore try to ensure that any differences in spectrum holdings between mobile competitors are not dangerously or anti-competitively large.
However, depending on the number of competitors legally and otherwise able to enter a market perhaps none of them will then acquire access to enough bandwidth to be able to deploy efficient and economical broadband networks and services to their customers. As a result users of mobile services will suffer from lower quality and higher prices than they would and should otherwise enjoy, which would hardly be a desirable outcome in the “public interest”.
The bases on which positive competitive differentiation can be achieved, and the scope for the introduction of distinctive innovations at the services level ensured, have to be clarified for an environment – an open access LTE network – in which possibly all providers will eventually be using the same basic platform on which to build and deliver broadband services.
Fortunately in principle there are many possibilities for an MVNO or wholesale customer of an open access LTE network to pursue to establish a viable business model, covering the range from niche to full service, depending on their other assets and capabilities. These bases may include (illustratively) one or more elements of cost superiority, operational excellence, vertical value added services, and partnerships such as for international roaming.
Nevertheless the prospect and potential value of an open access LTE network that could be a monopoly or at least one among a small number of modern mobile broadband networks raises fundamental policy and regulatory as well as business issues in a new context, with some “back to the future” features, such as the basis on which to set prices and the establishment and enforcement of incentives for efficient operation by a monopoly.
The messages about an open access and possibly monopoly LTE network operating as a wholesale provider are mixed. While such a network may offer a path towards allowing the deployment of LTE technology in the most efficient and economical manner, it would also require tackling a number of difficult regulatory, policy, and operational issues.
If these issues are not resolved with the right set of incentives and constraints in place and enforced, then there could be a resurgence of the very same problems such as blocking of innovations and unreasonable pricing that have led to and justified the introduction of market liberalization (competing networks and services providers) during the last 30 years around the world.
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