Wireless wholesale networks
So far wholesale networks have not worked in the USA and as far as we can see in Europe, the winners in wholesale deals have been the MVNOs, not the wholesale providers which are usually the national provider turned national enemy with a regulator hell bent on creating competition by constraining the incumbent. In Australia and New Zealand the governments have taken strong positions to create a wholesale market. It is early days, but certainly an exciting approach which is designed to offer all consumers broadband access. Despite the complete lack of evidence that a wholesale carrier can exist and thrive, we are big proponents of the wholesale model.
Economics of wholesale:
Wireless networks are like railways. If you want to get the prices for consumers down you ensure there is competition. But there are many forms of competition. Would prices go down if a new railway company simply put another set of rails right next to the existing railway? Maybe they could take some shortcuts or change the rail gauge to make the trains faster and safer? I don’t think so. It would probably be prudent to simply have more than one train company using the same set of rails?
Telecoms is similar and none more so than in wireless, where a competitors network can cause interference and reduce the performance of all networks. The predominant model in the world is build your own network and compete. But let’s examine where else this happens; How many electrical wires are run into homes? One. How many water and gas supplies are run into your house? Again one of each. Urban homes my have one telecom line and one cable line and although they perform similar functions, they were not run into homes with that understanding. It seems like the predominant model in infrastructure is one supply. One might argue that wireless is less like roads and more like air travel, but here again although there are many airlines, there are few airports that are mostly shared. There is no need to beat on this drum anymore, we think you get the point.
So why build what you can share? Well there is the spectrum thing, which makes it pretty difficult to share and then which incumbent wants to drop the biggest barrier to entry for a new possibly more nimble competitor? None, right. So we have to find a way where wholesale networks can survive and even thrive without onerous regulation. Some incumbents argue that network quality is at the core of what they do. We disagree – please see Wireless network quality myths.
So assuming carriers cannot differentiate on network, how can we make it in their best interest to share? We have a few thoughts:
- Make is a requirement for winning additional spectrum or do a spectrum set-aside for wholesale networks only?
- Reward carriers with tax incentives to invest in shared infrastructure
- Cost plus or retail minus based wholesale price regulation
- Discount the cost of wholesale spectrum vs. retail spectrum.
- Require industry structural separation?
While none of these is very appealing, we believe it is too early to give up on wholesale wireless and would encourage everyone to contribute their ideas on how we can make this work.
Good luck to both LightSquared and Clearwire. (c) Alphasynb
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