Shared infrastructure may be key to rural 5G roll-out

Thursday 26th September 2019

The Commerce Commission says shared infrastructure may be vital in getting 5G mobile technology to remote regions, even if it poses potential issues.

The commission noted that 5G technology is a potentially transformative technology, but will need network operators to invest at a time when profits are constrained by flat revenue. That investment profile may change given the heightened prospect of network operators sharing infrastructure.

The report said sharing can reduce the cost of deploying a network, but may also reduce competition, which can spill over into higher prices and less innovation.

"The trade-off between the costs of deployment and infrastructure competition may become more pronounced given the potential densification of cell sites required for 5G," the regulator said in a report on the performance of the mobile market.

However, those arrangements "are likely to facilitate 5G coverage, particularly in more rural areas," and the report notes the Rural Connectivity Group - a tie-up between Spark, Vodafone and 2degrees - as potentially playing a key role in hitting more remote regions.

The group plans to deploy 520 cell sites and share spectrum to improve rural coverage as part of a government initiative, which the commission said could be reused to deploy 5G technology more cheaply.

"In this way, it is possible that it will be economic to provide 5G services in areas where it might otherwise be uneconomic," the report said.

The group's structure is also covered under existing telecommunications law, meaning future arrangements might not need authorisation by the commission.

Any new infrastructure sharing deals to back a 5G roll-out might cover access for third parties, and the regulator said it would expect to receive any proposals that give rise to competition concerns.

Spark today said it has switched on the first 5G wireless broadband in Alexandra, and will roll that out to five other towns before Christmas. It has said it expects its capital investment in building the 5G network can be met within its existing envelope of 10-11 percent of revenue, and has forecast total capital spending of $370 million in the year ending June 30. It spent $417 million in the June year, of which $118 million was on its mobile network.

Vodafone's capital spending programme is forecast to rise to $300-350 million in the March 2020 year, up from $253 million in 2019. The country's biggest mobile carrier is poised to switch on a 5G network in Auckland, Wellington, Christchurch and Queenstown in December.

Earlier this year, Infratil chief executive and Vodafone NZ chair Marko Bogoievski said the nation can't afford to invest billions in new technology when there are opportunities to rationalise that spending through cooperation and sharing.

Telecommunications Commissioner Stephen Gale said the allocation of spectrum in the upcoming auctions will be of particular importance to future competition.

"In our view, there is a need for wholesale and retail competition matters to be at the forefront of decisions relating to MBIE’s upcoming allocation of 5G spectrum," he said.

The report also repeated an earlier warning that excluding Chinese supplier Huawei Technologies from the 5G roll-out could affect the development of competition and the scheme's overall cost.

(BusinessDesk)

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