31 March 2022

Neutral host networks appear to bring solutions to a set of problems, but do they bring benefits to all? Lee Sanders, Managing Partner at Aetha Consulting, recommends a targeted approach.

Neutral host networks (NHN) are inviting industry attention. Touted as a game-changing model to improve the economics of mobile networks by eliminating duplication of infrastructure, they can enable coverage in historically uneconomical locations and densification of networks to provide true 5G speeds. Consequently, in instances, NHNs are being promoted by policy makers. At the extreme, nationwide single wholesale mobile networks have either been introduced or proposed in the likes of Mexico, Malaysia and Poland.

While the benefits are clear and the rationale for NHNs evident, there may also be cause for caution – a balance must be struck between gaining efficiencies and losing healthy competition.

NHNs – not new, but now

Despite industry hot-topic status, neutral hosting is not new. The concept of neutral parties deploying elements of mobile networks and wholesaling services to multiple operators has been around for a while – indoor venues hosting multiple mobile operators on Distributed Antenna Systems (DAS), or TowerCos hosting multiple operators on sites are prime examples. What has changed, facilitated by technological developments, is the scope of neutral hosting – both in terms of depth and services offered.

NHNs deploy active equipment on sites, some using their own spectrum (or shared spectrum) to offer connectivity as a service. This frees mobile operators or private network providers from needing to provide their own network equipment. Other factors contributing to the allure of NHNs include the potential savings for cost-conscious mobile operators faced with expensive 5G deployments, and higher expectations from consumers for near ubiquitous mobile coverage at 5G speed – including rural areas and indoor venues where providing high-quality services is both difficult and costly. And with the advent of virtualisation and openRAN, the neutral host can build and manage some components of the network leaving the mobile operator with more control of its virtual network.

Bringing benefits – a convincing case

There is a convincing case to be made for NHNs improving the economics of providing mobile services by removing duplicate costs and increasing occupancy of sites and utilisation of equipment. This, in some circumstances, might even enable the business case to make a deployment viable and result in wider benefits – rural areas gaining much-needed coverage, consumers having the choice of multiple providers in a given area, small cells improving services in high-demand areas, faster rollout of 5G networks and private networks emerging where they otherwise might not. In this scenario everyone’s a winner – the neutral host gains business, the mobile operator expands its services at low cost, and the consumer receives new and/or more competitive services. There is also the environmental and aesthetic cost of duplication to consider – a growing concern in recent years and one that is likely to gain traction as the world faces the grand challenges of climate change, resource constraint and zero carbon.

Competition – then and now

The liberalisation of the telecoms sector catalysed improved services at better prices for consumers. Back in the 1990s and early 2000s, when operators around the world were rolling out mobile networks, ‘infrastructure competition’ was key. The consensus among policy makers was that competition was desirable despite the inevitable duplication of infrastructure this created. As ARPUs have been competed down and margins squeezed, the focus has changed from speed of deployment to keeping a close eye on the cost base. The inefficiencies associated with operators duplicating infrastructure were highlighted and the need for competition in all parts of the value chain was questioned.

Over the years, there has been steady relaxation of restrictions to share infrastructure. This led to operators sharing passive infrastructure, such as sites and towers, and then active infrastructure and even spectrum. This shift in the threshold for infrastructure competition has delivered many benefits – TowerCos and network sharing between operators have been key to unlocking unserved demand for mobile services – and will continue to be so.

However, the role of competition should not be forgotten. Before surrendering competition at the network level, either gradually over time or through active policy decisions, let’s press ‘pause’. From a policy perspective, NHNs should perhaps be encouraged using a light touch and scalpel-like precision rather than more blunt instruments. While there is much to gain from NHNs, the wider context must be handled carefully – and not leave all infrastructure competition out in the cold.