3G industry at odds with governments

Network operators want to cut costs and share 3G infrastructure. But the cost could be competition and quality of service

At a technology briefing to the European Commission on Thursday, networking firm Nortel laid out the case for telcos sharing the expensive work of building 3G networks. But there are plenty of reasons why governments are keen to oppose such a move.

The cost of rolling out 3G services has been a hot topic in recent months as telcos reel from the huge fees paid for licences and the general downturn in shares. Analysts suggest firms will have to wait until 2010 to recoup losses but predict the 3G market by then will be worth around £200bn.

In a briefing with the EC, Nortel laid its feet firmly in the shared network camp, explaining how it can be accomplished as well as endorsing the radical telecoms regulation shake-up proposed by Brussels.

"Nortel has a solution for sharing networks and there would be significant cost savings," said Nortel's government relations director Thomas Reynaert. Nortel believes costs could be reduced by up to 30 percent.

Commissioner for the Information Society Erkki Likkanen is backing the move, but not all governments are behind it. Michael Ryan, telecoms lawyer with Arnold & Porter, believes the EC has its work cut out to persuade member states to go down the shared network route. "The EC convened a meeting about infrastructure but it has not taken off. I would be hard pressed to see how they could compel governments to permit facility sharing."

From the government's point of view network sharing is not something it would be keen to see. "It was an understanding of the licences being issued that there would be competition in the network," explained Ryan. "The more that share facilities the less diversity there is."

Network diversity is important, not least in the case of a network failure. If all operators are relying on the same network, they will all be affected by outages.

From the operators point of view, though, the huge amount paid for licences changes the goalposts of the rollout. "Operators make the excellent point that having sucked £22bn out of their coffers it is not reasonable to expect them to get together the same level of networks they would have done," said Ryan.

It is estimated that it will cost around £2bn for each operator to set up a network and in the current climate commentators have cast serious doubt on whether the five UK operators will be able to accomplish this, especially as technology investor money dries up rapidly.

"The issue is very controversial and requires rethinking to strike a balance between network competition and the financial integrity of operators," said Ryan.

If the situation is not resolved, the UK faces the possibility of networks below the standards originally expected and in some parts of the country, no network at all, predicted Ryan.

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