To some extent, sharing networks is not new in the wireless business. Carriers throughout the world share the transmission towers and base stations that make up existing phone networks. They also frequently sign so-called roaming agreements to provide service on another company's network when customers travel beyond the reach of their carrier's system.
But in Europe, telephone providers straining under enormous debt are now inking deals not just to share existing networks, but together build new ones from the ground up.
Analysts, and some wireless industry executives, say network sharing is likely to follow in the United States. And, US consumers could see many benefits as a result, they say. For one, service providers expect to save costs by sharing one network, rather than building their own, and could possibly pass the savings onto consumers. The strategy also could help speed the next generation of wireless services to market.
But there is also a downside. For example, carriers could be hard-pressed to differentiate themselves from competitors when they all offer the same features by sharing a single network. There could be technological hurdles to overcome because not all cell phones can operate on the same networks. And, some previous attempts at communications-industry collaboration--such as the failed Global One venture between Sprint, Deutsche Telekom and France Telecom--crumbled when carriers had differing opinions on strategy.
"It seems like kind of a no-brainer from a financial standpoint," said Jane Zweig, chief executive of wireless industry analysts The Shosteck Group. "Shared infrastructure makes sense. It reduces the costs and shares the risk. But in the longer term, what does it mean as networks evolve? For instance, how do network operators differentiate themselves when they get into a shared network?"
Despite the potential drawbacks, Nextel Communications Chief Executive Tim Donahue foresees shared networks on the US horizon.
"Once all of us go through our due diligence, once all of us understand which way we're going, once all of us appreciate the capital requirements and the operating costs, I think that it'll be a possibility that carriers could sit down and say, 'Let's jointly build a network,'" Donahue said during a recent interview. "The carriers would continue to market under their current brands and compete in the marketplace as we do today."
Analysts also are mixed on just what impact network sharing may have on the makers of the infrastructure. Some believe it could hurt them because sales of the actual gear will likely decrease. "The manufacturers would like different companies to buy equipment so they could make money," said Naqi Jaffery, an analyst with The Strategis Group.
But there is also an upside. Gear makers may want to start marketing their equipment as capable of working on a shared network, said Chris Isaac, managing partner for the North American wireless industry at Andersen, a consulting firm.
"Certain vendors may see infrastructure sharing features in their products as a competitive advantage," Isaac said. The network-sharing fad began in Europe several months ago, when many wireless telephone service providers paid more than US$100 billion just to buy government wireless licenses.
By some estimates, these carriers will have to spend another US$200 billion to finish building their own networks.
As a result of these steep costs, there have been several high-profile sharing deals of late, which promise to save carriers substantial cash.
The biggest was between BT and Deutsche Telekom, which announced Tuesday that they will share a network in both Germany and the UK BT estimates it'll save US$1.6 billion, while Deutsche Telekom believes it will save about US$2.5 billion.
In Germany, a regulatory agency last week announced it will allow German providers to share a network. Following the announcement, four of the five companies that successfully bid for the right to create high-speed phone service in that country reportedly are looking to build a single network together.
There have been similar deals affecting French, Italian and Spanish mobile operators.
Even Nokia, the handset maker that sells base-station equipment for the next generation of phone service, has gotten into the act. Last month, it announced the availability of a "Multi-Operator Radio Access Network". The gear allows carriers to "enjoy the advantages of network sharing and provide their own service portfolio to their subscribers at the same time", the company said.
But while Europe is sharing out of economic necessity, analysts and industry insiders say the US is a more complicated landscape.
Some of the carriers might not need to share networks. Sprint and Verizon, which plan to offer 3G services by year's end, already have their networks either completely built or are close to finishing, analysts say. Representatives from the two companies did not return calls Thursday for comment.
US companies, though suffering a downturn, aren't saddled with the same type of debt as their European counterparts, said Nextel's Donahue.
"Here, you get deep-pocketed players for the most part," Donahue said. "Verizon is probably not going to share a network with us. AT&T is probably not going to share a network with anybody."
Andersen's Isaac said the variety of cellular phone standards adds another layer of complexity in the United States.
In Europe, most telephone providers are using one particular type of network, known as GSM. But in North America, there is no such consensus. Instead, providers are building or using networks that employ different types of standards, most notably GSM and CDMA (code division multiple access), created by Qualcomm. Other carriers use TDMA (time division multiple access).
"The competing 3G technologies in the United States market also limits the extent of sharing," Isaac said. "It is not likely that we will see common base-station infrastructure for the (differing) technologies in the next few years."
There are also worries about whether the Federal Communications Commission will even allow network sharing, he added.
"Regulatory concerns will need to be addressed upfront to mitigate the risk of legal action by those excluded from a shared 3G infrastructure opportunity," Isaac said.
Aside from the potential hurdles in the United States, some recent studies suggest any cost savings for carriers will be critical.
After all, Jupiter Media Metrix has prognosticated that worldwide revenue from 3G applications will increase from US$104 million currently to about US$7.3 billion by 2005. That figure alone is only half what BT paid for its 3G license.