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EU faces a €150 billion network investment gap to reach its 2025 connectivity goals - Here are the challenges that impact telecom operators' options

It is not news to say that the EU faces a €150 billion network investment gap to reach its 2025 connectivity goals. The more interesting question is why European Commission policies purported to incentivize investment haven’t worked. Moreover why the European Commission, rather than admitting its mistakes and changing course, continues to make policies and regulations that have proven not to work. That Europe continues with heavy-handed policy choices is even more perplexing when compared to the demonstrated success of the light-touch approach taken by the US, Japan and South Korea. These nations are advancing on 5G. Moreover, the US has delivered twice the investment per capita for more than a decade compared to the EU. Importantly, it quickly reversed harmful internet regulation after it observed two years of falling network investment and broadband deployment.

10 regulatory challenges that impact telecom operators and regulators
The trends of convergence have been with us for decades. While communications, content, and computing have been converging--and even the regulators of these industries--the actual regulation has not converged, and remains sector specific.

Telecom regulators and competition authorities are challenged by these technological trends. They use toolboxes based on outdated models and assumptions. It would seem that with the emergence of Skype and WhatsApp which have singlehandedly erased 20-30 percent of the value of the telecom industry that officials would “get it”, but no. Instead they insist that the telecom industry needs even further regulation on top of the technology that has disrupted its cash flow.

Understandably telecom players ask for an even playing field with over the top providers (OTTs), but it falls on deaf ears. With unchecked OTTs, nations suffer loss of tax revenue and a 99-1 traffic distribution of their internet, in which 99% of the traffic flows to locations outside of the country.  Current business models and regulation don’t allow operators to recover the cash flow they need or to partner with local content providers to make competition with Silicon Valley giants.

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Telecoms operators Telefonica, BT, and TIM consider spinning off their networks. EU policymakers reap what they sowed. Overregulated Europe is not a good place to invest in networks.
Strand Consult has analyzed the European telecoms market for over two decades and published reports on the pros and cons infrastructure sharing and structural separation on fixed line networks. Operators Telefonica, TIM, BT, and others now consider spinning off their infrastructure into separate companies. This research note reviews the drivers of the current trend and their consequences.

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Many mobile operators outsource their infrastructure to tower companies for too high a price. This is expensive for shareholders.
Around the world a number of mobile operators outsource their infrastructure (masts, towers etc) to tower companies with a classic "sale and lease back" model. It makes sense for a business to outsource or spin-off non-core activities, but Strand Consult’s analyses shows that outsourcing infrastructure management can result in higher cost for operators. This is because tower companies are generally compensated on commission for the total cost of portfolio of rental locations. Given that their commission grows with the rental price, they are not necessarily incentivized to get the lowest rental price for the location.

To be sure, by outsourcing site management and rental to tower companies, operators may have less administration in dealing directly with site owners (frequently greedy municipalities and private landlords), but operators may face overall higher costs. This means that shareholders earn less.

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How to deploy 5G: Best practices for infrastructure, regulation and business models
Operators around the world are building the next and 5th generation of mobile networks. 5G is clearly an evolution, and commercial products are combinations of 4G, 5G, NB-LTE and other technologies. While 5G promises a new technological revolution, there are major regulatory challenges to deploy networks and new business models.

Str
and Consult’s survey of the past 20 years of building and operating mobile networks shows that conditions for mobile operators have gotten worse, not better, for operators. The process to erect a single mobile mast/antenna can take between 12-36 months and cost €150,000 – €350,000. Policymakers and local government want to copy-paste the tower paradigm to small cell networks, a development which would kill 5G in the cradle.

While operators are stepping up their investments in spectrum, infrastructure, and technology, consumers increasingly complain about mobile coverage. Demand for data has exploded but subscriber revenues have not kept pace. As such, operators need to take concerted steps to optimize the expected benefits and costs when they deploy 5G. Operators need to learn how to rollout infrastructure, to find partners for business models, and to address the regulatory challenges that impede its business.

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While operators are stepping up their investments in spectrum, infrastructure, and technology, consumers increasingly complain about mobile coverage. Demand for data has exploded but subscriber revenues have not kept pace. As such, operators need to take concerted steps to optimize the expected benefits and costs when they deploy 5G. Operators need to learn how to rollout infrastructure, to find partners for business models, and to address the regulatory challenges that impede its business.

Strand Consult’s reports and workshop “How to deploy 5G: Best practices for infrastructure, regulation and business models” helps operators save time and money. Based upon Strand Consult’s success to reduce cost and improve regulation for mobile infrastructure, this report and workshop describes the 10-step process to get results. This engagement includes knowledge, training, and tools provided to operators over a 3 - 24 month period.

Contact Strand Consult to see how you can take advantage of “How to deploy 5G: Best practices for infrastructure, regulation and business models.”

Request more information of the report and workshop