Sharing infrastructure may be important in improving the economics of 5G mobile services and speeding its take up across the country, the Commerce Commission says.

The new technology is considered necessary for the wide take-up of automated services – such as transport – and increasing use of smart technologies that can monitor and self-manage everything from industrial services to farm machinery and home energy usage.

“New mobile technologies like 5G will benefit consumers but we are checking whether their adoption by telecommunication companies may affect competition,” Telecommunications Commissioner Stephen Gale said in a statement.

“One question is whether any potential new entrants will be able to access 5G spectrum. Another is whether existing regulation of mobile infrastructure sharing needs to be eased off or stepped up.”

The discussion is part of a review the commission is undertaking into the performance of the mobile market in New Zealand. A core theme is whether there are any barriers to entry for new players into the existing market and whether the evolving technology could make that harder in future.

The commission notes that Spark New Zealand, Vodafone New Zealand, and 2degrees have all indicated they intend to roll-out competing 5G networks over their existing infrastructure. Newcomer Blue Reach has signalled its interest in converting to 5G. Chorus has suggested a single national network could also be an alternative, an idea hotly opposed by the major retail carriers.

While the complexities of upgrading the technology are not new, the commission says the new spectrum required, the increasing data volumes that will be carried as new services are developed, and the additional cell sites that that will require, means the scale of investment could be a stark contrast to previous technology transitions.

“With more cell sites being built, the relative importance of fibre backhaul will also increase, as there is a possibility that the failure to secure adequate fibre backhaul will act as a potential bottleneck for 5G rollout and subsequent service provision—if the backhaul market is not sufficiently competitive,” the commission says in its 71-page issues paper.

The regulator observed that the “densification” of cell sites likely to be required in urban areas may make the trade-offs between infrastructure competition and deployment costs more pronounced.

And it noted that the Rural Connectivity Group – a Vodafone, Spark, 2degrees joint venture contracted by the Crown to install 4G mobile and wireless services in rural areas – is providing its infrastructure on an open-access basis, including tower locations and wholesale backhaul.

Depending on its configuration, the commission says parts of that network could possibly be reused for 5G technology, which may see it offered in rural areas where it might otherwise have been uneconomic.

“Jointly investing and thereby lowering individual investment costs could make it profitable to invest in more areas,” it says.

“Where sharing extends to radio spectrum, there may be additional efficiency gains in terms of spectrum usage. For example, where blocks of spectrum are awarded to different parties, some spectrum must be used as guard bands to prevent interference. Where a single block of spectrum is awarded and shared, the amount of spectrum set aside as guard bands may be reduced, freeing up more spectrum to be used.”

Among the 47 questions it poses for submitters, the commission says it is keen to hear how important widespread, timely access to 5G will be. It also asked whether firms think three or more competing 5G networks would be viable here, and whether infrastructure sharing would encourage a fourth mobile network operator to enter the market.

Spark welcomed the paper, saying it showed that there was healthy competition in the country’s mobile markets. It also commended the regulator for looking at the sector’s longer-term development.

“However, we would emphasise that on these forward-looking issues – particularly with regards to the allocation of spectrum for 5G networks – time is of the essence,” John Wesley Smith, the firm’s general manager for regulation, said in a statement filed to NZX.

“We would urge the commission to move as quickly as possible to conclude this process, as Spark – and our competitors – have some large investment decisions to make in a short period of time.”

Vodafone, the biggest mobile provider, said it strongly supports infrastructure competition.

It was not convinced there is a lack of mobile providers, noting that there are more virtual mobile operators – those that lease spectrum and infrastructure from the major firms – than in similar-sized markets in Singapore, Ireland and Finland.

Nor did it see any obvious barriers to a fourth firm starting another mobile network.

“Potential mobile entrants have all the regulation they need to enter and compete, including mobile roaming, cell site co-location, mobile interconnection, and number portability,” chief executive Russell Stanners said in a statement. 

“Similarly, spectrum access is not an impediment to 5G entry, with MBIE expected to auction 3.5 GHz, a key spectrum band for 5G, next year.”

The commission observed that the three mobile networks provided by Vodafone, Spark and 2degrees cover more than 97.5 percent of the population and that their 4G services reach more than 92 percent of the population.

The three current virtual mobile providers – Compass, Vocus and Warehouse Mobile – collectively supply less than 1 percent of the country’s mobile services.

The commission noted that prices for a range of mobile services have been trending down in recent years and that the providers collectively have been investing between $200 million and $400 million a year in those operations.

But it also observed that mobile data use has increased 16-fold since 2012 and is now ranked more important by consumers than voice or text services.

The number of residential mobile accounts allowing more than 3GB of data a month more than doubled in 2017, and it said mobile bundles with higher calling and data allowances – such as the 25GB plans offered by Skinny Direct and 2degrees – appear to be relatively expensive compared with those offered in Australia.

Submissions close on Oct.12.

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