Vodafone and O2 network sharing move in the UK would reverberate around the industry

By Paul Lambert

Vodafone and O2 are discussing a network-sharing deal in the UK that would, if it gets off the ground, have major ramifications not just for the UK but also for the entire industry.

The move, reportedly code-named Cornerstone, would cover 2G and 3G networks, as well as data and transmission sites. It would probably see Vodafone turn its back on the site-sharing deal it struck in Feb. 2007 with France Telecom-owned Orange UK.

3UK and T-Mobile also have an extensive network-sharing deal, which means that Orange would be the only operator without a network sharing deal, unless, of course, it succeeds in negotiating its way into someone else’s.

So, if Vodafone and O2 do share their networks, this would collapse the number of networks in the UK from five to three.

This represents a major shift that’s taking effect in the industry, not least because it shows just how far operators have come over the last five years in what they consider to be their core business. No longer are they focused on operating networks, they are mainly focused on providing services.

But, beyond the UK, this deal is significant because of the signal it gives to operators and, importantly, regulators worldwide: network sharing is the future.

The UK government is understood to support the move by operators to share networks, which sends a powerful signal to other governments: let your operators share networks because it will improve network coverage and will likely lower the cost of services to end users. Indeed, the UK government’s recent Digital Britain initiative outlines aggressive broadband network coverage goals.

Regulators will surely take note of what’s happening in the UK, and elsewhere in Europe such Sweden, and realize that to improve network coverage getting operators to share network is the way forward.

And for the next generation of networks, such as LTE, network sharing will surely built-in from the start. While this is, on the face of it, bad news for vendors, there will be opportunities for the ones who offer the best network management solutions.

The cost saving to operators from network sharing are clear. 3UK and T-Mobile agreed December 2007 to share their 3G radio-access networks and set up a 50/50 joint venture, Mobile Broadband Network (MBNL), to manage the integration. MBNL originally targeted a savings for the two operators of £2 billion (US$2.8 billion) over 10 years, and the project is already coming in ahead of target.

And perhaps pointing the way future for operators who share infrastructure, MBNL announced in November that Ericsson would operate and maintain the combined network for four years.

After all, when operators combine their networks, what’s the point of running it at all?