Sharing Economy in the Telecommunications Industry: A Guide to Open Access Networks - Part 1

Open Access Networks (OAN) help bring the benefits of the sharing economy to the telecoms industry, fast tracking its digital transformation. In the first part of this blog series, Mukesh Binani explores the key benefits and challenges of the open access approach.

The sharing economy has disrupted many traditional industries. Companies like Uber and Airbnb have become market leaders in their space by leveraging this model. Investopedia defines the sharing economy as an economic system in which assets or services are shared between private individuals, either free or for a fee, typically by means of the internet. Of course, the vast improvements made to internet and big data technologies have made it easier for asset owners and consumers to discover each other and offer more unique services.

However, it’s no longer just the start-ups. Incumbent companies have now begun to realise the benefits of the sharing economy too, and telcos are no exception.

Telcos are already leveraging the power of the sharing economy through the following B2B and B2C approaches:

Infrastructure sharing – Network operators share the use and costs for building and maintaining the physical network (e.g. cell towers) and non-physical (e.g. roaming traffic) network infrastructure.

Communities – Operators manage their customer base at a community level allowing members of the community to share their offers. For example, friends and family plans or corporate plans with shared balances between members and devices.

Offloading – Using Wi-Fi offload to reduce congestion on mobile data networks.

Local Loop Unbundling (LLU)/Virtual Unbundled Local Access (VULA) – Allowing multiple operators to use connections from the local exchange to reach their customers.

MVNO/MVNA/MVNE Business Models – Leasing of wireless capacity to other brands and service providers.

Open Access Networks (OAN) – A horizontally layered network architecture and business model that separates the physical access to the network, from the delivery of services over the network. Simply put, the network infrastructure company offers network access to other service providers who then sell retail services and manage the customer relationships.

OAN and the Telecommunications industry

Traditionally, telecoms has been run based on vertical integration: one entity delivers the service, owns the network infrastructure and operates it. However, the rapid advance of technology has made it possible to deliver more services (video streaming, online gaming, grid computing) where the information is stored and transmitted digitally. Moreover, these services are being increasingly delivered leveraging the Internet Protocol (IP).

In addition, end users themselves have become both consumers and producers of data (e.g. YouTube). Within such an ecosystem, a vertically integrated approach with dedicated network infrastructure for each service is inefficient. The open access network model is a radically different approach which allows for services to be provided on a fair and non-discriminatory basis to network users by separating the roles of the service provider and the network operator.

Broadly speaking, the following business models exist within OAN:

Two-layer model - In the two-layer OAN model, there is a network owner who operates their own network, and multiple retail service providers that deliver services over the network.

Three-layer model - In the three-layer OAN model, the physical layer – the fibre or wireless infrastructure – is owned by one company, the operations and maintenance of the network and the provision of services is run by a second company, and the retail service providers that deliver services form the third layer.

In an OAN, the owner or manager of the network does not supply services for the network; these services must be supplied by separate retail service providers. OAN is suitable for fixed, mobile, broadband and fibre networks. This model is similar to how other utilities are managed including roads, railways and airports.

Benefits of OAN

OAN is a win-win for participating entities. The network owner can find new sources of revenue while the other retail service providers get access to different markets without incurring infrastructure costs. This architecture also creates the “unbundled corporation” where each entity can focus on its core business. Thanks to this collaborative approach, customers should now get better services at lower cost.

Furthermore, OAN helps increase market reach for service providers giving them access to remote areas by public/private partnerships. It fosters healthy competition between operators and leads to better utilisation of resources, with resulting savings for the business bottom line – and, potentially, the environment. It also lays the foundation to build smart cities.

Countries such as Sweden, Australia, USA and Singapore have already made heavy investments in open access networks to improve penetration of high-speed broadband services. Many other countries are also making quick strides in this space. The need for improved internet access is becoming a necessity to improve business efficiency and help innovators from across the globe. In that sense, OAN levels the playing field for smaller (and newer) telecom operators worldwide.

Challenges for Open Access Networks

Despite its myriad benefits, OAN comes with its fair share of challenges too. Getting service providers, especially the big ones, to join OAN remains one of the key issues. Managing an OAN is seen as an extra burden on network operators. In addition, any ISP acting in bad faith can hurt the reputation of the network.  There are also fears that, in the long run, service providers may only be able to compete on price, which will lead once again to consolidation and less competition – exactly the opposite of what OAN was built for.

However, perhaps the biggest roadblocks are regulation and inertia. The current landscape is generally skewed towards incumbent operators, who are interested in maintaining the status quo. That said, OAN is a necessity as the world becomes more connected. It is progressive, sustainable and enables true digital transformation of the telecoms industry.

In our next blog in the series, we will look at the Open Access Model for Fibre Networks.