Analyzing the Economic Effect of Mobile Network Sharing in Korea

Abstract

As mobile markets in most developed countries are rapidly coming close to saturation, it is increasingly challenging to cover the cost of providing the network, as revenues are not growing. This has driven mobile operators, thus far mostly involved in facility-based competition, to turn their attention to network sharing. There exist various types of mobile network sharing (MNS), from passive to active sharing. In this paper, we propose a model, based on the supply-demand model, for evaluating the economic effects of using six types of MNS. Our study measures the economic effects of employing these six types of MNS, using actual WiBro-related data. Considering lower service price and expenditure reduction, the total economic effect from a year's worth of MNS use is estimated to be between 513 million and 689 million USD, which is equal to three to four percent of the annual revenue of Korean mobile operators. The results of this study will be used to support the establishment of a MNS policy in Korea. In addition, the results can be used as a basic model for developing various network sharing models.

Multi-criteria Evaluation of Mobile Network Sharing Policies in Korea

“…MNS in previous studies has been classified into various types. Song and others [1] classified MNS into six types according to the sharing level of mobile network elements. The six types of MNS include site sharing, mast sharing, radio access network (RAN) sharing, core network sharing, network roaming, and mobile virtual network operator (MVNO).…”

“…Research on the effects of MNS primarily consists of calculating the amount of capital expenditure (CAPEX) savings and the operational expenditure (OPEX) between specific operators in a country [1]. Siemens [10] estimated the amount of CAPEX and OPEX savings for four types of MNS by 3G mobile operators in Germany.…”

“…Based on the MNS classification, Song and others [1] proposed a model for evaluating the economic effects of MNS. KISDI [13] and Han and others [14] reported that MNS might have negative outcomes, including limiting competition, quality of service (QoS) differentiation, and service innovation.…”

“…The cost of constructing new mobile networks is no longer offset by investment revenue as mobile markets are reaching saturation point in most developed countries [1]. Incremental revenue growth no longer supports the network costs required to cope with the surge in mobile data traffic and mobile services focused more on data than on voice [1] (see Fig. 1).…”

“…Network sharing is an alternative that effectively reduces network investment costs. Mobile network sharing (MNS) allows mobile operators to decrease costs by avoiding duplicate network assets through the sharing of mobile network elements [1].…”