Cooperation between Telecommunications Operators for Infrastructure Deployment

It is undeniable that cooperation between telecommunications operators has become important for the deployment of new infrastructure but what is the status right now of these cooperative agreements and what can be done to mitigate potential anti-competitive affects? These are key questions considered this CERRE Issue Paper, “Cooperation between telecommunications operators for infrastructure deployment”.

Infrastructure Sharing

Academic author Marc Bourreau reviews the potential pros and cons of allowing for infrastructure sharing between telecommunications operators, based on the relevant economic literature and previous CERRE research on co-investment and network sharing. It restarts the discussion and sets the scene on the debate since Member States transposed the European Electronic Communications Code (EECC).

Infrastructure sharing occurs when two or more operators share network infrastructure and thus the costs associated with it – it encompasses both co-investment and network sharing. For fixed networks, infrastructure sharing corresponds to co-investment and for mobile networks, infrastructure sharing corresponds to network sharing.

Pros and cons

Bourreau highlights that cooperation between competitors at specific stages of the value chain, for R&D or environment protection, can benefit both companies and society. However, horizontal agreements can also raise concerns, as firms may end up coordinating in softening competition.

When looking at the pros of infrastructure sharing, Bourreau highlights multiple elements including cost reductions, which may benefit consumers in terms of lower prices, wider network coverage, higher quality of service, and a wider availability and variety of products and services. Cooperation can reduce the fixed costs (CAPEX) of deploying or upgrading a network for an operator and reduce the variable costs (OPEX) of maintaining and operating a network that has already been deployed.

On the other side, there are also cons to consider. Partners may have the ability or incentive to raise final prices and soften competition at retail level or prevent other competitors from using their joint network. Infrastructure sharing may limit the possibilities of differentiation and weaken motivation to improve services. It may also facilitate explicit or tacit collusion: for example operators could coordinate their technological choices, opting for lower network quality, or reduce investment, thereby increasing profits (explicit collusion).

Conclusion

Since an infrastructure sharing agreement may have both pro- and anti-competitive effects, the key message drawn by Bourreau is that details matter. Various factors are at play such as the counterfactual, the market structure, and technology and as such any assessment should be done on a case-by-case basis.

This Issue Paper will be presented and debated amongst academics and policy makers during a CERRE webinar at 14:00 CEST on 25 October 2021.