National Roaming – Government searches for a Needle in a Haystack
The UK Prime Minister has recently discovered what many locals have known for decades. All of the mobile operators have significant rural areas where their coverage ranges from patchy to non-existent. Continuity of coverage from any one operator is poor. However unlike the rest of us he is uniquely placed to do something about it. He does not want to carry four mobile phones, one for each mobile operator, to be sure of being able to make and receive mobile calls when he visits rural Britain. He wants just one mobile phone and expects the mobile industry to do the rest. The mobile industry doesn’t quite see it this way. They have more than met their coverage obligations and they are not charities. National Roaming could easily solve the problem. But mobile operators fear the precedent being set. What may start as national roaming for GSM today may quickly lead to pressures for national roaming for data tomorrow and that commercial development is a bridge too far.
The Government has been struggling for months to try to find a voluntary solution acceptable to the mobile industry and it has been like trying to find a needle in a haystack. The teeth of the draft Statutory Instruments in the consultation document demonstrate the Government’s firm resolve but to do what? Faced with an impossible problem to solve the Government appears to have put the whole haystack out for consultation in the hope that somebody might spot the needle. All of the main options are deeply flawed.
What is really tantalising about the Consultation Document is that the one approach that has the potential to be “the needle” the Government are looking for has only been half developed…this is what they have termed an MO-MVNO– (Multi Operator – Mobile Virtual Network Operator) implemented through “international roaming”. It is an inexpensive solution, does most of the job and could be up and running by May 2015. Further it does not involve the mobile operators other than not obstructing third parties from getting on with it.
Why it is only half developed is that, whilst the Government is prepared to ensure the mobile operators do not tie in their MVNO’s into exclusive contracts, they do not seem to have gone as far as mandating that mobile operators must enter into an international roaming agreement upon request from an MO-MVNO’s on fair terms…or indeed on any terms. Further, they are only seeing these partial coverage not-spots as a telephone and SMS story. But having no signal is just as catastrophic for data as for voice and with Voice over IP they become one in the same thing. There is absolutely no reason to preclude data roaming if that is what an MO-MVNO wants to do. If the Government were to address these oversights this may well be a compelling solution.
The costs for an MO-MVNO may be lower than many believe. Vodafone and O2, from the very early days, shared sites whereas Orange developed many more of their own independent sites. So an MO-MVNO that already had a normal MVNO deal with EE, Vodafone or O2 would only need one international roaming agreement with an MNO from the other site sharing group to be able to capture a large slice of the continuity of coverage benefits with only a third of the roaming agreements (leading to better volume discounts). “SIM steering” can also keep a mobile locked onto the lower cost signal wherever this is available. On the revenue side this is much bigger opportunity than just partial not-spots. All coverage maps mislead as they involve localised averaging. Radio wave propagation is not like sending a signal down a wire with absolute certainly of arriving at the other end. In urban areas getting signals from different mobile operators using different spectrum and from different directions fills-in coverage pot holes due to the perversities of radio-wave propagation through urban building clutter. This will make a full National Roaming offer highly attractive to businesses that prize reliable mobile signals. This is why a competitive response from the mobile operators becomes highly probable. None of them would want to lose their high margin business customers. This competitive response does not have to involve all four mobile network operators (where agreement might be difficult) but any mobile operator pairing across the two site sharing groups does most of the job. It is this competitive response from the mobile operators where there could be an enormous benefit to the digital economy as the mobile operators are uniquely placed to implement far better forms of roaming that include full cell handover and boosting data capacity at cell edges where site diversity exists.
The one barrier to the MO-MVNO solution may the Home Office’s unwillingness to countenance an unlimited number of MO-MVNO’s on national security grounds. We can only guess the reasons but if there is an objective limit on numbers set by the bandwidth of the Home Office then the solution is for Ofcom to run an open competition for the limited number of MO-MVNO licences the Home Office has the bandwidth to cope with. The UK is fortunate is already having a number of MVNO’s with the scale economies to turn such an opportunity very quickly into a success, such as Virgin, BT and Talk Talk. The new MO-MVNO’s may have some advantage over other MVNO’s but this may not be significant as many MVNO’s compete mainly on price and the MO-MVNO offer will have to bear the extra roaming costs.
What is particularly attractive in the MO-MVNO solution is that it is directionally correct looking at the very long term. Really high performing wireless networks of the future require mobile operators to diversify their sites and share their spectrum. The current UK regulatory policies and economic pressures are driving the country in the exact opposite direction and that is likely to continue without an external stimulus. That external stimulus could begin with an effective MO-MVNO competitive challenge. A competitive response from the mobile operators (roaming with cell handover) would propel the UK’s mobile infrastructures to becoming one of the most powerful in the world, driving the expansion of the UK digital economy much faster. If Secretary of State Sajid Javid came behind a refinement of his own MO-MVNO suggestion – it could be the biggest regulatory driven improvement to the UK’s wireless infrastructure for the past decade. And the best argument of all is that – competition is infinitely better than coercion.
Since posting this article I have received some thoughtful questions by e-mail on the impact an MO-MVNO competitive challenge on the current market operators. These are set out below in black with my response shown in red:
Q. If consumers had access to an MO-MVNO which offers unbeatable coverage, why would any consumer use one of the traditional MNOs, other than due to difficulties in switching or inertia?
Coverage is not the only factor driving the choice of service provider. Other factors include price, choice of new (subsidised) smartphones and brand image. But the MNO’s are unlikely to sit there and let a new player take customers away with a better coverage proposition. They can match this “unbeatable” coverage with their own roaming arrangements. This would then force the new MO-MVNO’s to have to work a lot harder. This is making competition work for consumers…in this case to improve coverage and reliability.
Q. Would there be any meaningful distinction between MNOs if a consumer could access their services without knowing who was providing the coverage at any point?
The emergence of a successful MVNO market already demonstrates that a retail distinction can be made without consumers knowing who is providing the coverage, as few consumer know which network an MVNO is being hosted on. Our national aim must surely be for mobiles to just work and not have a competition based on how many times it does not work.
Q. By the same standard, what would be the MNO’s incentive to invest in new infrastructure if they knew consumers were not going to associate better coverage with their brand?
Competition over telephone coverage stopped around 10 years ago. Since the smartphone arrived there is considerably more investment going into capacity than pushing the boundaries of coverage. The competitive pressure to fill partial not-spots (or not spots) is zero. That is where we are today in the telephone and data markets…no evidence of any competitive pressure to associate better rural coverage with their brands.
The emergence of 4G has seen a renewed coverage competition in the data market but this is likely to extinguish itself by 2017 as all the MNO’s are expected to reach the same 4G coverage set out in the obligation O2 has in their 4G licence.
Q. Wouldn’t this proposal turn the MNOs essentially into infrastructure providers selling a wholesale product?
A wholesale market already exists ie the existing MVNO wholesale market. The creation of a roaming opportunity for these network “over the top” players changes the nature of this wholesale market only to the extent that the MVNO is not locked into getting all their capacity from a single MNO.