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Wireless Infrastructure Group (WIG) welcomes the opportunity to provide evidence to this important enquiry. WIG is committed to building sustainable digital infrastructure in the UK that will support the transition from 4G to 5G and help bring connectivity to the hardest to reach parts of the UK.
As a wireless infrastructure operator our response has been limited to issues around enabling 5G and addressing connectivity in these challenging areas.
The biggest challenge for 5G will be attracting the investments needed to create the dense, high speed networks of the future that will support new and innovative applications.
Faced with falling ARPU (‘average revenue per user’) and loss of economics to the OTT (‘over-the-top’) players, the traditional model in which the retail mobile operators funded the investment in new network infrastructure is increasingly challenged – particularly in the context of the scale of 5G investments needed.
Over the last decade a well-funded sector has emerged focused solely on the investment in and operation of independent (or neutral-host) infrastructure that is built to provide for several competing retail networks; but is owned by an independent operator who does not compete for the end users of that infrastructure. Over two thirds of the world’s four million communication towers (the original wireless infrastructure) are now operated by independent players through special purpose entities, rather than by mobile operators directly.
The neutral host sector has attracted significant funding from global infrastructure investors and is already playing a major role in the funding of 5G networks and rural infrastructure (WIG for example is backed by Brookfield Infrastructure - through the world’s largest infrastructure fund). More could be done in the UK by policy makers to encourage this new sector which offers a pro-competitive model for new infrastructure; incentivised to maximise utilisation of the assets driving greater level of connectivity; and above all, substantial low cost capital to raise the level of investment in UK infrastructure.
How does this help the mobile network operators (MNOs) climb the mountain of digital connectivity?
Armed with low cost capital funds, operators like WIG build, own and operate neutral host networks that support all the MNOs, allowing them to benefit from the reduced costs of sharing that infrastructure. And neutral host operators accelerate the delivery of the infrastructure by investing with just one MNO customer - the ‘anchor’ – the first that wants presence in any location; whether that is in a football stadium, in corporate real estate or outside a highland village. The neutral host will invest on the back of the anchor contract, and would lose money were that their only customer, yet with the anticipation that the other MNOs will join the neutral host infrastructure in the years to come.
Neutral host infrastructure is a pro-competitive model allowing the MNOs to benefit from the reduced costs of sharing whilst maintaining competition at the service level, and allowing them to differentiate on the amount of radio equipment, spectrum and backhaul that they deploy in any given location. DCMS has begun to recognise the merits of neutral host in its Statement of Strategic Priorities (2019) by seeking to create the conditions for a competitive mobile market that supports investment and innovation in 5G including to “Support the growth of infrastructure models (including ‘neutral host’ wholesale providers) that promote competition and investment in network densification and extension”.
In setting its telecommunications policy agenda for the 5th Generation of mobile infrastructure, policy makers should place neutral host at the heart of its thinking and ensure that the regulatory environment, planning rules and taxation systems provide the right conditions to incentivise investment in multi-operator infrastructure offered on a neutral host basis. Below, we explore specific ways in which this thinking can be applied in rural areas.
Rural villages face the dual problem that more substantial and costly infrastructure is needed (taller towers to send the signal over a wider area, together with leased line / fibre backhaul over greater distances); whilst in these locations the MNOs receive less income from the smaller population in the surrounding communities.
Coverage obligations in the MNOs spectrum licences help to close some of the gap, effectively forcing through the spectrum auctions a cross-subsidy between the more attractive dense urban and the less attractive rural areas.
Neutral host operators too, have a major role to play, investing in infrastructure with a long-term business plan of up to 30 years and offering the first anchor operator the anticipated benefits of multi- operator infrastructure. Over half of WIG’s 2,000 towers are in rural communities, and we continue to invest on a commercial basis to close the rural coverage gap. We estimate that around two thirds of such remote rural communities are served by neutral host infrastructure.
At the edge of the networks, where the incremental revenues of end users dwindle and the costs of network provision are high, some government intervention is likely to be needed; and so it is that the government has struck a deal with the MNOs for the Shared Rural Network (SRN) – in which the MNOs will invest c£0.5bn to eradicate partial notspots and the government will invest £0.5bn into new towers to extend the coverage in complete notspots to achieve 90% landmass coverage from each operator. To make this investment deliver benefits in the most effective way for the taxpayers, we have two clear policy recommendations:
2. Second, government should consider taking the brakes off investment in rural areas by removing business rates on rural digital infrastructure in their entirety. At present non- domestic business rates unfairly penalise rural infrastructure by using the height of the tower (need for wide area coverage) as a proxy for the value of the rental stream of the asset, and by charging increased rates for multiple occupancy of the towers – removing the incentive to deploy neutral host infrastructure, and at odds with planning policies which seek to reduce the proliferation of single occupancy towers.
Delivering service to the same number of users can cost 10 times as much in business rates for rural towers than it would for an urban tower. This needs to be addressed as a matter of urgency.
WIG is committed to investment in 5G and the success UK digital economy, and we would be pleased to provide further information that may be helpful to your enquiry. Attached to this letter is further information about WIG, and about the neutral host business model.
Alastair Davidson Director
Wireless Infrastructure Group
Wireless Infrastructure Group (WIG) is an independent wireless infrastructure operator and one of the UK’s larger digital infrastructure challengers. The company builds and operates long-term, sustainable infrastructure including communication towers (masts) in rural and suburban areas together with networks to improve mobile coverage inside buildings, stadiums, along major transport routes and on city streets. The company is fully independent of any network operator and invests in high capacity neutral-host infrastructure that is made available to all mobile and wireless networks to use on a shared basis.
WIG is a pioneer at enabling connectivity in challenging environments including in rural communities, in buildings and along transport routes. More than half of WIG’s 2,000 communications towers are in rural areas. Recent projects include the construction of new high capacity communication towers in rural parts of the UK like Milton (at 50m this is the tallest UK telecoms tower in a decade), together with the deployment of neutral host infrastructure in offices and other venues such as Anfield Stadium, Lord’s Cricket Ground, the King’s Cross development as well as more than half of the UK’s top ten shopping malls. WIG provides mobile coverage for all four of the MNOs in the Excel centre, which has been converted by the NHS for use as the Nightingale Hospital during the COVID-19 outbreak.
Following its launch over ten years ago, WIG has invested in some 2,100 communications assets across the UK and has also established operations in the Netherlands and Ireland. The Company is headquartered in Edinburgh with key offices in Solihull, Bellshill and London. WIG is backed by Brookfield Infrastructure, a leading global infrastructure company, that is affiliated with Brookfield Asset Management, a leading global alternative asset manager with over $500 billion of assets under management.
Independent neutral host infrastructure unlocks new investment that will be critical to 5G - infrastructure funds alone have an estimated $160bn[1] dry powder available for investment in long term infrastructure assets. Globally, this is the preferred model with nearly two thirds of wireless infrastructure outsourced to neutral host players, as wireless operators take advantage of the long term, low cost capital in this sector; Europe falls behind with only 21% of such infrastructure held independently.
Independent neutral host infrastructure is twice as productive as vertically integrated infrastructure, leading to better connectivity. Independent wholesale only infrastructure operators can deliver a more efficient form of infrastructure. With a very different business model to the vertically integrated operators, they are incentivised to maximise utilisation of the assets, leading to higher productivity and ultimately better connectivity. Studies by EY for EWIA[2] have shown that independent neutral host infrastructure delivers a collocation ratio almost two times higher than vertically integrated assets.
Neutral host reduces infrastructure costs, whilst offering a pro-competitive solution to infrastructure sharing. Independent wholesale players invest in more substantial assets, designed for use by multiple network operators from the outset. They lower the economic threshold for rolling out new coverage with just one anchor customer and reduce the total cost of ownership for that customer by anticipating future sharing by other wireless operators.
By lowering barriers to entry or expansion, independent neutral host infrastructure encourages smaller wireless operators and innovative new applications (e.g. fixed wireless access, Internet of Things), and in addition to the three or four mobile network operators, independent neutral host infrastructure supports hundreds of other wireless networks.
The merits of the neutral host infrastructure model have been recognised by policy-makers and regulators alike. In its Future Telecoms Infrastructure Review (FTIR) DCMS published 23rd July 2018,
DCMS highlighted that
“Neutral host providers could help boost network coverage in the following areas:
• In remote rural areas, where there could be insufficient demand to justify multiple networks;
• In dense urban areas, where shared networks could be desirable in order to reduce deployment costs and minimise street clutter; and
• In offices and factories, where landlords may wish to self-deploy a single network (possibly through a third party service provider) to provide coverage and capacity within the building”.
DCMS followed up with the inclusion in its Statement of Strategic Priorities for telecommunications, the management of radio spectrum, and postal services (SSP) the publication on 18th July 2019, of its strategic priorities to help create the conditions for a competitive mobile market that supports investment and innovation in 5G including:
“Support the growth of infrastructure models (including ‘neutral host’ wholesale providers)
that promote competition and investment in network densification and extension”
Further afield, the European Electronic Communications Code (EECC) (11th December 2018 recognises the benefits of ‘wholesale only networks’ in Article 80 which seeks to provide greater investment incentives for neutral host networks through greater certainty and a lighter touch in the regulatory regime. The government anticipates transposing this into UK law by 21st December 2020 during the EU-exit implementation period, although this may be revisited in the light of the COVId-19 outbreak.
An independent study by the Rail Safety and Standards Board – “Connected Train and Customer Communications: Rail and Digital Industry Roadmap” (January 2018) identified the important role that neutral host can play in delivering greater connectivity along the railways:
“We believe that a neutral host option offers the most promising solution; delivering benefits to train operators, rail users, neighbours, rural towns and villages, highways, and the public sector. As a physically separate national telecoms network, it also offers diversity for other critical national infrastructure. In addition to serving the needs of the railway community, a neutral host managed solution could also provide connectivity for rural broadband, remote monitoring, construction, private and public sector organisations using fibre or wireless connectivity either from the trackside or from stations. Independent infrastructure providers provide not only operational expertise and business development for existing passive infrastructure they are also able to deliver much needed private funding to maintain and build additional assets”.
In its Connected Future report (2016), the National Infrastructure Commission included a case study holding up Aberdeen City Council as an exemplar of best practice. Aberdeen has a vision to maximise connectivity through world class infrastructure and platforms that secure the long-term vibrancy of the City's digital economy. Whilst other cities award short term Wi-Fi concessions, Aberdeen shaped its concession to target significant long-term investment in enabling infrastructure for 4G, 5G and other wireless services. They recognised that future densification of the UK’s 5G infrastructure will require small cells connected by fibre and in awarding a concession for the deployment of small cells connected by fibre they looked to a neutral host operator. The Council sought to maximise wireless connectivity by ensuring that new infrastructure would be available to all network providers and following a competitive tender process, awarded the concession to Wireless Infrastructure Group
(WIG) - an independent provider of wholesale infrastructure to the UK communications sector. In partnership with Telefonica O2, WIG has delivered the UK’s first multi-operator small cell network connected by fibre, and on this network O2 have launched the UK’s first centralised radio access network (CRAN).
In seeking to attract investment into wireless infrastructure and deliver the greatest choice of connectivity from all operators Transport for London in its Telecommunications Commercialisation Project is currently tendering for a commercial partner, seeking a neutral host 4G telecommunications infrastructure to support not only public cellular services but also the extension of the new Emergency Services Network in the London Underground.
More recently Brighton Mainline (Network Rail) begun a tender process in 2019 - “The proposal is to fit telecoms equipment to the Brighton Mainline to provide neutral host infrastructure with Mobile Network Operators (MNOs) paying to access the improved connectivity. The infrastructure must be available to all the MNOs”.
[1] Prequin Fundraising update page 5 (2017)
[2] https://ewia.org/wp-content/uploads/EY-EWIA-Economic-contribution-of-the-European-tower-sector- Published-A....pdf