Mobile network operators are experiencing significant financial strain due to the substantial investments required for mobile Internet infrastructure. The GSMA, in collaboration with Kearney, has released a report highlighting this issue, unveiled at the Mobile World Congress. This report subtly calls for financial assistance from other industry stakeholders, particularly large content and application providers (CAPs) and cloud firms, aligning with discussions within the European Commission on ‘fair share’ contributions to network infrastructure.
The Disparity in Investment Burden
Mobile Operators’ Financial Strain
The report reveals that mobile network operators have been investing an average of $127 billion annually in mobile Internet infrastructure over the past five years. This staggering sum, which does not include spending on end-user devices, is predominantly funded by mobile operators. However, when end-user devices are factored in, the total annual investment nearly doubles to $244 billion. Despite this increase, the percentage attributed to mobile operators drops to 45%, starkly highlighting the financial burden they bear. This broader definition of investment underpins the GSMA’s objective to shift some financial responsibility to CAPs and cloud companies, who currently contribute a smaller fraction of the total expenditure.
The GSMA’s report brings attention to the disparity in investment burden, as CAPs and cloud firms tend to focus their investments on specialized areas like backbone infrastructure and CDN infrastructure. The figures suggest that despite the significant contributions from CAPs and cloud firms, their investments are merely a fraction of what mobile network operators spend annually. This apparent imbalance not only strains mobile operators financially but also affects their ability to invest in other crucial areas, such as expanding rural coverage and implementing new technology like 5G Standalone infrastructure.
Contributions of CAPs and Cloud Firms
The GSMA report acknowledges the significant investments made by CAPs and cloud firms in developing backbone infrastructure for interconnecting data centers and establishing CDN infrastructure. However, these contributions, though valuable, represent a small fraction of the capital expenditure shouldered by mobile network operators. The report suggests an inequity in the distribution of financial burden, as operators derive less economic benefit from these joint efforts compared to other digital players. This disparity points to a need for more collaborative and balanced investment strategies to ensure sustainable growth in the telecommunications industry.
Further analyzing the financial dynamics, the report emphasizes that while CAPs and cloud firms focus their investments on backbone infrastructure, mobile network operators are tasked with sustaining and enhancing access infrastructure. This critical segment connects end users to the network and demands significantly higher investments. The report calls attention to the need for a fairer distribution of financial responsibilities to maintain and develop the essential infrastructure that supports the digital ecosystem. The GSMA’s advocacy reflects a growing sentiment among mobile operators that the current financial model is unsustainable and requires a re-evaluation to ensure long-term viability and innovation.
Dissecting the Financial Burden
Access vs. Backbone Infrastructure
The GSMA report delves deeper into the financial burden faced by mobile network operators, revealing a significant disparity between investments in access infrastructure and backbone infrastructure. According to the analysis, investments in access infrastructure to connect end users dwarf those in backbone infrastructure by a factor of 19. This indicates a massive financial commitment by mobile operators to ensure reliable and widespread connectivity for consumers. In contrast, CAPs and cloud firms focus their investments on backbone infrastructure, which, while important, represents a mere 2% of the total outlay on mobile Internet connectivity infrastructure.
Additionally, the expenditure on core and backhaul infrastructure is estimated to be eight times greater than that on backbone infrastructure. This further highlights the substantial financial burden borne by mobile network operators in maintaining and expanding the mobile Internet infrastructure. The GSMA contends that while CAPs and cloud companies play a role in developing backbone infrastructure, their contributions fall short of what is required to sustain a robust and comprehensive network. This imbalance calls for a reassessment of investment strategies and financial responsibilities within the digital ecosystem to ensure equitable and sustainable growth.
GSMA’s Call for Regulatory Support
In light of these financial challenges, the GSMA advocates for a more balanced deployment of investment and calls on governments to implement regulatory frameworks that incentivize investment in mobile infrastructure. The association suggests simplifying spectrum policies and ensuring a fair and sustainable financial environment for operators. This push for regulatory support aims to address the systemic inequities in the current investment landscape and promote a more collaborative approach to infrastructure development. The GSMA’s recommendations emphasize the need for forward-looking policies that support long-term innovation and connectivity in the telecommunications industry.
Vodafone echoed this sentiment with its publication, “A Framework for Responsible Use of Networks,” which calls for regulatory measures to ensure fair contributions from all digital players. Vodafone’s statement highlights the environmental impact of unchecked network usage by over-the-top (OTT) players, who leverage operator networks without adequately contributing to network costs or prioritizing service efficiency. The mounting capital spent on capacity expansion, according to Vodafone, detracts from other critical investments such as rural development and the establishment of 5G Standalone infrastructure. The call for regulatory support underscores the industry’s collective push for a more equitable investment environment that fosters sustainable growth and innovation.
Vodafone’s Advocacy and Industry Consensus
Vodafone’s Position on OTT Players
Vodafone’s position on OTT players is that they should contribute more fairly to the costs of network infrastructure. The company’s statement combines environmental considerations with a critique of OTT players who leverage operator networks without prioritizing service efficiency or contributing adequately to network costs. Vodafone argues that the mounting capital spent on capacity expansion detracts from other critical investments such as rural development and the establishment of 5G Standalone infrastructure. By calling attention to the disproportionate financial burden borne by mobile operators, Vodafone seeks to highlight the need for a more balanced and sustainable approach to network investment.
This perspective is not unique to Vodafone; other mobile network operators are likely to echo similar sentiments during the Mobile World Congress. The GSMA’s report provides a platform for operators to raise awareness of financial inequities and advocate for more collaborative investment strategies. The overarching narrative within this discussion is a call for a re-evaluation of financial responsibility in the telecommunications sector. Mobile operators argue that the current model, where they bear the brunt of investment costs, is unsustainable and hinders long-term innovation and connectivity.
Amplifying the Call for Fair Share Contributions
Mobile network operators are facing significant financial challenges due to the heavy investments needed for mobile Internet infrastructure. In response, the GSMA, in partnership with Kearney, has issued a report shedding light on this issue, which was revealed at the Mobile World Congress. The report indirectly calls for financial support from other industry stakeholders, particularly large content and application providers (CAPs) and cloud companies. This aligns with ongoing discussions at the European Commission regarding ‘fair share’ contributions to network infrastructure. The idea is that these major tech firms, who benefit immensely from the network, should contribute to the costs of development and maintenance, ensuring a balanced distribution of financial burdens. This move is seen as essential to sustain and expand robust mobile Internet services globally. Such collaboration could ease the financial strain on mobile network operators and promote a more equitable financial ecosystem within the industry.
