Connected Research

Union policy research in the 21st century

T-Orange to build afresh?

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Concluding the week with some news which has only just come to light, it’s been rumoured that T-Orange, which said today that it had successfully completed its joint venture following regulatory approvals earlier this week, and which may – or may not – be about to re-brand itself TOM, is considering building a brand new network for itself.

T-Mobile is thought to have been discussing with its network build partners, Nokia Siemens and Huawei, building out new base stations right across its spectrum coverage, from 900MHz to 2.6GHz. This would enable it to offer seamless services across different frequencies and regardless of the type of handset being used by the consumer, as well as improved capacity based on a network offering greater speed and efficiency and, therefore, a more attractive consumer prospect. Building a new network from scratch means offering such potential to consumers earlier than rival operators, providing a commercial boost to the JV, while others have also commented that building a new network is, in cost terms, likely anyway to be no more expensive than T-Mobile integrating its network with that of Orange – itself likely to be a significant project – since new technologies have emerged which allow base stations to be built on the basis of low power and which are, therefore, both cheap and, presumably, energy efficient.

These are all important considerations not least on top of last week’s news from Ericsson that the 400m mobile broadband subscriptions now generate more network traffic than 4.6bn mobile subscriptions [registration required; limited viewing time]. Worldwide data traffic has surged by 280% in each of these last two years, clearly putting immense and increasing pressure on mobile network capacity as well as on capital expenditure resources, since data revenues are not expected to surpass mobile revenues anywhere in the world until 2014 (when Japan is likely to be the first).

It’s just a rumour – and indeed, the reports suggest that Orange was somewhat of a cooler partner to the idea. If true, however, its significance will lie in two things. Firstly, from a trade union perspective, such an activity would see the creation of network build jobs during 2012-2014 once the JV has decided its strategy as a single operator – a welcome boost on top of what is likely to be job losses as the operators seek to realise efficiency gains of £3.5bn in network operation and capital expenditure savings, as well as other synergies. As the reports suggest, the move towards higher frequency services is likely to mean extensive network re-builds for other operators so there may well be knock-on effects on network build jobs in other areas, too.

Secondly, it should be recalled that one of the reasons that the Office of Fair Trading withdrew its opposition to the JV was the agreement reached with 3 UK over access to the JV’s network. It is to be hoped from a regulatory and competition perspective that this agreement was watertight as regards any new network instigated by the JV, and did not confine itself to access to existing base stations. These pages have argued previously that public competition policy was, as a result of this private agreement, essentially made subject to an arrangement which was not open to public scrutiny, while commentators at the time suggested that a focus on one or other network of the merged entity may well be to the detriment of maintenance investment in the other, and to any commercial agreements reliant on the other network. Such suggestions may well come true if the agreement is not ‘future proofed’ as regards access by 3 UK to any future networks the JV builds out jointly.

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Written by Calvin

01/04/2010 at 5:56 pm

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