INWIT’s vision for the future of towers

INWIT are leveraging their close MNO relationships to accelerate small cell rollout in Italy. But between their current deployment plans and the infrastructure needed by 2030 is a significant gap. TowerXchange spoke with INWIT CEO, Oscar Cicchetti about his vision for the future of towercos, INWIT’s plans and how quickly he anticipates infrastructure players will need to change to meet market demands.

TowerXchange: How does INWIT think 5G will roll out in Europe?

5G is coming. MNOs and vendors are working on the standard and on the key technologies needed for the new network features. Several trials are up and running in order to better understand and shape the potential business models, the risks and opportunities.

I’ll start by focusing on the two main features promised by the new standard: speed and latency.

In terms of speed, the expectation is to go from 100MB for 4G to 10GB delivered by 5G. In terms of latency, the new technology should allow to move from 30-60 milliseconds to just one millisecond. Even if we just consider these two key features, it’s immediately clear that 5G will not be just smartphones. Smartphones, even with an intensive use of video, don’t need these extreme features. That is to say that we have incredible capabilities ahead of us, but it’s not yet known what the customers and players will do with it. The whole industry is looking to 5G rollout to see what kind of use cases will be made possible by the new promised features.

Moving to actual 5G deployment, it’s clear that between now and 2020, 5G is expected to be deployed in the Far East and the US. The first use case in the US seems to be using 5G to provide ultra-fast broadband in areas where fibre is not available, while in Korea MNOs will probably start with the next wave of services, as there are many areas where 5G seems to be very promising, in particular robotics and smart production, augmented reality for professional and consumer applications, low latency connections for connected cars and platforms for connected objects.

Again, the main issue our industry has to address is a better understanding of use cases.

TowerXchange: 5G could be a game changer for players across the mobile value chain, where do you think the biggest changes or relationship shifts will take place?

If you look at what’s going on now, I think that the separation between infrastructure based business models and service based business models starts to become very clear. What happened in the US, where over 80% of wireless infrastructures are now managed by towercos, is taking place everywhere in the world. If we try to understand the European route to consolidation, it’s clear that there is a delay, because the tower industry is only taking off now. But, on the other hand, the towers have already been built up. The difference between Europe and the US is that there’s no big room for new BTS projects. Consolidation in Europe is and will be more focused on decommissioning than BTS. I expect Europe’s consolidation will come in the form of MNOs undertaking sale and leasebacks transactions or consolidation among existing towercos.

TowerXchange: How will infrastructure change over time?

The current situation is very clear: the infrastructure business models of towercos are real estate business models. Operators and investors look at towercos as real estate providers but they are something more than that.

In the path from 4G towards 4.5G and 5G, MNOs will be called to heavily invest in spectrum and new network technologies, but it is not yet clear where and how they can get an adequate return. As a result they’re increasingly willing to share, in order to reduce the total cost of ownership of their networks. If the operators decide to not only share towers, but also additional infrastructures, the towercos can fruitfully expand on those new services.

Let’s consider one of the most likely new sharing area: small cells. In the new network architectures, for several reasons, many more antennas than now will be needed. In a 5G fully deployed scenario, a single operator will need at least 10 small cells for each macro cell, so we’re talking about hundreds of thousands of small cells in single European country. It’s likely that MNOs will be willing to share among them a relevant part of this new assets and to use a third party as a provider. This translates into an opportunity for neutral host players able to offer “small cells as a service” and towercos are very well positioned to play this role. What’s happening in the US confirms this trend.

TowerXchange: What is INWIT currently doing to prepare for 5G rollout?

First of all, it’s worth mentioning that we are the leader in Italy for traditional towers. With our 11,000 high quality towers and special relationship with TIM, as well as the with other MNOs, mainly Vodafone, we are often chosen to provide the new macro towers which MNOs might need in densification projects.

Secondly, we believe that small cells will have a significant role, not only in 5G deployment but also in the path from 4G to 5G. We want to position INWIT as the main neutral host in this transition. We’re at a very early stage of the process, and are currently trying to pinpoint areas where shared micro-coverage is or will be needed in the near future.

In addition to that, we have noticed that operators at this stage are looking also for single operator small cells. They believe that in some cases having single operator micro-coverage can be a competitive advantage. We don’t want to lose this opportunity, so we include this offering in our portfolio. We now offer two services: coverage as a multi-operator neutral host and single operator solutions.

We have included 4,000 small cells in our plans to the end of 2018. This number for this stage of deployment is relevant but is in line with the market’s needs. Just a couple of years ago MNOs were planning hundreds, not thousands, of small cells but now the demand is taking off and we see in this a potential exponential growth.

Our goal is to become the neutral host of choice by quickly reaching an appropriate scale through agreement with the owners of the most relevant locations and in tune with the plans of our customers.

TowerXchange: Can you talk us through how you see your role in 5 years? Do you think it will change significantly?

We believe that we could move from a real estate business profile to something else. If towercos want to fully value the relationship with MNOs, they have to deal with a next generation infrastructure business model. I do believe that in this second wave of shared infrastructures there will be many opportunities for towercos.

I’ve already cited the first that is on the radar screen: small cells. Small cells are an infrastructure business, being characterized by long term contracts with landlords and MNOs. In term of numbers, we have two dots to be connected, the first is the few thousand small cells of today, the second is the hundreds of thousands in the longer term. The line between those two dots could take any shape and will be driven by the market. In five years it’s impossible to tell if we’ll be at 20,000 or 40,000 or even 80,000 small cells.

There are several different players who could get a slice of the small cells pie, such as facility management providers in buildings, but we believe towercos have a competitive edge as they know the MNOs and there are many commonalities between tower workflow and small cells workflow, such as dealing with landlords, providing energy and civil infrastructures, managing the relationship with MNOs.

TowerXchange: Are there other infrastructure elements to be considered in five years time?

I’d like to mention two opportunities that could materialize in the next five years or more: tower data centres and 2G refarming.

Let me start with tower data centres. As mentioned previously, one of the two relevant figures for 5G is the low latency, with robotics and self-driving cars as services that will need it. But the real latency that the user is interested in is the application latency. We experience how much time we need to get a video or a webpage, not the latency of the radio subsystem. If we consider this, to obtain an “end-to-end low latency” the content should be closer to the users, as it could take one millisecond to reach the antenna, but then nine or ten milliseconds to reach the app in the cloud.

One solution is mobile edge computing, which takes the content closer to the customer. And it’s reasonable to expect that this higher proximity to the customer should be at the tower base. In the future, towers should include a new structure called a tower data centre where MNOs can put a cache or protocol acceleration server to deliver “end to end low latency”.

Also for tower data centres we have a relevant advantage as towercos as we have the towers and space around, so if someone wants to build a distributed data centre there’s no better place.

As far as the refarming is concerned, we have seen the rollout of 2G, 3G and 4G and we are now implementing 5G; some of these technologies could be switched off sooner or later. There are differing points of view. 3G seems to be the most likely to be switched off because it was deployed to provide data services, but 4G and 5G can do that better than 3G. On the other hand 2G could have a longer life, as it will continue to be used by the visitors coming from less developed countries and by the first generation of IoT implemented on GPRS which will make it very hard to be switched off. But, on the other hand, 2G is on frequencies that could be better used in the more remunerative 4G/5G services. It seems reasonable to guess that in the future operators could agree to have just one 2G network using a limited shared spectrum such as 5MHz to free up more spectrum for 4G or 5G. Should this happen a third reliable party like a towerco can manage the shared network.

TowerXchange: We are at the beginning of a huge evolution for the mobile industry. We’ve talked about opportunities, but what does INWIT see as the biggest threats for towercos over the coming years?

In terms of threats I think first of all it’s about the health of our customers. The mobile industry needs to grow and if the operators stopped investing in and growing their businesses, we would fail with them. We need the mobile industry to continue to be relevant, but there’s no indication this could be a real threat.

Another threat we need to consider in our business model is RAN sharing. An operator could decide not to have its own nodes on the towers, but to use nodes of other operators. This issue can be easily addressed through appropriate contractual provisions. RAN sharing should be either forbidden or towercos can charge more for it. Currently, there are very few cases where RAN sharing is taking place in Europe.

TowerXchange: What are your thoughts on network virtualisation? Do you see this as an opportunity to extend your offering?

Network virtualisation is something that is happening now. In general, we could say that the network intelligence will move towards two opposite trends: virtualization will move network features from the borders (Radio Access Nodes) to the core while the mobile edge computing will move contents from the core to the borders (tower data centers).

In concrete terms, we are already seeing the operators implementing cloud RAN architectures where, among other features, a single baseband module will be serving several radio modules. So there would be one master node with baseband and some other satellites without it. This can translate into an opportunity for the existing tower contracts because no changes are expected in the towers without baseband modules as they will maintain radio unit and antennas, while in the master towers MNOs could require more space and consequent price uplift could be asked.

TowerXchange: What willl telecoms infrastructure look like in 2030 and what role do you expect INWIT to play?

I’d like to quote a GSMA white paper on 5G that says it will be likely that in the future the operators will agree to operate just one network and transform themselves into service providers. This was written by the operators themselves. Whatever date in the future we choose for this, the trend is that the operators will be pushed to share more. This could be the final twist in the story and it’s likely that towercos are well positioned to partner with operators.