The 5G technology is potentially transformative but will need network operators to invest at a time when profits are constrained by flat revenue.
But the investment profile might change given the heightened prospect of network operators sharing infrastructure.
Sharing can reduce the cost of deploying a network but might also reduce competition, which can spill over into higher prices and less innovation.
“The trade-off between the costs of deployment and infrastructure competition may become more pronounced given the potential densification of cell sites required for 5G,” it said in a report on the performance of the mobile market.
However, those arrangements are likely to facilitate 5G coverage, particularly in more rural.
The Rural Connectivity Group, a tie-up between Spark, Vodafone and 2degrees, could play a key role in hitting more remote regions.
The group plans to deploy 520 cell sites and share spectrum to improve rural coverage as part of a Government initiative, which the commission said could be reused to deploy 5G technology more cheaply.
“In this way it is possible that it will be economic to provide 5G services in areas where it might otherwise be uneconomic.”
The group’s structure is covered under existing telecommunications law, meaning future arrangements might not need authorisation by the commission.
Any new infrastructure sharing deals to back a 5G roll-out might cover access for third parties so the commission expects to receive any proposals causing competition concerns.
Spark has switched on the first 5G wireless broadband in Alexandra and will roll that out to five other towns before Christmas.
It expects its capital investment in building the 5G network can be met by its existing envelope of 10-11% of revenue and has forecast total capital spending of $370 million in the year ending June 30.
It spent $417m in the June year, of which $118m was on its mobile network.
Vodafone’s capital spending programme is forecast to rise to $300-$350m in the March 2020 year, up from $253m in 2019. The country’s biggest mobile carrier is poised to switch on a 5G network in Auckland, Wellington, Christchurch and Queenstown in December.
Earlier this year Infratil chief executive and Vodafone NZ chairman Marko Bogoievski said the nation can’t afford to invest billions in new technology when there are opportunities to rationalise that spending through co-operation and sharing.
Telecommunications Commissioner Stephen Gale said the allocation of spectrum in the upcoming auctions will be of particular importance to future competition.
“In our view there is a need for wholesale and retail competition matters to be at the forefront of decisions relating to the Ministry for Business, Innovation and Employment’s upcoming allocation of 5G spectrum,” he said.
The report also repeated an earlier warning excluding Chinese supplier Huawei Technologies from the 5G roll-out could affect the development of competition and the scheme’s overall cost. – BusinessDesk
