How Strategic is Ownership or Operation of an Access Network?

For a very long time, one vital "core competence" for a fixed network telco might have been said to be its right to operate a monopoly access network. By definition, a legal barrier of entry to all other competitors is a rather notable advantage. 

But the value of that advantage is challenged under competitive conditions. When there are at least two ubiquitous fixed networks, or two or more broadband networks, plus mobile, fixed wireless and satellite access providers, one might argue the uniqueness of any access network is lessened, and presumably therefore the value of owning any single set of network facilities.

Few competitors would argue that network ownership is an insignificant source of advantage. But contestants might disagree about the extent of value, in a competitive market. And that also speaks to new questions about "core competence," which also relates to strategic business value.

What is a telco's core competence? It is a tougher question that sometimes seems to be the case. A core competence is not just "something we are good at," but a unique attribute that provides significant business advantage.

Some would say the three key attributes include: 

1. It is not easy for competitors to imitate.
2. It can be reused widely for many products and markets.
3. It must contribute to the end consumer's experienced benefits and the value of the product/service to its customers.

For that reason, the question now is asked with reference to network sharing agreements that have become more common in the mobile business. 

To be sure, one might argue such network sharing is and also somewhat involuntarily agreed to in the fixed network business, where mandatory wholesale policies and steep wholesale discounts are a feature of the regulatory landscape. 

But network sharing, where two or more competing mobile service providers agree to share towers or radios, for example, provides the more-challenging questions about the strategic value of networks. 

The Czech units of Telefonica and Vodafone could be on the verge of entering into a network-sharing agreement that is said to lower Telefonica's costs by more than CZK 4 billion (€155 million) over 15 years.

The natural question is the value of a mobile access network. Does it provide a unique advantage? Some service providers that have outsourced towers or even operations of the radio network seem to be saying that the network does not, in fact, provide unique value. 

One wouldn't want to stretch the argument too far. The use of the radio network also implies use of the spectrum, which might not be a completely unique asset, but certainly is not easy for competitors without spectrum to emulate, and is reused widely for all of a mobile service provider's products. 

One might argue that spectrum also contributes directly to an end user's experience. In those senses, spectrum, more than tower networks, might be said to provide a core competency. But that would be a rather "passive" source of advantage. 

Rights to use spectrum mean only that a service provider using licensed spectrum can afford to buy it. No particular operational or marketing skills are inherently involved. 

Scarcity remains a valuable attribute of spectrum-based and wire-based networks, in many or most cases. But just how valuable is a new question, as mobile operators start outsourcing or divesting assets related to spectrum, such as radio networks.