A baseline Model for the Relationships between Network Operators and Tower Companies

TL;DR

This paper proposes a baseline business model for network operators and Tower Companies, analyzing how outsourcing tower management impacts costs, pricing strategies, and market competition using optimization and game theory.

Contribution

It introduces a novel baseline model for network operator and Tower Company relationships, combining centralized optimization and game theory analysis.

Findings

Outsourcing towers reduces operational costs.

Price reductions can attract more customers without harming market share.

Market competition must be carefully managed to prevent destabilization.

Abstract

The introduction of virtualization techniques in radio cellular networks allows the emergence of a business based on the outsourcing of towers hosting antennas and operated by the so-called Tower Companies (TowerCos). In this paper, we develop a baseline business model for studying the potential relationships between network operators and TowerCos. It turns out that the gain in operational costs achieved when network operators outsource the management of towers can be gracefully utilized to reduce prices so as to attract more customers. The price drop has however to be carefully realized so as not to break the market share between operators and to preserve competition. To prove this claim, we adopt in a first step a centralized optimization formulation. In a second step, we develop a game theoretic framework.