Economics of Strategic Network Infrastructure Sharing: A Backup Reservation Approach

In transitioning to 5G, the high infrastructure cost, the need for fast rollout of new services, and the frequent technology/system upgrades triggered wireless operators to consider adopting the cost-effective network infrastructure sharing (NIS), even among competitors, to gain technology and market access. NIS is a bargaining mechanism whose terms and conditions must be carefully determined based on mutual benefits in a market with uncertainties. In this work, we propose a strategic NIS framework for contractual backup reservation between a small/local network operator with limited resources and uncertain demands, and a more resourceful operator with excessive capacity. The backup reservation agreement requires the local operator (say, operator A) to reserve a certain amount of resources (e.g., spectrum) for future sharing from the resource-owning operator (say, operator B). In return, operator B guarantees availability of its reserved resources to meet the need of operator A. We characterize the bargaining between the operators in terms of the optimal reservation prices and quantities with and without consideration of their competitions in market share, respectively. The conditions under which competing operators have incentive to cooperate are explored. The impact of competition intensity and redundant capacity on performance under backup reservation are also investigated. Our study shows that NIS through backup reservation improves both resource utilization and profits of operators, with the potential to support higher target service levels for end users. We also find that, under certain conditions, operator B may still have the incentive to share its resources even at the risk of impinging on its own users.