Is open RAN a serious challenger to the mobile infrastructure market?
Research Director, Networks and 5G Analysys Mason
Senior Analyst, Social and Region Research GSMA Intelligence
Principal Analyst, Mobile Infrastructure Omdia
CEO Strand Consult
With the industry buzzing over the potential for open RAN to overhaul the current status quo in the mobile equipment sector, Mobile World Live asked top analysts if the strategy can live up to the hype and who wins if so.
Q: So far, open RAN seems to be more of a PR success than a commercial one: is it just the latest hype or does the approach have teeth?
John Strand (JS) It’s hype. GSMA figures show more than 175 commercial 5G networks have been launched globally. These are classic RAN installations which support 2G, 3G, 4G and 5G in one base station. There is only one commercial open RAN installation, Rakuten Mobile in Japan.
Open RAN only supports 4G and 5G and therefore it is not a 1:1 commercial alternative for 5G networks.
It is too little, too late to make a difference when it comes to 5G. If open RAN gets the success its proponents predict, it will account for less than 1 per cent of the 5G mobile sites in 2025 and not more than 3 per cent in 2030.
Caroline Gabriel (CG) It’s certainly not commercially important yet but that is to be expected when most of the specs have not been finalised, so while there is considerable hype, it’s unfair to dismiss it as mainly PR.
The substance behind the chatter lies in two areas:
- Considerable investment of money and resources into bodies developing solid specs, the O-RAN Alliance being the highest profile of course, but also important are Small Cell Forum (for Split 6, which is possible in open RAN but not prioritised, but important for enterprise networks), and Open Networking Foundation (ONF) SD-RAN. The ONF’s involvement in any initiative gives it credibility because it is an actual engineering organisation rather than just an alliance.
- Strong effort by enough major operators to move the market, in terms of proof-of-concepts, trials and financial support for small vendors’ development and testing processes. Rakuten Mobile, Reliance Jio, Verizon and others have their own implementations of course, so not fully standard, but they are giving confidence to others by planning to deploy at scale in the short term. European operators are far more cautious on timescales for open macro RAN and aren’t very specific about what they really mean by open RAN (for example, it is just open fronthaul or the full architecture) but again, they are putting real effort and money into this, not just lip service.
None of this guarantees success (it didn’t in WiMAX for instance) but it makes open RAN more than just a marketing effort or a way to pressure large vendors.
Remy Pascal (RP) We agree the commercial activity does not match the level of coverage and discussions, however in recent months we observed that some of the early announcements started to translate into actual revenue for the vendors involved. We expect open, virtualised RAN (vRAN) revenue to grow in 2022 as more operators move from small scale trials and pilots to sizeable commercial deployments, and also thanks to greenfield deployments like Dish Network in the US, 1&1 Drillisch in Germany and of course Rakuten Mobile in Japan. But to put things in perspective, we estimate open vRAN will still represent less than 5 per cent of the total RAN market in 2022. Note that we refer to open vRAN specifically, which describes an implementation where open and virtualised principles are applied rather than just open RAN, as this is the opportunity we chose to size.
Emanuel Kolta (EK) Next to sustainability, privacy and recent rearrangements in the global supply chain, open RAN is one of the most discussed technology topics in the telecommunication industry nowadays. I believe this is not just a PR success or just the latest hype: it is more like the beginning of the adoption in the s-curve and the early years of a powerful paradigm shift.
Q: Who wins: operators, users or system integrators?
JS Open RAN's solutions are something operators are testing. Most recently Deutsche Telekom has told about a test in Berlin. While it sounds like an impressive development, the test is a literally a schoolyard outside a DT research centre.
Just as children play with Lego, operators around the world play with open RAN. The winners are the media which can sell adverts to companies seeking to market open RAN. I find it difficult to see how customers can benefit from a solution which will only be available on a few mobile sites by 2030. Imagine if you could only use voice or other services on less than 3 per cent of the mobile sites in a country.
CG Almost certainly companies that are looking to deploy enterprise, private and rural networks, not necessarily established MNOs, but also specialised operators. It seems very plausible a parallel ecosystem and platform could emerge based around relatively small and simple cells, which would adopt various open interfaces from scratch. The timing is good as the demand for these supplementary networks rises.
If open RAN in its broadest sense, full architecture; multivendor networks; and broad ecosystem, does become dominant in the macro RAN in the later 2020s, and it’s still a big if, the operators should win because they will have access to more innovation and choice.
Integrators will win in the short term, as long as the multivendor networks require a great deal of effort to deploy and optimise, but in the longer term the success of open RAN at scale seems to rely on reducing the cost and involvement of systems integrators and making the whole network more automated and easy to implement (another big if).
In theory users will win if networks are more agile and can support a wider range of services more flexibly, a key goal of vRAN and open RAN. There’s some talk of users gaining from lower prices if operators can deploy RANs more cheaply: in my view the cost difference won’t be huge in the macro RAN (where there isn’t the opportunity to commoditise that there is in smaller cells), and it’s questionable whether savings would be passed onto users when operators need to reduce their operating expenses while also supporting increased levels of usage and traffic.
RP Operators have a wider choice of vendors and can mix-and-match. Those not convinced by open RAN can always continue to buy integrated solutions. So for operators it’s positive at least in terms of choice.
Whether or not operators will be able to lower network total cost of ownership (TCO) is not obvious. There are a lot of variables and it’s difficult to generalise.
We also think the capex and opex savings, if any, will be more driven by vRAN rather than the opening of interfaces. As for vendors, challengers collectively are likely to gain market share at the expense of incumbents, specifically current vendors which are not, or less supportive of the movement.
EK Depends. Everyone can win, as the nature of open interfaces carries the promise of more choice and innovation in the supply chain. This means lower prices and better position for operators, affordability and faster deployments for users and a huge addressable market for system integrators.
Q: Why hasn’t open RAN been done before?
JS The infrastructure market has consolidated from 20 top providers in the 2G market in 1989 to 12 in 1999, to five in 2019. Many of the first-generation enthusiasts did not make it out of the 1G analogue cellular world into the world of 2G digital. Over time the GSM standards family (GSM, WCDMA, LTE et cetera) became the de facto basis for the roadmap, the standard for global economies of scale and the industry benefits such as lower unit costs. Those equipment suppliers which focused on CDMA and analogue exited the market. In that period BT reduced its network portfolio from 50 vendors to four and saved £1 billion in three-years. It believes too many vendors increase costs and complexity.
Simply put, the business case for open RAN did not exist in the past, nor does it today.
However, there are always opportunities to market pie in the sky ideas. Open RAN is being driven in the US by some domestic technology companies seeking government support to build and run their business. It is cheaper and probably easier than having to go out and collect money from investors who will be critical of these companies' opportunities.
In Europe, open RAN has been launched as an alternative to Huawei and ZTE, with the aim of allowing operators to maintain their cooperation with Chinese players. It is difficult to know where the commercial value should come in the short, medium and probably long term.
CG Some elements of the RAN are open, the air interface based on 3GPP specs, any phone working with any network and so on. The main focus of opening up the RAN in other layers has been the fronthaul between baseband and radio. As you know, that’s been tried before with CPRI and OBSAI et cetera, but these resulted in only limited interoperability because implementations were vendor-specific and so swap-out remained expensive and difficult, a critical issue for many MNOs. There’s no guarantee that wouldn’t happen again. To keep the interfaces fully open, operators have to: a) accept some trade-offs since a lot of proprietary additions do improve performance; b) be in a more powerful position to insist on full openness, not box-ticking, this time.
This relies on having a more competitive set of vendors, but the big question is whether the new entrants can develop sufficiently powerful radio units to support advanced macro 5G networks to the same level of quality-of-experience as an Ericsson unit for instance. Nokia, NEC and Samsung are important in this respect because they have decades of experience of developing radio, but they’re hardly the plucky small start-ups the open RAN PR likes to highlight.
In terms of the fuller Open RAN architecture (RIC et cetera), it hasn’t really been tried before because it’s tied into RAN virtualisation, which will be a very gradual process for most operators, but is now becoming urgent for a few leaders and of course new entrants.
RP Open RAN has been discussed for years, but external factors including vendor bans mean some operators have been incentivised or in some cases forced to diversify their supply chain and look for alternatives, so it accelerated this movement. The work done by organisations like the O-RAN Alliance and the Telecom Infra Project have also played a key role.
EK In the past five years, vendor market concentration reached a critical point: The market share of the top three was more than 64 per cent during 2020. Virtualisation, escalating political and trade conflicts and the enormous cost of 5G deployments pushed the need for larger supply and lower prices, and the potential to mix-and-match.
Q: Vendors have produced interoperable equipment for years so what changes with open RAN?
JS The way the media portrays the mobile infrastructure market is grotesque. One often gets the perception of Huawei, Ericsson and Nokia sitting in 100 per cent of the market. It's not true, the facts are that RAN is important, but how important is just one part of an operator’s infrastructure requirements. The total value of the global RAN market is less than $35 billion annually. This figure should be analysed in comparison to the global mobile capex of $170 billion and also in relation to annual ARPU, representing less than 3 per cent of operators' total. Put it in relation to the operators' sales and marketing costs, then the RAN costs are de minimis.
Too much importance is attached to the RAN and, in particular open RAN. If you look at 4G, the value was not created in the mobile networks but on the smartphones and in the apps OTT players developed. When it comes to 5G, the bulk of the value will still be created on the devices along with the public clouds AWS, Microsoft and Google will deliver to the market.
I find it very difficult to see which services can be developed at the top of the RAN and how open RAN can create a value for operators’ customers.
CG This is covered in my comments above [in question 3].
RP Yes, interfaces between the user device and RAN, and between the RAN and core, were already opened. This is why operators can select different radio and core network vendors or use multiple RAN manufacturers with a single core provider. Interoperability within the RAN domain was also possible via bilateral agreements between two vendors, generally at the request of their client, but it was relatively rare because vendors were not very supportive and also because it added complexity. Specifications like those from the O-RAN Alliance for the fronthaul interface enable mixing and matching.
EK Vendors did produce some semi-open solutions, but the integration of other suppliers was time-consuming and costly. The core promise of open RAN technology, to be able to mix-and-match efficiently, was very far off.
Since then, the technology developed significantly, operators committed to several trials and the open RAN ecosystem matured with experienced system integration providers.
Q: With current leading equipment vendors now committed to open RAN, will the market ultimately settle back to the status quo?
JS I don't know what you mean by the status quo. The fact is network technologies are, and always have, evolved faster than operators can implement them. We live in a world where over 1 billion people will still use 2G by 2025 and where there are countries that have not yet implemented 4G.
The O-RAN Alliance develops technical specifications for 4G and 5G RAN internal functions and interface, not for 2G and 3G. It is not a standards development organisation (SDO) like the 3GPP, but instead is a global partnership between seven regional SDOs. The Alliance is a closed industrial collaboration developing technical RAN specification on top of 3GPP standards, which define the technical specifications for an end-to-end mobile cellular network spanning 2G to 5G.
It is hard to believe open RAN is helping to speed technological development: in 5G this is driven by the work of 3GPP. In addition, there is an impressive development among OTT players which emerged in 4G, alongside cloud services.
The less people know about the mobile market, the more enthusiastic they are for open RAN. After 25 years as a fortune teller in this industry I find it hard to see where open RAN will make a difference for operators’ shareholders in the short, medium and perhaps long term.
CG There’s certainly a scenario where the big vendors committed to open RAN, especially Nokia, will dominate large contracts because they bring the engineering expertise and the safety factor. Samsung could effectively replace Huawei, especially in Europe, though operators supported Huawei heavily to enter the market in the 3G era to broaden their vendor list and put pressure on Ericsson, Nokia, Alcatel et cetera, which resulted in consolidation of the other suppliers. The same could happen again: there probably isn’t room for more than four or five equipment providers in the macro network and, as stated above, it’s possible small cells and private networks will evolve differently.
The wild card is the platform approach, such as Rakuten Symphony or others likely to emerge. If heavily adopted by large operators, these might provide the scale for smaller vendors to grow, plus mitigate risk for operators. However, they move the lock-in to the controller of the platform, and in the short-to-medium term, look more suited to relatively plug-and-play or greenfield environments than big messy macro networks with all their legacy equipment.
RP Currently, leading vendors’ level of commitment to open RAN varies a lot.
Vendors which are fully supportive are likely to gain market share at the expense of others. But each operator has their own strategy and it’s difficult to predict what will happen. Some operators are determined to introduce new vendors regardless of their existing suppliers’ attitude towards open RAN, so even if an incumbent supports open interfaces, this does not guarantee it will maintain its position.
Others have no concrete plans to introduce additional vendors, but they are nonetheless asking their providers to comply with open RAN specifications to provide future options. Overall, incumbent vendors will be more challenged but they still have a lot to offer including their RAN expertise, portfolio breadth and competitiveness, economies of scale and service capabilities, so they will not be suddenly supplanted by upcoming vendors.
EK Not all major vendors are committed to open RAN. Those which are still don’t have a full open RAN portfolio ready yet. I don’t expect the market will ultimately settle back, it will constantly develop, fuelled by different technological, economic and political factors. New open RAN providers are also expected to consolidate, takeovers of some players through outright purchase or merger is expected in the near future, too.