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How to Shrink the Bill for Your Chinese Takeout

Service providers forced or keen to replace Huawei in their 5G networks might now have several options for reducing the cost.

Iain Morris

September 24, 2019

10 Min Read
How to Shrink the Bill for Your Chinese Takeout

Bought equipment from a Chinese vendor that now smells funny to security watchdogs? Worried that Xi Jinping's minions are using "backdoors" in your network? Interested in going Nordic after spending years on Chinese fare? Fear not, because substituting non-Chinese equipment for Huawei and ZTE might not have to come at exorbitant cost and with major hassle.

In Europe, service providers have been worried that a Huawei 5G swap-out -- mandated by government authorities bowing to US pressure -- would shred their business plans. Ripping out Huawei's 5G equipment would hinder the rollout of 5G services, they have argued. Worse, the cost of replacing Chinese 4G gear, to guarantee compatibility with 5G products from a non-Chinese vendor, could run to billions of dollars, they insist.

But perhaps not. Several options may be available to operators that want to switch from a Chinese to a non-Chinese vendor in the 5G radio access network (RAN). And while each comes with caveats, and none originates with a fully impartial source, they all merit attention in a market where moving from one supplier to another is still perceived to be far too hard.

The future's O-RAN
Interoperability in telecom networks used to be an arcane topic for the industry's technical professionals. Suddenly, it is at the crux of the Huawei debate. Operators that have relied on Huawei's 4G RAN equipment cannot simply use another vendor in the 5G network, they say, because the two suppliers might be incompatible. At fault is the so-called X2 specification, which supports "baseband" communications between 4G and 5G technologies. This, it turns out, is about as open as Trump's vision of the US-Mexican border.

Figure 1: Building Walls Mobile networks are not as open as standards bodies would have us believe. Mobile networks are not as open as standards bodies would have us believe.

Even before Huawei became such a pariah, some of the world's largest operators had clubbed together to find solutions. Through an association called the O-RAN (standing for open RAN) Alliance, which also includes numerous vendors, they are developing alternative specifications that should, in theory, allow them to mix and match RAN suppliers.

Then, last week, Japan's NTT DoCoMo, one of the world's very biggest telcos, unveiled plans to roll out "pre-commercial" 5G services based on the O-RAN Alliance's X2 profile specifications. DoCoMo has been testing baseband equipment from Finland's Nokia in conjunction with radio units provided by Japan's Fujitsu and NEC. So far, there is no indication it will use a different 5G baseband vendor from its 4G supplier. "But they are saying they can do it," says Gabriel Brown, a principal analyst with Heavy Reading. "There is no question at all this is a big statement about O-RAN."

The intention is not to aid a Huawei swap-out, but the technology could possibly help service providers facing that dilemma. If governmental concern is restricted to the 5G network, an operator should be able to keep Chinese vendors in the 4G frame by taking advantage of the O-RAN Alliance's new specifications. It might even avoid the potentially huge cost of replacing Huawei's installed 4G gear.

There are some major caveats. The systems are untested, for one thing. Nor did Huawei develop its 4G RAN equipment with O-RAN Alliance specifications in mind. Indeed, the Chinese vendor remains firmly on the outside of that group, having previously voiced doubts about the performance of equipment based on open RAN technology. Moreover, some authorities may demand that Huawei be excluded entirely, especially if they realize that 5G will at first rely heavily on the underlying 4G network.

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

The Finnish line
Nokia has been trying to push an alternative workaround that would let any telco introduce a new 5G vendor without ditching Huawei's 4G products. Its solution takes advantage of an emerging radio feature called dynamic spectrum sharing (DSS), which allows spectrum to be moved between different radio technologies as and when needed.

That feature is one that all operators may eventually need as they grapple with emerging bandwidth demands. But introducing it now would provide an interoperability fix, according to Marcus Weldon, Nokia's chief technology officer, who spoke at length on this topic with Light Reading in April. Essentially, the service provider would buy DSS radio equipment from its new 5G vendor and initially run that in 4G mode, using some existing 4G spectrum. This "overlay" would guarantee interoperability between the 4G and 5G systems, says Nokia. And roaming between different vendors' 4G systems would happen at the packet core level, as it always has, explained Weldon.

But if it sounds good in theory, there has been little evidence of it in practice. Weldon acknowledged that Vodafone, Europe's most vociferous telco opponent of the anti-Huawei campaign, is not interested. "I think that they want to more aggressively use their incumbent 4G base as part of the 5G evolution," he said. Other companies have privately dismissed the workaround without providing reasons. Some may simply prefer Huawei.

Next page: Do the Strand

Do the Strand
A no-nonsense approach is to phase out Chinese vendors in recognition of the danger they pose, and to do it without incurring the outrageous costs cited by Huawei and its loyal band of customers. John Strand, an independent telecom consultant with strong views, believes the economic impact of a Huawei ban has been grossly exaggerated by these vested interests. Claims that it would cost Europe €55 billion ($60.4 billion) and delay 5G rollout by 18 months do not stand up to scrutiny, he says. According to his conservative estimate, the actual bill would be just $3.5 billion, or about $7 per mobile subscriber.

Why the huge disparity? Strand's complete findings are detailed in a 21-page report that was sent on request to Light Reading, but a key reason is his assumption that most of Europe's telecom infrastructure is already three to five years old and ready for replacement. Factoring in 5G requirements, this upgrade could well prove costly. But it would need to happen anyway, regardless of the debate about Chinese gear.

At least one recent development lends weight to this analysis. Three, the smallest of the UK's four mobile network operators, deployed a 3G RAN with Nokia and 4G with South Korea's Samsung before last year awarding a 5G contract to Huawei. Quizzed on the interoperability issue, Three revealed it was phasing out Samsung, and replacing it with Huawei's 4G equipment, as part of the upgrade. "This equipment has a lifespan and the Samsung gear had more or less come to an end," said Heavy Reading's Brown when commenting on the shift.

While this backs up Strand's assessment, the nature of Three's switch is clearly not the kind he favors. Strand is unapologetically critical of the Chinese vendors and derides their Western supporters. "Those skeptical of the claims that Chinese-made telecom equipment poses a threat to security should ask themselves whether they would be OK with NATO buying a fighter plane made in China," he writes in his report.

What some people in the industry dispute is whether products developed by Ericsson and Nokia are any safer. The complexity of today's supply chains means spyware could feasibly be introduced and escape attention somewhere along the way, according to experts. That may explain why US officials are reportedly worried about the Nordic vendors' use of Chinese facilities to make and assemble equipment destined for the US market.

Want to know more about 5G? Check out our dedicated 5G content channel here on
Light Reading.

Regardless of the immediate costs, another argument is that banning Huawei would reduce competition and inevitably lead to higher prices in the long run. Strand also takes issue with this claim. His checks show that equipment prices have fallen in the US market despite recent consolidation. Moreover, Huawei's prices are low purely because it competes unfairly, he writes: It benefits from financing arrangements with China's government that would be deemed illegal in other countries, for instance. A well-placed source who previously spoke with Light Reading on condition of anonymity accuses Huawei of "dumping," or selling below the cost of production to secure market share, in violation of World Trade Organization rules.

From this, one could argue that banning Huawei might ultimately bolster competition by removing a bad actor from the market. Yet many service providers are likely to continue fighting a Huawei ban on competition grounds. Noting that Ericsson, Huawei and Nokia control most of today's market, Vodafone boss Nick Read has insisted there will be nasty consequences if one disappears. "The market changes a lot when you go down to two players," he said during a press conference at this year's Mobile World Congress. "At the same time, you have to balance resilience at the national level in terms of infrastructure. How do you do that? Suddenly you get inefficiencies injected into that."

Huawei or your way
Could Huawei's perpetual licensing of its 5G portfolio provide the answer? During a recent interview with the Economist newspaper, Huawei founder Ren Zhengfei proposed cloning the company's 5G assets and selling these (presumably for a hefty fee) to a Western vendor acceptable to Western security agencies. The buyer would then be free to modify source code, he said, and develop 5G products as it saw fit. Huawei would retain existing contracts and carry on building its own 5G gear.

Figure 2: Can I Tempt You With 5G? Huawei's Ren Zhengfei has proposed the licensing of technology to a rival. Huawei's Ren Zhengfei has proposed the licensing of technology to a rival.

This left-field suggestion, which took experienced industry observers by surprise, was clearly not intended to facilitate a Huawei swap-out. But if an operator were forced to abandon Huawei in the 5G RAN, the company buying its technology could be the ideal replacement. It should, after all, be in a much stronger position to guarantee interoperability between Huawei's 4G equipment (assuming this were still allowed) and its own 5G products based partly on Huawei's intellectual property.

Ren's proposal continues to perplex and seems likely to encounter at least some resistance from Chinese authorities determined to see China build a 5G lead over geopolitical rivals. Even if it takes off, the company buying Huawei's technology could attract suspicion in the West as a potential new conduit for Chinese spies. If US spooks are right, Huawei's 5G deals with European operators mean there are too many of those already.

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— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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