Orange Deputy CEO Gervais Pellissier has warned Ericsson, Huawei and Nokia they should not expect to mop up the 5G contracts when it starts rolling out the next-generation mobile technology.
Speaking at a press event in London earlier today, Pellissier said Orange (NYSE: FTE) was trying to be as active as possible in the development of 5G standards partly to prevent existing suppliers from becoming too powerful.
"If we aren't then we will more and more be obliged to choose one supplier solution," he told reporters and analysts. "We need to keep freedom vis-à-vis suppliers and introduce new ones with 5G ideas. I'm not sure we will order 100% of 5G infrastructure needs from existing suppliers."
The warning comes as operators start making plans for the rollout of 5G services following progress on the standardization of 5G new radio services at the end of last year. (See 5G Is Official: First 3GPP Specs Approved.)
Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. and Nokia Corp. (NYSE: NOK), the world's three biggest mobile network suppliers, have witnessed a slowdown in business as operators have reduced spending in the wake of 4G rollout. Their hope is that 5G will trigger a new wave of equipment investment. (See Has the 5G Upturn Begun?)
But as networks become increasingly software-based and "virtualized," service providers such as Orange are scouting for alternatives to the equipment oligopoly.
In June last year, Orange began offering support to several network startups whose software-based offerings could provide such an alternative. Amarisoft, one of those startups, says its software can essentially turn a PC into a mobile basestation. (See Startup Could Replace Ericsson, Says Orange.)
At the time, Bertrand Rojat, the deputy vice president of Orange's Technocentre R&D unit, said it was entirely conceivable that Amarisoft, which then had just a handful of staff members, could in the future displace 110,000-employee-strong Ericsson on a national scale.
That one of Orange's C-suite executives is now hinting at a similar upheaval is hugely significant as operators start to think about 5G deployment.
And his remarks were echoed by Laurent Paillassot, the CEO of Orange Spain, during a conversation with Light Reading on the sidelines of the Orange event.
"This [virtualization] is breaking the model of Ericsson and Huawei and ZTE," said Pellissier. "We don't want to become prisoners of them and they still want to have specialized boxes."
With extreme virtualization, operators should, in theory, be able to run network functions as software programs on commodity servers, instead of using the dedicated "black boxes" they have typically bought from their main suppliers.
Executives including Pellissier and Paillassot say this will allow them to reduce costs and work with a broader ecosystem of vendors.
Paillassot also played down any prospect of heavy spending on 5G in the next few years. While operators in the US and parts of Asia are already plotting nationwide rollouts, the Orange executive sees little immediate need for the technology in either a smartphone or broadband setting.
"5G remains for us: What is the business case and where is it needed?" he said. "Spain has good coverage on 4G and very good on FTTH [fiber-to-the-home] and 5G cannot be a way to offer more coverage."
His current expectation is for some kind of launch in 2020 aimed at the enterprise market rather than the residential sector. "There remains huge potential to capture capacity for the next seven or eight years with 4G," he said.
In December, Orange said capital expenditure would peak this year at about €7.4 billion ($9.2 billion) across the group, up from around €7.2 billion ($9 billion) in 2017, before starting to decline in 2019. (See Orange Capex to Peak at €7.4B in 2018.)
Other European operators similarly believe that 5G will have greater relevance for business customers than residential ones. With its low-latency capabilities, the technology could be used, for instance, to support connected car and remote healthcare offerings in the coming years.
European interest in 5G seems quite different from that in the US and Asia, where operators see the technology as both a substitute for fixed broadband and a way of delivering more advanced smartphone services.
Pellissier said another reason for taking such an active role in 5G standardization efforts was to "ensure we have things that are valuable for Europe and not just designed for China and the US."
— Iain Morris, News Editor, Light Reading