AT&T's $14B open RAN commitment with Ericsson snubs Nokia

AT&T said it plans to shift up to 70% of its wireless traffic to an open RAN network architecture by 2026 through a new agreement with vendor Ericsson. AT&T said the value of that new agreement could reach up to $14 billion over five years.

The move represents a shift away from Nokia and positions Ericsson as AT&T's primary 5G equipment supplier. Ericsson's shares rose slightly on the news Monday afternoon, while Nokia's fell.

AT&T's shift from Nokia to Ericsson isn't a complete surprise. Analyst Earl Lum, of EJL Wireless Research, suggested last week that AT&T was considering removing Nokia from its list of 5G equipment suppliers.

"It's still going to be interesting to see how they pull it all together," Lum said of AT&T's new open RAN effort with Ericsson. 

The Nokia angle

Nokia's loss of AT&T's business represents another major blow to the company. 

Verizon replaced Nokia with Samsung as one of its primary 5G equipment vendors in 2020. Ericsson is Verizon's other primary supplier. Nokia officials didn't immediately offer a comment on AT&T's new deal with Ericsson.

Lum, the analyst who first hinted at AT&T's plans, explained that part of the reason Verizon dumped Nokia was because of Nokia's use of Intel chips in its products. In response, Nokia has inked new deals with Broadcom and Marvell, and refreshed its product portfolio. However, he said Nokia has been slow to replace its Intel-based products with those sporting chips from other vendors.

But a main reason driving AT&T's shift away from Nokia could be Nokia's use of fans in its radios. Lum said those fans – needed to keep the radios cool – struggled to survive in some of AT&T's hotter markets.

"Given the joint nature of the press release I think Ericsson must have offered AT&T a really nice price for this deal. Perhaps Nokia was not prepared to go so low," James Crawshaw, a principal analyst with Omdia (a Light Reading sister company), suggested in a LinkedIn post.

AT&T's deal with Ericsson also comes amid a broad slowdown in spending among US network operators. According to recent reports from vendors like Nokia, Ericsson and Crown Castle, that slowdown was far bigger than expected.

The financial analysts with KeyBanc Capital Markets wrote that AT&T's new deal with Ericsson could be a sign that operator spending is starting to stabilize.

Analyst Roger Entner, with Recon Analytics, noted that AT&T's $14 billion contract with Ericsson will not cover its total radio needs over the course of five years. Meaning, AT&T will likely need to purchase radios from another vendor in order to meet its full radio needs.

'Transformational,' but light on details

During a call with media on Monday, AT&T's Igal Elbaz called the operator's deal with Ericsson "transformational," noting that Ericsson will supply "the foundation" of AT&T's open RAN platform. He said Ericsson would provide "many" of the parts of the effort, including hardware, cloud software and a management layer. 

He said Ericsson will also provide dual-mode 5G radios that support AT&T's C-band and 3.45GHz spectrum holdings. 

However, Elbaz declined to provide specifics, including details on exactly which specifications of the O-RAN Alliance that AT&T will implement.

Ericsson earlier this year pledged to introduce open RAN products into its cloud RAN portfolio by 2024 – after years of describing the technology as immature. However, the company said it would only support "class A" iterations of the technology, which shunt uplink features including the equalizer from the distributed unit (DU) into the radio unit (RU). Meaning, Ericsson will not support "class B" equipment that keeps the equalizer in the DU.

"I don't want to get into the specific nuances," Elbaz said of AT&T's open RAN details. But he did say that AT&T will implement advanced networking technologies like Massive MIMO via open RAN. That kind of technology has been a sticking point for open RAN.

Elbaz explained that AT&T's deal with Ericsson paves the way for AT&T to mix and match vendors using open RAN interfaces. Other vendors named in AT&T's open RAN announcement include Fujitsu, Corning, Dell and Intel. But Elbaz declined to discuss their specific roles and what equipment each will supply.

Entner said that Intel's appearance in AT&T's release indicates AT&T will use the "lookaside" version of open RAN and not the "inline" version supported by Nokia.

Finally, Elbaz did say that AT&T's new deal with Ericsson won't affect its work with Microsoft. AT&T in 2021 said it would run its core network operations in Microsoft's Azure cloud platform. 

A maturation of open RAN

The O-RAN Alliance was founded in 2018 by operators including AT&T. The international association is working to develop interoperable specifications that break up the proprietary interfaces connecting various wireless networking elements. In introducing standard interfaces into those connections, operators can then mix and match equipment from a variety of vendors.

But open RAN remains a work in progress. Some operators, like Verizon, continue to argue the technology is not yet mature. Others, like Vodafone, are working to put it into action across their networks.

Upstart providers – those without legacy operations – have been quick to embrace open RAN. Those include the likes of Dish Network in the US and Rakuten in Japan.

"This is a journey," explained AT&T's Elbaz. He said that AT&T's new deal with Ericsson represents the start of AT&T's path on the journey, and that in the coming months and years the company would work to integrate equipment into its network from a variety of suppliers.

"I'm not going to tell you that it's simple and plug-and-play," Elbaz said. But he argued that AT&T has the resources and knowhow to put open RAN to work inside its network. 

Made in the USA

A final element in Ericsson's deal with AT&T involves equipment manufactured in the US.

Ericsson opened its 5G manufacturing plant in the US in 2020. The company said its facility complies with the Biden administration's Build America, Buy America rules. Those rules are designed to funnel spending by the Biden administration into networking equipment built in the US.

Those trends also dovetail with a push by US regulators to support open RAN domestically and internationally. Indeed, the Biden administration is now doling out up to $1.5 billion in grants to promote open RAN technology across the US. US officials view open RAN as a hedge against Chinese suppliers like Huawei and ZTE.

AT&T officials are clearly aware of such issues.

"This isn't just a win for AT&T – it's a major step toward the federal government's goal of getting more interoperable infrastructure deployed in American wireless networks," AT&T's Chris Boyer wrote