June 16, 2021
Nokia has always bet big on open RAN.
Pekka Lundmark, the company's head since August, has seen it as a chance to mix up the market and catch its chief competitors.
Its bigger rivals, Ericsson and Huawei, have more typically seen open RAN as a threat.
Figure 1: Open season: Nokia.
(Source: Paweł Czerwiński on Unsplash)
And in the case of Huawei, probably it is. Moving to open-source, interoperable components from a mix of companies looks attractive if you, like the UK, suddenly decide to rip all Huawei kit out of your network by 2027.
So it's not too big of a surprise Nokia is now opening its first open RAN collaboration and testing center in Dallas.
The facility, which lets vendors assess interoperability while protecting their proprietary IP, is all about testing how well Nokia's O-RAN equipment plays with others.
It's a long way from Finland to Dallas, but Nokia says it will "open similar facilities around the world in the future."
Who you gonna Alcatel
Going into O-RAN lets Nokia make up for some recent missteps.
Under Lundmark's predecessor Rajeev Suri, Nokia fell behind the other companies, and took its eye off the 5G ball, when the company bought Alcatel-Lucent for $16.6 billion in 2015.
Like many things in life, buying Alcatel looked like a good idea at the time.
Alcatel owned assets that fit well into Suri's vision of Nokia delivering more complete "end-to-end" communications systems.
But it also left a $16.6 billion hole in the balance sheet, saw the Finnish company's share price topple by a third in a year, and left Suri scrambling to cut costs. Just when Huawei was pouring cash into research and development, and Ericsson was honing its RAN equipment.
Another retrospective blunder was plumping for expensive programmable chips for its 5G equipment, instead of customized, lower-cost ones like other operators.
Nokia reconsidered this move eventually but had to dig itself out from the position.
As the Finnish share price suffered, going hat in hand to Ericsson and asking for a merger could have seemed an option, except regulators clearly would have said no.
But then the world's sole superpower decided to devote its attention to blowing Huawei out of the market.
And for Nokia this looks suspiciously like a new lease of life.
The one who O-Ran away
Open RAN especially is a "highly strategic topic for us," says Tommi Uitto, the company's head of mobile networks business.
Of the 27 large operators in the O-RAN Alliance, 23 are Nokia RAN customers, Uitto points out.
The big question is just how quickly open RAN takes off.
Want to know more about open RAN? Check out our dedicated open RAN channel here on Light Reading.
Toppy forecasts put the open RAN market at tens of billions of dollars in revenue by mid-decade. More cautious ones place it at $3.2 billion by 2024.
And 5G generally is a better bet than Nokia's mobile operation.
The mobile business, currently nearly half the company's revenues, barely breaks even, if that.
But the danger with Nokia betting on open RAN is that vendors who are drawn to O-RAN, like Vodafone in the UK and Rakuten in Japan, will prefer to shun the Big Three of Huawei, Ericsson and Nokia altogether – and instead plump for smaller specialist providers like Boston-based Altiostar. Or, in the case of Vodafone this week, Samsung.
The open RAN road ahead
But there are recent indications open RAN isn't that bad a bet to make after all, at least in Europe.
Deutsche Telecom, Orange, Telefónica, Vodafone and now also Italy's TIM have signed a memorandum saying they expect open RAN will achieve parity with proprietary equipment by 2025.
By 2025, Orange says it will only deploy equipment compatible with open RAN specifications.
As Nokia looks to earn its chops in the field, it will be hoping countries like Germany and UK shake the magic money tree and, having given Huawei its marching orders, offer open RAN some support.
It's a bet for Espoo, but in the end, could prove a cunning one.
Read more about:Europe
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