Predictions fly around like party poppers in the final weeks of the year, usually to be swept aside and forgotten as people return to work. But one sticks in the mind because of who acknowledged it and what it would mean for his business. It's the reference by Mike Murphy, Ericsson's chief technology officer for North America, to an estimate that open RAN will be in 40% of radio systems by 2030. The Swedish vendor has never displayed any great enthusiasm for the fledgling technology concept. And yet Murphy, a senior executive, recognizes it is on the march.

Ericsson's company forecast – based, it says, on data from Dell'Oro, a market-research company – is that open RAN will account for 20% of the RAN market by 2030. But even that could look look surprisingly high to Ericsson's critics. Two sources involved with the O-RAN Alliance, which develops open RAN specifications, say Ericsson is either deliberately hindering progress in its working groups or simply not contributing. Closer to home, Ericsson whispers that open RAN is not a European technology and lobbies against it, according to another telco source who works on open RAN development (all three sources spoke on condition of anonymity). Twenty percent would be at least 15 percentage points more than open RAN has today, making Ericsson's tactics look as futile as the apocryphal attempt by King Canute, another famous Scandinavian, to hold back the tide.

Figure 1: For Ericsson CEO Börje Ekholm, open RAN is one of the biggest potential threats.
(Source: Ericsson)

Ericsson's open RAN strategy remains one of the great mysteries of telecom at the start of 2023, nearly five years since the O-RAN Alliance first pitched up at Mobile World Congress. The most charitable view is that Ericsson is wary of the competitive threat and concerned about open RAN's limitations but certainly not opposed to the whole idea. Unlike China's Huawei, it is a member of the O-RAN Alliance, having joined the group back in 2019.

But Ericsson would have good reason to be nervous about open RAN. Before its advocates started babbling about things like the RAN intelligent controller (RIC), and conflating open RAN with cloud RAN, the entire rationale was to boost interoperability and competition. Pairing products from different suppliers at the same mobile site – a radio from one with baseband equipment from another, say – is harder than coupling pandas at a zoo, persuading most operators to stick with a single big vendor like Ericsson and bypass the specialists. Designed to foster compatibility, the O-RAN Alliance's new interfaces could weaken Ericsson's grip. For some, that is the goal.

What's the point?

Had a bullish prediction been cited by Nokia, Ericsson's big Nordic rival, there would be less head-scratching. The Finnish company decided a few years ago that open RAN was coming, like it or not, and that Nokia had more to lose as an outsider or opponent. Facing skepticism among critics, it began touting O-RAN-compliant products. Last October, it met with the approval of Yago Tenorio, Vodafone's network architecture director, for building a "fully compliant open RAN system."

Yet Nokia has hardly been an unreserved enthusiast. Tommi Uitto, the head of its mobile networks business, has repeatedly griped about open RAN's various perceived shortcomings – the inferiority of general-purpose processors compared with Nokia's customized silicon (strictly more of a cloud RAN issue), the awkwardness of matching up different suppliers, despite O-RAN Alliance specifications. What's been disaggregated needs reaggregating, he told Light Reading last year, and that systems integration job is tough.

Figure 2: Ericsson's share price (SEK) (Source: Google Finance)

Ericsson executives may have noted, too, that Nokia's semi-embrace of open RAN has not led to extra business. Nokia originally supplied some 4G hardware for Rakuten's open RAN deployment but has been increasingly sidelined by the Japanese firm. Nor has it landed a single RAN job with either Dish Network in the US or 1&1 in Germany, the two other high-profile greenfield projects. It is not among Vodafone's squad of open RAN substitutes for Huawei in the UK. When Deutsche Telekom named companies contributing to its "O-RAN Town" trial in Neubrandenburg, Nokia was not included.

Outside China, Nokia has also lost market share in 4G and 5G, by its own admission. At the end of 2019, it had 27% of the RAN market for these technologies, according to earnings statements. By May last year, the figure had stabilized at 26%, said Uitto at the time, after 5G product setbacks it has now fixed. Over the same period, Ericsson's share of the entire RAN market outside China appears to have risen by about three percentage points, to nearly 39%, and it has grown by six percentage points since 2017, said CEO Börje Ekholm, on a recent call about earnings. So much for open RAN apathy slowing Ericsson down.

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At a senior management level within the Swedish company, there is known to be a view that open RAN will not weaken the might of big players in critical sectors, such as the one that makes chips for mobile basestations. Concentration is a fact of life when economies of scale are so important. The view is unlikely to have changed after recent developments. Most open RAN work has gone to three big Asian firms – Fujitsu, NEC and Samsung. And some operators are buying all or most of their open RAN products from one supplier.

What's more, if the aim of open RAN is to produce alternatives to the oligopoly of Ericsson, Huawei and Nokia, why should any of them take an interest? Nokia's apparent failure to land open RAN deals suggests operators will choose alternatives to the big three regardless of their willingness to adapt. Tenorio's recent comments about Nokia might sound encouraging. But Vodafone will not cultivate diversity by handing contracts to Nokia.

Picking and choosing

Ericsson has previously bristled at suggestions it joined the O-RAN Alliance only as a passive observer. But its initial contributions were clearly in areas where it saw less risk to its business, including artificial intelligence, automation and what Erik Ekudden, Ericsson's chief technology officer, previously called "open interworking" between the RAN and the network's orchestration and management systems.

By contrast, it has never advertised products based on open fronthaul, the specification that supposedly makes it easier for an operator to use one vendor's baseband products with another's radios. The closest Ericsson has got to that is a cloud RAN offer with Intel. Even in this area, it seems leery. It previously denied cloud RAN would bring cost savings and has not designed software to work on any merchant silicon besides Intel's.

Figure 3: Sales growth and gross margins at Nordic vendors (Source: Ericsson, Nokia)

In late 2021, Ericsson also launched its own RIC, an open RAN software innovation that could support the automated configuring of network changes and do it in "real time." For all the hype, however, the RIC is on the periphery of open RAN and poses no serious threat to Ericsson. It is, essentially, a real-time successor to the self-organizing network (SON), and the SON market was generating annual revenues of only about $300 million in 2020. Ericsson's Intelligent Automation Platform is arguably not that real time, either. It manages the network through centralized servers and leaves most of the network intelligence locked up in the nodes.

If the 40% forecast turns out to be right, then 60% of radio systems will still be using traditional "closed" technology in 2030. But this not a fast-growing sector like the public cloud, and so that would leave Ericsson with a much smaller addressable market than it has today. A big unknown is what open RAN will look like in seven years' time. Will operators be master Lego builders taking parts from dozens of players? Or will equipment be open RAN in name but supplied mainly by a few big firms? In either case, if open RAN is to achieve its original goals, it is hard to see how Ericsson will fit in.

Update: This story and its headline have been changed since initial publication to incorporate feedback from Ericsson and point out that its own expectation is for open RAN to account for 20% of the market by 2030.

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— Iain Morris, International Editor, Light Reading