Telcos doubt open RAN challengers will have a role

From the perspective of the dutifully skeptical, Ericsson's swift conversion to open RAN last year looked as rushed and improbable as Daenerys Targaryen's overnight metamorphosis from equal-rights advocate to psychopathic dragon jockey in the final Game of Thrones season.

Discussions with industry executives at Mobile World Congress (MWC) last month revealed a spectrum of opinions on its $14 billion "open RAN" deal with AT&T, from the outright cynical to full acceptance of the Ericsson pitch about "industrializing" open RAN (which to the cynical translates as dominating open RAN). But there is a widespread telco view that small vendors – the very companies open RAN was designed to help – might fail to have any impact on the broader market.

"I think you are right that today there is a risk that smaller vendors – it could be quite difficult for them to join this initiative," said Laurent Leboucher, the group chief technology officer of Orange, when asked to share his thoughts. "Is there a way for smaller vendors like Mavenir?" he said, calling out the US software company. "How can they be part of this initiative? It is not clear."

At this stage, the signs suggest the French operator will do as AT&T has done and lean heavily on a single big supplier for any future open RAN deployment. And Orange's vendor preference appears to be Samsung, whose open RAN products it is testing at rural sites shared with Vodafone in Romania. The immediate priority, Leboucher said, is setting up an open RAN-compliant system.

"We prefer to organize a set – it is simpler with Samsung playing a leading role in the integration," he said. This does not mean Leboucher is unhappy with the open RAN products he sees marketed by other vendors. But even here, it was another giant he praised when he met with Light Reading at Orange's MWC booth.

"I was in the Nokia booth, and I was really impressed by the fact they are now moving RAN solutions on different hardware implementations and give you the choice, including on AWS Graviton," said Leboucher, referring to the hyperscaler's Arm-based chips. "It means that step by step we move to a place where we will have more choice. However, we need to manage complexity and so we decided to go with Samsung," he added.

Vodafone is also relying on Samsung for open RAN deployments in the UK as well as Romanian cities where it does not share infrastructure with Orange. The South Korean vendor, lauded by Vodafone's technology executives, is now in pole position to land further business through Vodafone's 170,000-site tender across Europe and Africa. The operator's publicly disclosed target is to install open RAN products at 30% of European sites by 2030.

Santiago Tenorio, Vodafone's head of network strategy, agrees that smaller vendors have struggled. "Emotionally, it is sad, and yes, it is true," he told Light Reading a few months ago. "We were working together with them and particularly the name that no one mentions now is Parallel Wireless. They were very prominent at the beginning and now they are not a reference anymore," he said.

Parallel Wireless, another US software company, reportedly laid off hundreds of employees in 2022 after failing to land contracts, although it survives and continues to work on product development. As for Mavenir, its highest profile deal is with Dish Network, a company now "spiraling towards bankruptcy," according to Craig Moffett, an analyst with MoffettNathanson. Mavenir also has a deal with Deutsche Telekom to provide radio units outside Germany. But the scale of it remains unclear.

Competing on the same old terms

None of this should be surprising. Open RAN interfaces might allow a telco to combine vendors at the same mobile site, but they do not address the complexity or lower the cost of operating multivendor networks. Consequently, operators are sticking with the single-vendor-per-site approach. Market research firm Dell'Oro Group thinks multivendor open RAN deployments will account for no more than 10% of the RAN market by 2028.

But this single-vendor world naturally favors the big kit vendors with the resources to splash across everything from systems integration to hardware. This was the very problem open RAN was supposed to address. Creating an Ericsson from scratch would have been a monumental job. But with open interfaces, a supplier channeling all its R&D costs into radios could sell directly to a telco buying software from someone else.

Instead, smaller companies are being forced to compete on the same old terms. Former specialists saw what was happening. It explains why Mavenir and Parallel Wireless, both of which initially focused on software, have branched into radios. Mavenir today promotes itself as a systems integrator, too. All this is diluting the R&D focus of companies already just a fraction of Ericson's size.

Systems integration is an existential threat to these companies. In theory, operators have three choices: DIY; using a specialist systems integrator like Accenture; or leaning on a RAN vendor. But in practice, the RAN vendor responsible for baseband software – which runs inside an operator's distributed unit (DU) and central unit (CU) equipment – will usually take the lead. "So much of the network functionality and performance is decided by the DU and the CU," said Tommi Uitto, the head of Nokia's mobile networks business group.

By implication, baseband software vendors without systems integration expertise will lose out. But developing that expertise may cost a princely sum. Robert Soni, VP of RAN technology at AT&T, last year estimated that one in three dollars spent on R&D by Ericsson and Nokia goes toward systems integration. Matching that commitment will put huge pressure on companies struggling to generate profits as the RAN market shrinks.

Massive MIMO, an advanced 5G technology, is the other big driver of single-vendor deals. While splitting functions between the radio unit (RU) and the DU is possible, the algorithms still need to match. "If I have to connect my DU to someone else's massive MIMO RU, he will have to make changes to his software, I will have to make changes to my software, or both will," said Uitto. "I already have software in the field, so what do I do with that? Am I going to have two software tracks?"

The industry could fall back on simpler algorithms, but this would be at a cost to performance in Uitto's view. "Today, I claim it is not possible to get market-leading throughput with open RAN massive MIMO," he said. "It can be done, but the performance is lesser, and some work is needed to make it feasible, make it practical, make it something that actually can be used in the field. But it will be done. We will do it."

Seeing better days

Whatever they think of the deal between AT&T and Ericsson, most telco executives seem to welcome the involvement of both Ericsson and Nokia in open RAN. That reflects some wariness about dealing with smaller companies, said one telco executive who requested anonymity. "I need to have the big companies playing in the game, but it's nice to have Altiostar, now Rakuten; it's nice to have Mavenir. But will I put my multi-billion business there right now? I'm hesitant because the maturity is not there, yet."

The health and survival of Ericsson and Nokia are paramount in the absence of trusted alternatives for such critical technologies, he added. "If these guys don't survive, what will be the options? You have Samsung coming in right now. Their electronics matters. They can build hardware. But software takes time. So I am not averse to Ericsson."

Nevertheless, if the sole achievement of the open RAN challengers is to put pressure on incumbents' prices, the whole project could backfire, leaving telcos with weakened Nordic vendors and few other choices. Sales at Ericsson's mobile networks business dropped 23% in the final quarter of 2023. Revenues at the equivalent Nokia unit were down 17%. Together, they have announced plans over the past year to cut up to 23,000 jobs, a figure equal to about 12% of the 2022 total.

"The market is very competitive, even if you don't have Chinese suppliers in some markets," said Uitto. "In those countries where they cannot compete, it is a tough race between us and Ericsson and Samsung and now, of course, the open RAN challengers." In the RAN market's game of thrones, power seems unlikely to change hands. But the monarchs have seen far better days.