August 31, 2022
The open RAN motorboat still chugs along in the oil-tanker shadow cast by Ericsson, Huawei and Nokia, engine stuttering and crew weary. Parallel Wireless, a US promoter, recently laid off most of its workforce, insisting US sanctions against China had gummed up the open RAN supply chain. Mavenir, a rival, has had to raise debt to fund its efforts. Then there is Rakuten, the Japanese company that has run up gargantuan losses to build an underused network.
It does not seem to have quelled Rakuten's enthusiasm, giving it a financial imperative to sell its technology to others intrigued by open RAN. Weeks after disclosing details of its flagship deal with Germany's 1&1, Rakuten is parading a partnership with Virgin Media O2 (VMO2) in the UK. Macro sites have already gone live in Northamptonshire, said the companies in a statement this week. It suggests the UK now has two big mobile operators moving briskly ahead with open RAN, after Vodafone embarked on its own deployment last year.
But VMO2's project is not the same as Vodafone's, and its corporate chiefs have almost nothing to gain and plenty to lose from a substantial investment in open RAN today. Vodafone was forced to look for new suppliers when the British government imposed limits on Huawei, a Chinese vendor responsible for thousands of Vodafone sites in the UK. Dissatisfied with Nokia, it faced a choice between greater reliance on Ericsson and open RAN, eventually opting for the latter. VMO2's situation is markedly different.
Unlike every other UK operator, O2 – the mobile network that merged with Virgin Media to form VMO2 – was never a big Huawei customer, instead dividing its radio access network evenly between Ericsson and Nokia. While 5G is only partly built, older standards are ubiquitous. Introducing new open RAN suppliers would therefore mean ripping out some tried-and-tested technology before it has fully depreciated or maintaining parallel networks at considerable expense. Try selling either of those moves to investors during a recession.
It is not as if open RAN has any inherent advantages. There is even lingering concern that it will perform as well as a traditional network, partly because any supplier's baseband products are likely to work better with its own radios than they do with a rival's (using new interfaces to marry vendors at the same RAN site is the essence of open RAN).
Proselytizers insist open RAN costs less to build and operate, but the argument is unconvincing. If there are savings to be had, they come from virtualization and automation, not open RAN per se. And even if one accepts that general-purpose equipment is cheaper than the customized gear Ericsson sells in vast quantities (which is not obvious), the RAN accounts for only about a fifth of capital expenditure on mobile networks and an even smaller fraction of total network investment.
From an operating-cost perspective, VMO2 might be able to realize savings by pooling its baseband resources in data centers, cutting back on the energy-intensive equipment traditionally found at mobile sites. Again, however, this is a possible benefit of virtualization, not open RAN. It would also require an upfront splurge on the "fronthaul" part of the network – lots of small data centers and the fiber connecting these to mobile sites. Vodafone is not building open RAN this way.
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What, then, explains VMO2's apparent interest in what Rakuten is selling? The impetus comes from Enrique Blanco, the long-serving chief technology officer of Telefónica, the Spanish telecom incumbent that owns 50% of VMO2. Two years ago, in an exclusive column for Light Reading, Blanco said up to half Telefónica's RAN investments between 2022 and 2025 would be in open RAN technology. Weeks later, he announced an open RAN partnership with Rakuten, committing Telefónica to joint procurement.
Then, last September, Telefónica said it would build "at least" 800 open RAN sites in its four main markets of Brazil, Germany, Spain and the UK. Japan's NEC, which supplies radio units and core network software to Rakuten, was named as the "prime system integrator" at the time. Essentially, the VMO2 sites are combining RAN software from Rakuten with hardware from NEC, a blend that has proven successful for Rakuten in Japan. The main difference in the UK is that NEC oversees integration, but the companies already know this tie-up works.
Old married couple
Blanco has long been a cheerleader for virtualization, and he has emphasized the importance of building "multivendor" networks, minimizing dependency on one or two giant suppliers. Open RAN might let him do that. But NEC and Rakuten offer weak evidence that open RAN's interfaces would instantly support any multivendor setup.
Their arrangements make them look more like an old married couple, all too familiar with each other's habits, than a random pairing. As preferred partners – which they seem to be in Japan, with 1&1 in Germany and now with VMO2 – they appear little different from any companies that have teamed up to produce fully integrated RAN products. How, for instance, is their partnership any better than that between Nokia and Marvell Technology, a US chipmaker, on traditional 5G?
VMO2 has not indicated how many NEC/Rakuten sites are live or planned, but Telefónica's commitment to build 800 open RAN sites across four huge countries is negligible, accounting for less than 3% of its mobile sites in Germany alone. Still unclear, too, is what the NEC/Rakuten agreement means for Samsung, which flagged open RAN-compatible 4G and 5G trials with VMO2 in October last year. There was certainly no mention of Samsung in this week's update, and VMO2 had not responded to questions on the subject at the time of publication.
The 800 sites will most probably entail greenfield rollouts by Telefónica and VMO2, designed to boost coverage in hotspots or provide a dedicated service for business customers. But the UK operator is conceivably publicizing open RAN trials to exert pricing pressure on Ericsson and Nokia, both of which are determined to pass rising costs onto customers. Threatening the Nordic firms with a switch to non-Chinese alternatives could be a fruitful ploy in future negotiations.
— Iain Morris, International Editor, Light Reading
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