The slowdown in Japan's MVNO sector looks to be the calm before the 5G storm.
Japan has taken a slightly more measured approach to 5G than its frenetic neighbors, with no commercial launches planned until next year.
While MVNOs have driven a lot of growth in the last five years, taking around 11% of total market share, the market slowdown shows that customers and MVNOs are holding back as 5G nears.
The rate of subscriber growth has fallen almost continuously since peaking at 34% in early 2016, to just 13.8% in the fourth quarter of 2018.
Although that remains healthy, research firm Smartkarma says it is the lowest MVNO subscriber growth rate so far and the result of a fundamental change in the environment.
For one thing, the government is shifting priorities from wholesale growth to network-based competition.
And the biggest MVNO, ecommerce giant Rakuten, is now focused on building its own network. It has become less aggressive on the services side in the run-up to its facilities-based launch.
Rakuten Mobile was awarded 3.8 GHz and 28 GHz spectrum earlier this year and expects to launch a 4G network in October, with 5G making its debut in 2020.
Following Rakuten's acquisition of rival DMM.com for $21 million earlier this month, its share of the MVNO market is around 18%.
As the first new operator to launch in Japan in a decade, Rakuten looks poised to disrupt the MNO club.
It brings a very different culture: One of its latest plans is a drone delivery service for holiday makers on a popular Tokyo Bay island.
It also promises a different network and rollout.
CTO Tareq Amin is developing what he claims is the world's first cloud native end-to-end network, 100% virtualized and fully automated.
He says the cloud-based network will have vastly lower costs than its rivals.
Rakuten plans to invest $1.7 billion in a 5G network that covers 56% of the population after five years.
By contrast, NTT DoComo and KDDI have committed to spending $7 billion and $4.1 billion respectively to cover 90% of the population.
"The biggest thing we try to do is push the idea of one horizontal telco private cloud," Amin said.
"Our IT organization understood and mastered virtualization and container technologies years ago. Our radio access is completely virtualized and running as a VNF on a horizontal private cloud."
Rakuten's team of vendor partners also look very different.
For the radio access, it has chosen Altiostar’s vRAN and has also participated in that company's recent $114 million funding round.
Rakuten will also make generous use of Cisco kit, including NFVI telco cloud, edge solutions and 5G transport architecture.
Other vendors include Nokia, Mavenir, Intel, Qualcomm, Quanta and NEC.
Two vendors not included are Huawei and ZTE, and Rakuten CEO Hiroshi Mikitani said he is happy about his decision.
"Even if there's a 1% [risk], I told myself I can't take the risk something may happen to prohibit Chinese network equipment to be used for a Japanese network," he told Bloomberg.
- Rakuten Mobile CTO: We're Stronger, Faster & Cheaper Than You
- Rakuten Sets Cloud-Native 5G Template, Disrupts Japan's Status Quo
- Major Telcos Pool Efforts to Slash 5G RAN Costs
- Nice turns nasty as vendors face fire over cloud-native claims
— Robert Clark, contributing editor, special to Light Reading