There has been much discussion lately on the subject of Open Radio Access Network (Open RAN). Open RAN promises to bring disruption to operators in the form of lower capital expense, accomplished by the disaggregation of general-purpose hardware and software for base station deployment. The Telecom Infra Project (TIP) took a crucial step in February of this year to harmonize its technical efforts with the O-RAN Alliance, a move designed to further adoption of Open RAN. Given the current U.S. administration’s concerns about being reliant on foreign companies for cellular infrastructure, much of the dialogue on Capitol Hill has been tied to Open RAN’s ability to deliver a new set of 5G solutions that can be sourced domestically.. All of this said, RAN is only one component among the core and transport elements that are tied to cellular network deployment. With that in mind, can Open RAN truly be disruptive for operators?
Who are the players?
Among the traditional cellular infrastructure providers, Nokia has been especially vocal. The company has made a handful of recent announcements supporting its Open RAN initiative. Samsung Networks also embraces the platform, but it is a relatively small participant in the radio access space. In contrast, Huawei and Ericsson have been somewhat quiet and likely for good reason: Open RAN has the potential to replace a significant amount of base station hardware with open source, virtualized radio units. This sector’s profit margins are already thin, given the sheer volume of access infrastructure, and Open RAN could significantly impact profitability.
Open RAN also has the potential to open up the segment to a host of new participants, given its leverage of traditional IT enterprise infrastructure. These include Cisco Systems, Dell EMC, Hewlett Packard Enterprise (HPE) and VMware. Given recent announcements from Amazon Web Services (AWS) and Microsoft Azure in support of telco initiatives, hyperscalers may also have an opportunity here. I evaluated a number of these players in an article about a year ago, which you can find here if interested.
What are the impacts to operators and infrastructure providers?
The million-dollar question is whether operators like AT&T, Verizon, Telefonica and others that are actively engaged in the newly formed Open RAN Policy Coalition will benefit. Formed in May of this year, the organization is hoping to promote policies that further Open RAN and 5G. I believe there are capital expense savings to be realized. The question is, would an increase in operational expenses negate these savings, given the greater degree of complexity, cost and management of software integration and loss of accountability from the disaggregated nature of Open RAN? The key benefit of traditional RAN infrastructure from the likes of Ericsson and Nokia is having “one throat to choke” in the event of network failure. However, that also tends to drive vendor lock-in with operators.
The security ramifications are another potential concern with Open RAN. On one hand, open source has the ability to bring a broader collective together to scrutinize vulnerabilities—more “eyeballs” on a platform to root out issues. However, the very nature of Open RAN will bring more industry standard compute, storage and networking elements into the mix, thereby increasing the overall threat surface. It is a complex consideration for operators, as the burden falls on them to manage subscriber privacy in a dynamic environment.
On the flip side, what is the impact to the infrastructure providers themselves? I spoke earlier of RAN margin challenges, but with more solution providers vying for a piece of the RAN pie, will that make the addressable market unattractive? Could this dilution negatively affect the overall investment by infrastructure providers in RAN, and, in turn, the support for performance enhancements and higher band, mmWave spectrum coverage? Lastly, how realistic is it that Open RAN will be a substantial element of final 5G deployments? Most operators have chosen to upgrade base stations for non-standalone 5G, before upgrading their core network elements to the 5G New Radio standard. The only possible exceptions to this are Rakuten, in Japan, and Dish in the U.S., given their greenfield approach and the fact that they do not require LTE legacy support. Rakuten is an Open RAN trailblazer, but it stumbled with recent deployment delays. The company blames Covid-19, but the more likely culprit is the software complexity.
There is no doubt that Open RAN has great potential, but I believe it is too early to call it a 5G panacea. While it is poised to lower the capital expense tied to base station deployment, Open RAN also brings a new level of complexity. On a positive note, Open RAN facilitates U.S. supplier participation and a deep level of software development expertise in virtualized solutions. However, there have been recent silicon breakthroughs, from the likes of Cavium and others, that enable LTE “base stations on a chip.” These advances will migrate to 5G and future “Gs” over time. Huawei has also set aggressive global pricing, much to the chagrin of its competitors, and is inching closer to delivering a $10K cost per base station. As access network hardware gets less expensive through integration and silicon design advances, will the luster wear off of Open RAN? Time will tell.
Disclosure: My firm, Moor Insights & Strategy, like all research and analyst firms, provides or has provided research, analysis, advising, and/or consulting to many high-tech companies in the industry including AT&T, AWS, Cisco Systems, Dell EMC, Ericsson, HPE, Microsoft, Samsung and VMware, cited or related to this article. I do not hold any equity positions with any companies cited in this column.