OpenRAN (Open Radio Access Network) is an evolving topic, and stakeholders, depending on where they sit, have different views on how it could impact the mobile telecom industry. Not a technical standard per se, OpenRAN is an industrial concept which has been promoted as the solution to the “Huawei problem”, the new mode of network equipment innovation, and the key to cutting costs for operators. These all sound promising, so Strand Consult, having observed 25 years of industry hype, has investigated OpenRAN more closely to separate fact from fiction.
Mobile operators have different reasons to pursue an OpenRAN strategy, and these may be commendable from a financial perspective. On the other hand, the emergence of OpenRAN in the public policy discourse have been seized by some mobile operators to suggest that the promise of OpenRAN can be used to delay the removal of Huawei equipment. To avoid such rip and replace mandates, two leading mobile operators said they would switch equipment once OpenRAN solutions are viable, which could be years in the future.
OpenRAN proponents claim that increasing the number of network equipment vendors will increase competition and lower cost. That could be true, but it also the case that mobile operators have reduced costs by lowering the numbers of vendors with whom they work. This has provided value pricing, reduced complexity, and trusted relationships. In any event, it is not the number of vendors which drives competition in the network equipment market, but the level and type of technology.
The more closely one examines OpenRAN, one finds that fiction is often presented as fact. Strand Consult has nothing against OpenRAN, but our job is to tell the truth so that our customers can make better decisions.
Background to Strand Consult’s analysis
Strand Consult’s research question is to determine if, when, and how OpenRAN and O-RAN will replace conventional RAN on a 1:1 basis without compromising the network quality, security, energy efficiency, and other important factors. Mobile operators have little ability to raise price, so operators must compete on network quality, coverage, and other factors. Here are few things to keep in mind.
In general, mobile ARPU is falling. In many countries, operators are trying to shift the focus away from price by competing on innovation and quality. For example, US mobile operators compete on the quality and coverage of their 4G and 5G networks. Mobile operators are focused on rolling out technology quickly, maintaining customer satisfaction, and ensuring quality of experience and other key performance indicators (KPIs). Chief technology officers, network managers, and other technical staff are laser focused on these KPIs and are loath to make changes to which would negatively impact these indicators.
In general, Strand Consult observes that what public affairs officials say about OpenRAN differs significantly from what network managers say.
Strand Consult’s 10 parameters to evaluate OpenRAN
Strand Consult’s investigation has been guided by 10 parameters or questions to determine the value of OpenRAN. Here is what we’ve learned.
- Whether OpenRAN is a technical standard. The O-RAN Alliance is a private organization that develops technical specifications for OpenRAN. It should not be confused with the OpenRAN Policy Coalition which is a public affairs organization. The O-RAN Alliance is not a standards development organization (SDOs) but rather an industrial collaboration that builds solutions on top of 3GPP standards. While industrial cooperation is important, there can be no mobile networks the 3rd Generation Partnership Project (3GPP), an umbrella term for many standards organizations which develop protocols for mobile telecommunications and define the technological inputs for cellular networks. Companies like Rakuten develop their own corporate and proprietary concepts for OpenRAN. These concepts that do not necessarily follow a particular standard (3GPP) or O-RAN Alliance specification.
- Whether OpenRAN can replace Chinese equipment. Some mobile operators have suggested that OpenRAN is the way to avoid Huawei and ZTE in mobile networks. However other Chinese companies are deeply involved with OpenRAN technical specifications, product roadmap, and strategy. One founding member of the O-RAN Alliance is China Mobile, a state-owned company and the world’s largest mobile operator with 950 million subscribers and 450,000 employees. The O-RAN Alliance has more than 40 Chinese member companies, many of which government-owned and military aligned (See Strand Consult’s research note 44 Chinese companies have joined the OpenRAN effort, a strategy to reduce Huawei’s presence in 5G). The Chinese members of 0-RAN Alliance outnumber the Europeans. China Mobile’s Chih-Lin has veto power over the organization. China Mobile leads or co lead 8 of the 9 O-RAN Alliance’s working groups either as chairman or vice-chairman.
- OpenRAN and 5G innovation. OpenRAN proponents claim it will have a revolutionary impact on 5G, however reports suggest that large scale deployment of OpenRAN won’t happen until 2025. This means that OpenRAN cannot replace existing RAN on a 1:1 basis today. The 5G networks rolled out today use the standards from 3GPP Release 15 with increased functionality forthcoming in Releases 16 and 17 within two years. There are more than 144 3GPP-5G commercial networks deployed but only one proprietary OpenRAN 5G network (Rakuten). If OpenRAN is to increase 5G innovation, it must evolve faster than 5G itself. Presently it is not on par with the 5G standards defined years ago. It is difficult to see how OpenRAN can catch up when the significant resources already supporting the 3GPP standards timeline.
- OpenRAN and 5G deployment. Today mobile operators are rolling out 5G at a faster than 4G and even fast than 3G. In practical terms, 5G networks already built in 2019 and 2020 and those to be built in 2021 and 2022 already have the standards roadmap in place. If OpenRAN can’t catch up by 2025, operators have only two choices, delay 5G until 2025 (when 6G will start to take root) or replace their 5G equipment in 4 to 5 years. OpenRAN may be too little, too late for 5G operators.
- OpenRAN and vendor diversity. OpenRAN proponents claim that it will create more competition in the network equipment market. The 5G network equipment vendor market has many vendors and segments. Omdia details more than a dozen full-service providers with additional providers in segments for antennas, basebands, remote radios, small cells, macro cells, phase shifters and so on. This idea that there are not many vendors for 5G equipment was likely created by Huawei to deter the security reviews and subsequent restrictions imposed on the military-aligned company. If anything, the restrictions on Huawei have helped to open the door to new equipment vendors which could not compete because of Huawei’s predatory pricing and anti-competitive tactics. For example, Samsung has quickly gained market share and is supply 5G rollouts in the US, Australia, and other countries.
- OpenRAN and network equipment cost. OpenRAN proponents suggest that it can lower the cost of network equipment. The cost competitiveness of OpenRAN versus RAN is not yet known. It may be that some OpenRAN providers can offer equipment more cheaply on some parameters, but the cost advantage may not be significant when considering all the costs such as supply, availability, energy consumption, security, warranty, network integration, equipment matching, new contracts and service level agreements etc. However, operators frequently reduce their number of vendors so that they can enjoy lower unit costs with volume purchasing, the company BUYIN is a great case. For an operator’s perspective, check out the comments from Neil McRae, Managing Director and Chief Architect at BT (Scroll to minute 51 minute in the video). McRae explains that when he took his job, he inherited a network portfolio with 50 vendors. He subsequently reduced it to 4 vendors and saved £1 billion in 3 years. He observed that too many vendors not only increased cost, it increased complexity. He is wary of notions of “open architectures” which require managing portfolios of 5-50 vendors. He noted that vendor reduction increased shareholder value and that he would pursue the same strategy again.
- OpenRAN and security. OpenRAN proponents suggest that OpenRAN technology and the “unbundling” of 5G hardware and software is the means reduce reliance on Huawei and hence greater security. However, it is not clear how trading one known insecure Chinese vendor for 50 unknown Chinese vendors is the path to greater security. The issue of backdoors is omnipresent on all Chinese hardware given the country’s disposition and associated intelligence and surveillance policies. Moreover, it is not clear how security is improved when network owners must vet not one, but multiple new OpenRAN vendors. The time and cost to perform this review would seem to be multiplied by the number of vendors the operators takes on.
- OpenRAN and energy efficiency. Energy efficiency is an increasingly important issue for mobile operators which expect to compete on carbon reduction strategies. Naturally if OpenRAN could offer a greener solution, that would be an advantage. However, it is reported that many OpenRAN installation use the Intel X86 processor, which is less efficient than specialized RAN chips. If anything, energy consumption could increase if signals must traverse a multitude of mix and match components instead of a single end-to-end system designed with energy efficiency in mind. To reduce energy, Apple developed tits own processer as an alternative to Intel X86.
- OpenRAN and Rakuten. The media has promoted a supposed Rakuten success story with OpenRAN success. However, Rakuten is not offering open-source tools, but rather proprietary OpenRAN solution. It offers this through a freemium model in which free service is offered for a period, and operators pay down the line. Some companies have success with freemium and loss leader models, but typically they need scale.
- OpenRAN and the indigenous movement. OpenRAN has been promoted as a way to support domestic innovation like India or Brazil or what Germany’s Economic Minister calls for European-only actors in 5G. Curiously many of these calls are coupled with operator strategies to keep Huawei equipment in place because OpenRAN will not be ready for some years. Policymakers have also pursued subsidies and other financial incentives to support local OpenRAN startups which may design the equipment in their respective country but manufacture it in China. Unfortunately, production in China and with Chinese partners could compromise security, as the Supermicro case demonstrates.
The many problems that OpenRAN is purported to solve is impressive. In fact, I have to go back to 3G in 2000 to find the level of hype observed today with OpenRAN. Indeed, the Huawei problem is so serious that people are desperate for a solution. However, in the enthusiasm for the OpenRAN solution, too many want to look past the inconvenient reality that China is shaping much of the Open RAN future particularly through the O-RAN Alliance.
It is important to develop secure alternatives to Huawei, but this is not a reason to oversell OpenRAN. While it may be commendable to pursue the goals proffered by OpenRAN proponents, the actual impact of OpenRAN must be measured by real world facts and experience.
The questions remain how OpenRAN will affect the CAPEX and OPEX mobile operators in the short, medium and long term and whether operators will buy OpenRAN as a serious 1:1 alternative to standard RAN in Paris, London, Berlin, Madrid, New York, Sao Paulo and Copenhagen. It seems that OpenRAN is falling short of expectations.
Strand Consult, an independent company, produces strategic reports, research notes and workshops on the mobile telecom industry.