At Wireless Watch, we keep a very regular eye on the activities of challenger companies that may break into the closely guarded 4G/5G RAN and core fortress. The competitive landscape, static ever since Huawei entered the market with such disruptive force, is now shifting again. This time, there is no single new force to up-end the industry. Instead, the landscape is a kaleidoscope, with many elements constantly rearranging themselves.
Riding on the wave of interest on open architectures such as O-RAN, and by the start of the slow progress to a fully virtualized and disaggregated network, the prospect of a more diverse and competitive supply chain seems more real than it did at the start of the 4G era. Then, operators held out similar, but quickly dashed, hopes for a break-up of the RAN oligarchy and the end of network lock-ins and multimillion dollar processes to replace a vendor’s equipment.
At the start of 5G, the enablers of diversity are far more mature and powerful – from shared spectrum to white box hardware to cloud-native functions. And the doubts over Huawei’s place as 5G vendor, which have spread in a ripple effect from the USA, only increase the operators’ desire to usher new suppliers into the market, rather than see their vendor choices, in many US-aligned countries, reduced to Ericsson, Nokia and, potentially, Samsung.
These trends will certainly give Samsung and NEC, plus a crowd of smaller RAN and core suppliers, opportunities that were closed to them a few years ago – and that will have a knock-on effect for their own supply chains, hastening the rise of merchant chips in mobile networks, for instance, and so opening up new doors for Intel, Marvell and others. And the cloud-based nature of emerging 5G networks will provide the chance of a greatly enhanced role for companies from the enterprise and data center world, such as HPE, Cisco and even the webscalers.
But do not write off the giants of the mobile network just yet. Nokia and Ericsson remain the natural primary beneficiaries of restrictions on Huawei (and ZTE), because – however much the operators may resent their entrenched position – they have decades of experience, expertise and R&D behind them. If an operator is deploying a secondary network, perhaps for a city or IoT application, or if a new deployer, such as a private network operator, is rolling out its greenfield platform – then there will be a real tendency to try something new.
But it will be some years before the majority of established MNOs will trust their primary 4G/5G macro networks to unproven technologies and suppliers, and only a handful will, in the near term, take on the integration challenge and potential performance trade-offs of a truly multivendor network.
That gives Nokia and Ericsson the opportunity to take advantage of Huawei’s problems in some key markets – though they may also suffer from retaliatory restrictions in other major countries, notably China, as the world splits into two 5G camps. To mitigate that risk, they will need to tap into large MNOs’ aversion to risk in the primary networks, but not just by behaving in the same old way. Instead, they need to establish more open credentials, more cooperative ways of deploying and optimizing networks, more willingness to sub-contract to small innovators. In other words, by the time an open platform such as O-RAN manages to mature enough to be trusted in the major networks, the Nordic giants need to look just like the open network challengers, only larger and safer.
Another risk for the two giants is that the experiments with open systems in secondary or greenfield networks quickly establish maturity and trust, combined with simpler and cheaper ways to procure networks, as heralded by the Rakuten Cloud Platform idea. Having reassured operators that the new systems can really perform, the new vendors could be ready to pounce on the second wave of macro 5G network roll-outs towards the middle of the decade.
This makes it important that Nokia and Ericsson participate in the secondary deployments as well, not just be adjusting the form factors, pricing and go-to-market strategies for their products, but also by signing up new partners and channels.
Ericsson is currently the stronger of the two, by a long way, in the first tactic – building up a base of large 5G deployments in order to secure market weight before the smaller companies scale up. Nokia is hampered by its 5G woes of late 2019, its enforced U-turn on its chip architecture, and a general lack of confidence about its future, including the persistent rumors that it is fending off unwelcome takeover offers. However, the company has a strong core portfolio and has good chances to bite back against its Swedish rival as operators start to roll out the 5G core, as long as it is not distracted and disrupted by an acquisition bid.
And in the second tactic – to infiltrate the secondary networks market and behave more like an open RAN supplier – Nokia is well ahead of its competitor. It has launched its O-RAN and virtualized RAN portfolios and has followed that by extending its already impressive offerings for private network roll-outs. It is aggressive in chasing enterprise business, officially via its MNO partners, but its cloud-based core, RAN and IoT platforms can clearly work via other network providers too – and it is forging closer ties to the webscalers, partly by targeting them with the high end of its router family.
This is not to underplay the challenges that face the two Nordic incumbents. The Huawei crisis is a double-edge sword, since it may slow down 5G altogether in affected markets like the UK, reducing business for all suppliers and giving the challengers more breathing space to develop their offerings. The two giants are slow-moving and have huge legacy businesses to support, which means they cannot achieve the agility of the open RAN community. They know that now all the challengers are start-ups – Samsung and NEC both have deep pockets and heavy backing from their home governments and telcos, while Cisco may well be poised for its latest foray into the RAN with an acquisition. And some of the potential sources of new business, such as the webscalers, will be even more difficult and demanding customers than the large operators.
One thing is certain – Nokia and Ericsson will be very different companies, with different product and services mixes, and different cultures, by the time 5G is deployed at global scale in the later 2020s. Their decisions now, made more urgent by the impact of geopolitics and the pandemic recession, will shape the way they survive (and we do believe they will survive), and how they will fit into the new 5G competitive landscape.