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27 July 2020

Ericsson slates European 5G inertia, pours cold water on O-RAN

Ericsson may have only privately acknowledged that ripping Huawei equipment out of mobile networks in Europe will, in the short term, hold back the continent’s advance into 5G. But it has publicly sided with Huawei in questioning the wisdom of rushing toward towards O-RAN (Open RAN) at a time when rapid deployment of infrastructure is critical for competitiveness at national levels.

Ericsson CEO Börje Ekholm said on the company’s second quarter earnings call last week: “Europe as a continent needs to not be behind on 5G. And why is that so important? 5G is going to drive a lot of enterprise applications, in healthcare, in logistics, in smart city planning etc … For high performance applications today, ORAN is not a way to speed up roll-out.”

The backdrop is that O-RAN was conceived by telcos as a way of escaping from the proprietary clutches of the big three, Ericsson, Nokia and Huawei, which between them account for over 80% of global cellular infrastructure revenues. Operators and other stakeholders such as Facebook saw the opportunity to exploit the trend to separate RAN software from its underlying hardware, to encourage new entrants to the supply chain. Hardware and software, or base stations and radio systems, could come from different vendors.

This was seen to pitch operators against their suppliers since the latter seemed to have little to gain from encouraging an alliance designed to reduce their grip by avoiding the lock-in achieved through various interfaces – such as CPRI and X2 – that have been implemented in semi-proprietary and incompatible ways.

Certainly, Huawei has spurned all opportunities and invitations to join the alliance, which has even led to the suggestion that O-RAN is anti-Chinese as the tensions over the company’s involvement in western 5G infrastructures has intensified. This is belied by the fact that Huawei’s Chinese rival, ZTE, is a member of the alliance and all three of the country’s main operators, China Mobile, China Telecom and China Unicom, are advocates of the open movement. Indeed, China Mobile hosted the plugfest Asian Session in December 2019, testing multivendor combinations that comply with the O-RAN Open Fronthaul interface between radio units and virtualized basebands.

However, the O-RAN movement has been co-opted by some US politicians and industry players as a potential foundation for an ‘America-first’ mobile ecosystem, which has led to some unhelpful association between the open initiative and the geopolitical tensions affecting 5G policies.

In some ways, Huawei and ZTE have less to lose from O-RAN than their Nordic competitors because they are more diversified across the whole telco market, including devices (and, in Huawei’s case, enterprise and cloud), while Ericsson especially has become almost totally dependent on the cellular sector, after largely divesting itself of its video technology.

Huawei, however, has been quite strident in its opposition to O-RAN, arguing that it is an unnecessary distraction that will merely hold back deployment of 5G infrastructure.

By contrast, Nokia has joined the O-RAN Alliance with enthusiasm, becoming active in standardization and also in May 2020 signing up to the O-RAN Policy Coalition, the US-centric body charged with promoting the standards developed by the alliance and lobbying for implementation, initially in the USA.

This may also reflect growing concern within the Alliance over the slow march towards deployment among members, with only Japan’s Rakuten having done so to date, although with Dish in the USA, while Vodafone, Telefónica , Etisalat and others have been involved in trials with a view to first commercial launches within 12-18 months. Telefónica has announced plans to incorporate O-RAN in its O2 UK network before the end of 2021 if not sooner, involving some challenger vendors including Mavenir, DenseAir and WaveMobile.

Ericsson has joined the O-RAN Alliance, though has been far less active than Nokia or Samsung, and joining the politicized O-RAN Policy Coalition is a step too far for the firm at this stage. Indeed, it has moved halfway towards Huawei’s position by arguing that operators and countries should prioritize getting 5G ready for its demanding use cases, ahead of opening out the RAN infrastructure, while tentatively reiterating its longer term commitment to the movement.

Ericsson’s stance on O-RAN seems driven by concerns over Europe lagging behind North America, China and some other leading Asia-Pacific countries in 5G. Speaking during the company’s earnings call, Ekholm suggested Europe never caught up with these other markets in 4G and risked staying behind in the 5G era.

“The problem we have is that Europe is rapidly falling behind in digital infrastructure,” he said. “It’s behind in 4G penetration, probably by… an average of two to three years – that has led to a lot of loss of economic value in Europe as a continent.

This seemed strange given that Europe is supposed to be Ericsson’s backyard and the company should surely share some blame for any backwardness there. In truth though European countries, even Ericsson’s native Sweden, have tended to select at least two of the three leading vendors for their infrastructure to avoid over-dependence on any one and would like more choice, which is precisely what O-RAN is supposed to provide.

But Ekholm argued that Europe would be better off focusing on speed of deployment at this stage, while O-RAN with the extra complexities and teething troubles involved would delay roll-out. The pressing need, according to Ekholm, was not so much for the 5G infrastructures themselves, but the use cases they will enable, where speed of deployment equates to national competitiveness.

There are some signs that even a few leading telcos are sympathetic to this argument, despite O-RAN being their cause. Vodafone has called in the UK for an upcoming 5G spectrum auction to be cancelled because that money is now needed to cover the cost of replacing Huawei equipment. That suggests O-RAN may be temporarily relegated in priority there.

It seems Ericsson sees O-RAN as an unwelcome distraction for its 5G strategy at this time, while also spotting an opportunity to exploit the Huawei crisis by winning major contracts to accelerate 5G deployment in Europe. It is also anxious to maintain good relations with China after some unexpected successes there, although whether distancing itself from O-RAN at this stage aids that cause is not quite clear.