KDDI has a lower profile than its rivals in the world of ground-breaking 5G architectures, but it still works within the Japanese tradition of working closely with selected vendors to invest in new technologies that can enable it to compete on the quality of its network. It has been particularly active in open, virtualized transport networks – co-chairing a Telecom Infra Project initiative in that area – and in network slicing.
Slicing is important because, like Docomo, KDDI is keen to diversify its services, with plans to extend the applications in its consumer digital portfolio, branded ‘au’, and to generate more enterprise business. It has discussed how it could facilitate the rapid launch of new services for multiple target groups via slicing and has conducted several trials of key enabling technologies.
That latest is a demonstration, with Samsung, of end-to-end network slicing in a 5G NR Standalone network, using a sliceable 5G core and a RAN Intelligent Controller (RIC). The RIC is a pivotal component of the new O-RAN architecture for the open, multivendor access network. It takes some of the control functions that are conventionally embedded in the base station, and runs them in software that sits between the base station and the orchestration layer. In theory, a RIC can come from a different supplier from the base stations, providing another level of openness in the network.
One view of the RIC is that it can also take on some functions that might normally be done by the orchestrator or even the core, particularly when it comes to slicing. This was the focus of the KDDI/Samsung trial in Tokyo, in which the companies said they used RIC control to enable different, defined levels of quality assurance in multiple slices.
The operator said there is currently no standard technical approach to enabling multiple network slices with guaranteed service quality end-to-end. Its approach to this challenge was based on a new technique that involved close cooperation between the 5G core and the RIC, and this will be submitted to standards bodies.
Toshikazu Yokai, general manager of KDDI’s mobile network technical development unit, said the demonstration “provides a foundation for new 5G commercial services” based on the operator’s 5G network, which went live in March.
Earlier this year, KDDI’s research arm announced another 5G slicing demonstration, in partnership with Radisys, the mobile network software company now owned by Reliance Jio. In their demonstration, they created two separate traffic streams, with different latency requirements, on a single radio unit (RU), connected to multiple virtualized central (CU) or distributed (DU) units.
The first slice was for enhanced mobile broadband and spanned two DUs in an edge cloud site and a CU user plane (CU-UP) in a regional cloud site. The second slice was created for ultra-reliable low latency (URLLC) services, using another pair of DUs in the edge cloud.
Radisys provided an end-to-end configuration consisting of:
- 5G NR gNodeB in Standalone mode operating in sub-6 GHz frequencies along with a RAN controller
- 5G Core Network including Access and Mobility Management Function (AMF), Session Management Function (SMF) and User Plane Function (UPF)
- eMBB and URLLC service functionality portioned in edge and regional clouds
Arun Bhikshesvaran, CEO of Radisys, said: “This demo goes beyond the typical single DU and RU binding and really brings to the forefront how mobile operators will manage their networks with intelligent edge deployments and scale into regional clouds to optimize efficiency and operational costs in order to realize the benefits of 5G disaggregation.”
Such advances are important for KDDI if it is to keep up with Rakuten and Docomo in terms of its digital services offering, and its agility to support a wide variety of different enterprise and consumer applications, with appropriate connectivity and QoS for each.
Japan’s second MNO is in the strange position of enabling Rakuten Mobile, through their MVNO agreement, and having to respond to the new competitive threat from a far more agile, cloud-oriented provider. The two companies’ deal goes well beyond a traditional MVNO contract. KDDI will provide roaming services for Rakuten until March 2026, allowing the new entrant to offer nationwide service from day one, but meanwhile, KDDI has used Rakuten’s payment platform and network of around 1.2m affiliated stores in Japan to launch its own barcode and QR payment service, called au PAY. Rakuten also provides its logistics services to KDDI’s Wowma online shopping channel.
But it will be important for KDDI not to become over-reliant on its new competitor. It is also looking to diversify its revenue streams and adjust to the digital era in other ways, though with a heavy focus on payments throughout. It has set out plans to move into ‘adjacent’ sectors to telecoms, with financial services top of the list. It has taken a 49% stake in online securities company Kabu.com, at a cost of about $800m; and raised its stake in mobile-centric online bank Jibun Bank to 63.78% (Jibun is a joint venture between KDDI and MUFG Bank).
The telco has formed a dedicated financial services unit called au Financial Holdings, to house Jibun (to be rebranded au Jibun), au PAY and four other finance subsidiaries – KDDI Financial Service, WebMoney, KDDI Asset Management and KDDI Reinsurance. It also has an affiliate company called Lifenet Insurance.
The company is aiming to harness its network and user base to diversify in other areas too, though – like Orange and others – it sees financial services as the low hanging fruit, despite regulatory and competitive barriers, and the strong presence of NTT Docomo in this field. Other target industries include automotive, ecommerce, energy and education, and broader IoT platforms. Last year it acquired KCJ Group, which owns the KidZania education centers and the energy company Eneres.
All these moves are designed to boost revenue and network ROI, but also to increase customer retention, especially in the face of Rakuten’s 5G launch.
KDDI president Makoto Takahashi has repeatedly set out a strategy to integrate telecoms services with “life design” options such as finance, ecommerce and video entertainment. This is how operators new and old aim to enhance the value of their networks and monetize their users better, a process which 5G, if well deployed, could accelerate.
“If customers use…multiple non-telecom life design services that have strong affinity with telecom services, we can increase touch points with our customers and strengthen our customer retention because of the stronger engagement,” Takahashi said. He has appointed Kae Morita as general manager of the whole life design business.
That division does not house all the new revenue generators, however. KDDI has been introducing a widening range of digital services to its core Personal Services operating unit, including energy services and payments. In the 2018 fiscal year, Personal Services was the strongest contributor to revenue and profit, both of which grew healthily, while Life Design segment was the fastest-growing in revenue terms.