Special Report: Next steps for NEPs
Despite all the excited speculation about Open RAN and its impact on the supply chain – in Wireless Watch as much as anywhere else – it remains unclear how far it will shake up the operators’ vendor choices.
In small cells and private networks, and in low-cost rural build-outs, we can see new ecosystems emerging, from chip to equipment and software layers. These are sometimes building on existing players in small cells or enterprise WiFi, and there is no reason why in these environments – which have such different economics, performance requirements and use cases to those of urban macro networks – a parallel and fairly separate supply chain should not evolve. Of course Nokia, on particular, spans the macro/enterprise divide, and its CEO said last week that enterprise remained the firm’s biggest growth area (see item below).
Some vendors will focus on small cells or rural systems rather than seeking to break down the walls of the 5G macro network fortress; while others, such as Mavenir, will try to challenge the tier 1 RAN network equipment providers (NEPs), though their chances of large-scale success in the demanding environment of the 5G macro networks are uncertain. The operators, at least for the next few years, are likely to look to established macro network vendors to provide a challenge to Ericsson and Nokia and a replacement, where necessary, for Huawei and ZTE. That will commonly mean Samsung and NEC – geographically constrained until now, but with decades of high-end radio expertise behind them – rather than new names.
But even Samsung and NEC, despite being welcomed with open arms into government diversification initiatives such as the UK’s, are making only limited headway against the big two, as the announcement of the first major Indian 5G contracts highlighted last week (see below). For Reliance Jio – a significant driver of new architectures and suppliers, and Samsung’s largest 4G RAN customer outside Korea – to choose Ericsson and Nokia for the bulk of its build-out does not bode well for the much-discussed supply chain disruption.
However, even in a worst-case scenario where all the challengers remain in small market share positions, or get acquired, there will have been changes in the behavior of the incumbents, as their recent financial results indicate.
Of course Huawei has had to rethink its strategies radically, and pivot to be less reliant on mobile and fiber networks, at least outside of Greater China and parts of Africa and Asia. But the pressure is on Nokia and Ericsson too, to be more cooperative and collaborative; to work with operators’ favored start-ups to develop flexible and cost-effective solutions; to cast complacency aside and really work hard to prove to operators that they offer differentiated and future-looking networks.
Some of this will be achieved by leveraging their large R&D budgets and engineering teams, to stay ahead of the pack in implementing the next 3GPP releases, collectively called 5G-Advanced, and starting to put their stamp on 6G as it emerges (see below). This will be particularly important for the regional NEPs, Samsung and NEC, to steal some of the leadership of the incumbents when it comes to the next few generations of standards and use cases.
But as all the NEPs will be forced to become more price-sensitive and more customer-driven, their economies of scale are likely to be eroded and they will need to seek growth beyond the public macro networks and start to become challengers themselves, in the enterprise and small cell markets, where specialist suppliers will have stronger positions, and where the corporate networking giants, Cisco and HPE, lurk.