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15 June 2021

New US funds set to come Open RAN’s way, but operators are still divided

Vodafone was not the only Open RAN newsmaker of the past week. As usual, there has been plenty of activity in the space, which we sum up in this round-up.

  • T-Mobile USA has been notably more cautious than its fellow US operators about Open RAN which is in line with the company’s broader attitude, and that of its CTO Neville Ray. In general, the company has been less prepared than AT&T, Verizon and (pre-merger) Sprint to adopt new architectures at an early stage, and has instead seized market share with clever marketing and pricing strategies under its ‘Uncarrier’ banner’.

Given the question marks over the commercial success of Open RAN trailblazers Rakuten and Dish (see separate item), it can be argued that TMO has the right attitude – let others make the mistakes with cutting edge architectures, and focus on the things that really deliver short term commercial gains, such as smart pricing. In the 4G era, TMO was far more cautious than its rivals in deploying LTE, but managed to gain market share through most of the 2010s, while Sprint, which had always been architecturally experimental, fell back and was finally overtaken, and then acquired, by TMO.

However, TMO is not a Luddite. It adopted a contrasting approach to 5G roll-out to those of its competitors, by targeting wide coverage, though with limited increases in data rates compared to 4G, from day one. And speaking to a UBS investor conference last week, Ray was clear that TMO might be cautious about Open RAN, but it was not indifferent to it.

“We just have to be patient,” he said. “The ecosystem in O-RAN is going to take some time to develop. You look at the radio business today and you have three major incumbents, right? One of them Chinese. It’s a massive scale game and it’s a complex business… There’s massive R&D in this space to futureproof your networks. There’s a whole debate about who built and developed this stuff and who owns the IP.”

He said that Open RAN could not meet the capabilities TMO needed in its first stage of 5G deployment. “Those capabilities were simply not there, let alone futureproofing,” he said. But he said the firm was “supportive”,  even though it would leave competitors and new entrants to drive O-RAN progress in the near term. “I’m trying to drive those pieces which I know will deliver and secure material benefit for this company, and O-RAN doesn’t necessarily help,” he said.

He concluded: “We just have to see how it develops. But we’re there. We’re watching. We’re all for open standards and capabilities, absolutely … It’s going to go through a massive journey.”

  • AT&T has been far more positive about Open RAN, and contributed much of the seed code when the O-RAN Alliance was formed, from the merger of the AT&T-initiated xRAN Forum and the China-centric Cloud-RAN Alliance. Last week, the operator’s Igal Elbaz, SVP of wireless and access technology, talked about key benefits of Open RAN, including the ability to fine-tune the network.

“AT&T will deploy O-RAN based architecture over time,” Elbaz told a conference. “And as it becomes available and mature, we have all intentions to take advantage of that architecture … Our ability to fine-tune our systems to the tune of our customers is fairly limited when you have fully closed integrated systems. The fact that we are going to be open will allow us to fine-tune the network with additional machine learning and AI to serve customers better.”

He also thinks there will be cost and operational efficiencies once operators make the full journey to a cloud-based network. “If we can now use the openness and the open interfaces and new specification to allow us to have a cloud-based management system” – no matter how many vendors an operator has, they can be unified into one.

  • Analyst firms, including our own, are starting to publish forecasts for Open RAN adoption and vendor revenues, and to analyze the operators and vendors that will cash in. Rethink has published a series of reports within its RAN research programme, focused on forecasts of unit deployment, spectrum bands, use cases and business models. Appledore Research is taking a different approach and assessing the strengths and weaknesses of early suppliers – an exercise in which NEC emerged as the most highly-ranked systems integrator, followed by fellow Japanese company (and NEC customer) Rakuten Mobile. Thanks to its plans to commercialize its Rakuten Cloud Platform and associated integration services, the operator also counts as a supplier in this report.

However, the analysts highlight the difficulty of providing a comprehensive picture at such an early stage in the market. The firm tracked 41 projects but of these, 30 had identified their vendors in three technology categories or fewer (the categories assessed were vRAN, radio units, RAN chipset, systems integration, data center/edge compute, cloud platform, RIC/xApps, and orchestration).

While SI is vital to early deployments, which will be somewhat hand-crafted before a fully open, at-scale platform evolves, more than half of early Open RAN projects have not disclosed their integrator, or even whether they are performing that role internally, or working with a supplier. Among the companies with some early Open RAN SI activity are traditional SI businesses such as IBM, World Wide Technology (WWT), Tech Mahindra and NTT Data, plus vendors such as Amdocs and Parallel Wireless.

Those with the most known Open RAN contracts overall, in any category, were led by Parallel Wireless, Altiostar, Intel and Mavenir. However, while Parallel has 18 contracts and NEC Radio, for instance, has only five, the value of the deals is not recorded (and NEC appears separately for its six SI deals).

Anayst Robert Curran said: “It looks like the industry is stepping up to the calls for greater openness, speed and diversity. And this is just the beginning. The major investments and support being given by large vendors to Open RAN explicitly (Dell’s is the just the latest example), will take time to have impact — but impact they will surely have.”

  • Dish Network and the Open RAN Policy Coalition have applauded the passing of bipartisan US legislation that includes schemes to fund technology development for open networks. The US Innovation and Competition Act of 2021, approved in the Senate last Tuesday, is a $250bn bill that aims to broaden the 5G supply chain, favoring US vendors and chip suppliers, and increasing the USA’s competiveness against China. The bill still has to be approved by the House of Representatives but the Open RAN Policy Coalition – an operator-driven group that aims to influence policymakers to support open networks – was already optimistic. It said the proposed legislation “recognizes the importance of Open RAN in establishing supply chain resiliency and supporting innovation. 5G supply chain security has implications not only for telecom policy, but also for economic policy and economic security,” said the coalition’s executive director, Diane Rinaldo.

One provision calls for emergency government funds to implement the USA Telecommunications Act, including $1.5bn for a Public Wireless Supply Chain Innovation Fund, to be managed by the NTIA. This would “spur movement towards open architecture, software-based wireless technologies, funding innovative, ‘leap-ahead’ technologies in the US mobile broadband market”, said the bill, which also calls for a $500m joint semiconductor and Open RAN program.

Through its Institute for Telecommunication Sciences (ITS) testing division, NTIA is issuing a ‘Broad Agency Announcement’ in order to obtain either prototype or commercial equipment “used in Open RAN 4G and 5G networks, as well as virtualized RAN (vRAN) software and RAN automation software”. The RUs, CUs, DUs and RIC should comply with standards “such as those developed by the O-RAN Alliance, Telecom Infra Project, etc”.

NTIA wants to “increase familiarity with the equipment and to assess Open RAN performance, interoperability, security and potential economic impact”, presumably before it starts awarding large funds to support the platform. Acting NTIA administrator Evelyn Remaley said: “Today’s announcement is an important step for testing the ability of these technologies to interoperate and scale, and to achieve a more secure and resilient global 5G supply chain.” Vendors that participate in the program will need to submit a proposal that provides a complete and total price including any labor and support hours.

  • Airspan Networks is one of the best-established of the challenger RAN vendors that aim to leverage Open RAN to take market share from Ericsson, Huawei, Nokia, ZTE and Samsung. The company reported a sharp leap in revenues and profits in its most recent quarter, as well as a ‘master purchase agreement’ with an unnamed “large domestic operator”. This is good timing, near to the close of Airspan’s transaction with a special-purpose acquisition company (SPAC) called New Beginnings Acquisitions. That transaction – expected to close in the third quarter – promises to give the vendor a $166m financial injection and return it to the public sector.

In its first quarter, Airspan reported a 67% year-on-year increase in revenues to $45.9m and a 42% increase in gross profit to $20.9m. However, its net loss also rose, to $13.5m.

“Our strong first quarter results reflect the adoption of Airspan’s innovative 5G software, product and Open RAN technology by customers across the globe. The validation we are receiving from our customers and partners supports our belief that Airspan is a differentiated, disruptive force in the industry,” said Airspan CEO Eric Stonestrom.

“In a world where network providers ZTE and Huawei have been placed on restricted lists, the want to do business with US-based companies has never been stronger and Airspan is the only maker of complete hardware and software systems,” wrote analysts at Wall Street firm DA Davidson & Co in a recent client note. Despite concerns about over-reliance on a few customers (78% of sales come from three operators), they wrote: “Our bullish thesis on Airspan includes: strong end markets, industry adoption of open architecture that mirrors the company’s business model, the only US-based maker of key network products, projected EBITDA profitability this year with continued strong 5G-based growth ahead, ramping margins, and plenty of model leverage.”