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2 September 2019

Rakuten reported to be scaling back launch because of deployment delays

Many operators say, confidentially, that in their ideal world, they would start 5G deployment at a later date when new cloud architectures and radio technologies are more mature. However, government and commercial pressures are forcing them to embark early, which involves compromises in terms of the technologies enabling their first roll-outs. Imagine the pressure on Rakuten Mobile, then, which has to build a network from scratch to launch commercial services in one of the world’s most competitive markets, Japan, this year.

It is, of course, starting with 4G, but it is aiming to deploy the world’s first end-to-end cloud-native mobile network, so in architectural terms it is closer to ‘true 5G’, and should be 5G-ready. While this is easier to do for a greenfield operator than one with legacy networks to migrate – and it would make little sense to do anything else – it still means Rakuten has the risks and pressure of being an early mover, and multiple challenges to get its network live on time.

Deploying mobile networks in the cloud is not yet, as many operators have attested during their trials, the automated, rapid process that should eventually evolve. Optimizing and tuning RAN virtual network functions (VNFs), in particular, to run with full efficiency on OpenStack cloud infrastructure, is a long and difficult process in these early stages. As BT and others have discussed, getting VNFs to support the same levels of performance and functionality as proprietary RAN and core appliances requires considerable time and expertise.

One day, containerization and full automation will reduce the time and cost to roll out a new network function, but that dynamic, agile platform is still years away.

In the meantime, the RAN also retains physical elements like antennas, which have to be costed, installed and optimized, and if these are to be fully managed by the cloud-native systems, the physical aspects, down to low level considerations like power supply and wiring, must be fully tuned to the wider platform.

Such issues may be slowing Rakuten’s progress, and according to the Nikkei Asian Review, delays in base station deployment may force it to scale back the first phase of its commercial network, which is due to go live in October.

The original goal was to roll out 3,432 base stations by the end of Rakuten’s fiscal year in March 2020, but at the end of June, the company was over 50% behind on its target, according to the reports, and that drove the Japanese Ministry of Communications to request that the MNO amended its plans to a more realistic schedule, but also put measures in place to speed up deployment.

An unnamed source from Rakuten Mobile told the reporters that the network had hit problems with wiring and labor shortages – construction workers are in short supply because of preparations for next year’s Tokyo Olympics.

All this means that, on October 1, the initial launch will cover some parts of capital Tokyo, plus the major cities of Osaka and Nagoya, but the coverage and capacity will not be as strong as planned on day one because Rakuten “does not have enough bases in city centers that have a high concentration of users”. The risk is, in a country where expectations for mobile broadband quality of service are very high, that users will be disappointed with the experience on the new network, reducing Rakuten’s ability to seize market share with disruptive pricing and new services, in the way that Reliance Jio (whose CTO Tareq Amin now has the same role at Rakuten Mobile) did in India.

Rakuten’s group chairman and CEO, Hiroshi Mikitani, told journalists last week that “we will absolutely have the bases ready in time for October”, but qualified that by saying the company could kick off with a “small launch”, limiting the number of initial users and services in order to assure good quality of experience for those that are supported.

The fourth Japanese MNO’s ambitious architecture plan is being cited as a role model by other new mobile entrants, such as the USA’s Dish Network, so its successes and setbacks will be closely watched. The company has attracted a lot of attention for its plans to deploy fully cloud-native 4G and 5G networks with help from a raft of vendors, including Nokia, Altiostar, Cisco, Red Hat, NEC and others.

But its business model needs to be creative too, to justify the investment in 5G and to differentiate it from the established trio of MNOs – NTT Docomo, KDDI and Softbank – without engaging in a destructive price war like those seen in many markets with new entrants, from France and Italy to India.

Rakuten Mobile has an MVNO agreement with KDDI, which will continue in its early years to supplement its 5G coverage. Its decision to acquire spectrum and become a fully-fledged MNO is not primarily because mobile broadband subscriptions will enhance its cloud and content revenues significantly.

Instead, the aim is clearly to give it full control of the user experience for services which are growing rapidly on mobile systems, such as financial services – its third biggest revenue stream after cloud and video. It will also be able to offer enterprise customers a combined cloud/connectivity platform to enable their own new services. It is even cooperating with another MNO, KDDI, supporting the larger telco’s own move into financial applications in return for roaming rights.

It is also scaling up through acquisition, announcing in July that it would pay JPY2.3bn ($21.1m) for businesses operated by ecommerce and web company, which will boost Rakuten’s mobile subscriber base by about 260,000 users. The deal covers two DMM units – its MVNO and its virtual internet service, DMM Hikari. The former uses NTT Docomo’s 3G and 4G networks and had around 240,000 subscribers as of the end of June, while the web service runs on fiber operated by NTT Hikari, with about 20,000 users.

This is not just about user numbers but about tying more people tightly into Rakuten services and user experience, the main motivation for becoming an MNO. The company said it was working to “maximize synergy with the other services and businesses in the Rakuten Ecosystem”, including loyalty schemes, for DMM customers.