India has been one of the most active countries in seeking to build a homegrown 5G infrastructure industry with the help of emerging Open RAN platforms. Its two largest operators, Reliance Jio and Bharti Airtel, both have experience of building their own local ecosystems and platforms and both have been active in open networking trials. In this context, it was initially surprising to see that Sterlite Technologies (STL), an Indian manufacturer and integrator, had ended its expansion into Open RAN and stopped investing in wireless.
The company will return to focusing on its core fibre and network services businesses, and is seeking partners to take on its Access Solutions Business Unit and personnel. The unit was set up two years ago to focus on “Open RAN, 5G, programmable FTTx, and controller/orchestration software” and hired Chris Rice, a former AT&T SVP of infrastructure, to head up the division. In March 2021, STL said it had won $100m in 5G network orders in Middle East and Africa.
However, on a second glance, the news is less surprising. STL is primarily an integrator, and a significant component of that $100m was actually optical equipment to support 5G xHaul – so linked to the vendor’s core business rather than to RAN directly. And integrators, even more than vendors, rely on network roll-outs with scale, not merely trials or small-scale deployments.
Just a few months ago, STL said it was pitching new integration services to ease the pain of Open RAN evolution for operators and claimed to have attracted interest from Jio. But India is a good example of how the scaling-up of vRAN and Open RAN will be slow to happen in most markets outside the very large new entrant deployments of Japan and the USA. Despite their enthusiasm for new architectures and vendors, Jio and Airtel chose Nokia and Ericsson to deliver their 5G macro networks, at least in the first phase.
Open RAN platforms and suppliers were not ready to deliver the huge numbers of base stations these operators require to meet their aggressive build-out targets for 2022-2024. They may well source small cells and rural equipment from new or local suppliers, as Jio has done in 4G, but as in most markets, vendors and integrators will have to wait for the next roll-out cycle to move into the macro network.
In that context, continuing to invest in a market that may not reach scale for many years is beyond the capacity of most companies, especially in a hardware business. STL’s first forays into Open RAN came on the back of its 2015 acquisition of India-based Elitecore, a provider of OSS/BSS software, which had extended its software activities. This unit developed a RAN Intelligent Controller (RIC) platform for Open RAN in 2019 and, although the RIC space has now become very overcrowded, this was a logical fit with other projects to develop software-defined networking (SDN) and programmable network systems.
However, with the formation of the new business unit, STL also started to develop 5G hardware, including small cells, radio units and WiFi access points. Its Open RAN radio units were based on the Evenstar reference designed developed by Meta and offered under the auspices of Telecom Infra Project (TIP). In September 2021, STL announced Accellus, a wireless/fiber converged portfolio that included the RIC and a programmable FTTx product; and at 2022’s Mobile World Congress, it unveiled its Firebird range of Open RAN 5G radios.
However, Open RAN hardware is a risky departure compared to software because it either requires a market where a large volume of commoditized units can be sold, or one where there is demand for a smaller number of very high performance, high value units. In Open RAN today, outside of trials, and the heavily custom deployments of Rakuten and Dish, neither has yet materialized. The low end has insufficient volume as yet to justify the low margins of commoditized equipment, and the performance of Open RAN is not yet good enough for many high end macrocells.
By contrast, STL’s core businesses in optical fiber and interconnect, plus network construction and integration, are seeing healthy growth in demand. In its second quarter of fiscal 2023, which ended in September, STL reported revenues up 17% year-on-year to INR17.68bn ($217m), and the firm claimed to 11% share of the global optical cable market, excluding China, up from 5% in fiscal 2020. But it is looking to improve profit margins by defocusing on non-core or speculative business, and believes the exit from wireless will improve its operating profits by up to INR500m ($6m) a quarter from the start of calendar year 2023.
CTO Badri Gomatam said in a statement: “Over the past few years, STL has invested in developing a full-stack portfolio of open-source, disaggregated and cloud-native solutions for wireline and wireless access. As a part of this endeavour, STL has successfully developed open-source solutions in programmable FTTx, Open RAN-compliant radios and small cells. As this shift towards 5G and newer architectures intensifies, we will take this effort forward with strategic partners.”
He added: “With this move, we will further sharpen our focus on enabling 5G and FTTx through our core business of optical connectivity, network deployment and network services, and continue to build advanced digital infrastructure in this decade of network creation.”