In February, U.S. Attorney General William Barr bluntly dismissed an emerging technology alternative to Huawei as “pie in the sky,” and suggested that the United States consider instead investing in traditional, hardware-based, vertically integrated providers, Nokia and Ericsson. While these European firms, along with Korea’s Samsung, do offer workable systems for the new 5G sphere, they are saddled with higher costs than Huawei, partly due to the heavy subsidization the Chinese government has lavished on its national champion. More importantly, the newer, predominately U.S.-led telecommunications systems are much more flexible, open to many more providers, easily upgraded and less expensive than any of the hardware-based offerings. Despite the economic disruptions in the wake of the pandemic, these emerging system designs are seeing increasing acceptance around the world and are getting a second look by the White House, the policy community in the United States and by telecommunications operators around the world.
The two related technologies are Open RAN (radio access networks) and virtualized networks (VN). They utilize software and cloud computing to replace much of the integrated hardware networks characteristic of Huawei and the three major competitors. They are open in the sense that they employ off-the-shelf components from any provider meeting common standards, in contrast to the proprietary hardware networks which are vertically integrated and rely on a single source for both hardware and software. They are virtualized in the sense that they utilize internet connections and easily changed software as the operating architecture instead of pre-programmed operating systems embedded in hardware from a single source. As such, these newer systems can be upgraded and adapted much more quickly and inexpensively for new applications and shifts in operating strategy. The leader of one of the pioneering Open RAN firms, Mavenir, recently emphasized the benefits of competition : “By giving mobile operators more flexibility in choosing the vendor best suited to their needs, we unleash competition and facilitate more innovation in network performance, faster deployment and network upgrades, and more resilient networks.”
The three most advanced and aggressive system integrators—which design the new architectures using multiple radio, mobile phone, computer, cloud and software vendors—are American based, but work with multiple providers around the world. Japan, Taiwan, Korea and increasingly India all have both component providers and wireless operating firms working with the leading integrators, Altiostar, Mavenir and Parallel wireless. IBM also offers system integration services.
According to a recent survey, global telecommunications operators representing 22 percent of all wireless customers are now introducing or operating Open Ran and VN networks. Research firm IGR projects that number will grow to 47 percent by 2024. The early experience with the new systems suggest that average savings relative to traditional, integrated hardware systems such as Huawei or Ericsson are around 40 percent of initial capital expenditures to build the networks. Total savings estimates range from 31 to 49 percent, including ongoing operating expenses.
It is also important to note that early roll outs of the new technologies include both dense urban and rural environments, and many are backward integrated so that existing network equipment does not have to be totally removed. Many of the early urban-dominated adapters, such as Rakuten in Japan and Vodafone in the United Kingdom, start with 4G systems, with upgrades to 5G planned in the near future. A Turkish network, with Parallel Wireless as the system integrator, is built on the existing 2G, 3G and 4G systems, disaggregating the hardware and software components. This complex system too can be upgraded to 5G without replacing all the legacy components, adding to the cost advantage. Another feature of the new systems, such as that of the rural U.S. operator Inland Cellular in the Mountain West, is labeled as a “self-organizing network” (SON) which uses computers and software to automatically adapt service according to network demand and fixing bottlenecks, saving the time and cost of human intervention.
The most important “greenfield” system is Rakuten in Japan, which is now operating a 4G VN in Japan, and is scheduled to light up 5G service this year. Rakuten, which is an investor in Altiostar, is also marketing its own technologies and services with that firm to other vendors as an explicit alternative to Huawei and the legacy hardware providers. Alaskan firm OptimERA, serving the dispersed coastal fishing areas around Dutch Harbor, integrates earlier 2G through 4G subsystems using Open RAN architectures for its planned 5G upgrade. Spanish giant Telephonica successfully built an Open RAN network in Peru.
Larger scale networks using the new technologies are underway in India, which is the world’s largest mobile telecommunications market by number of users, and in the United States. In India, all three of the largest cellular networks, Reliance Jio, Bharti Airtel, and Vodafone Idea, which collectively have over 1 billion users, are experimenting with some version of the new Open RAN and VN technologies. Vodafone is working with Mavenir and Bharti Airtel with Altiostar. Reliance Jio has committed to Open RAN and is developing its own integrated system, but is also working with U.S. 5G leader Qualcomm and with Google for handsets. In the United States the big three mobile network operators are all implementing both specialized company-specific networks and broader consumer systems using the newer technologies. In the United States satellite operator DISH networks has a vast amount of spectrum available and will exploit it to build a 5G system. This resulted in part from an agreement with the Federal Communications Commission (FCC). In the recent settlement with the U.S. Justice Department to clear the Sprint-T-Mobile merger, DISH also acquired the sizable pre-paid business of those two companies to add to its wireless plans. In its deal with the FCC, DISH committed to provide 5G service to 70 percent of the U.S. population by June 2023. In a major boost to Open RAN technology, DISH has chosen this technology for its 5G network and is working with Mavenir, Altiostar and VMware’s cloud-based platform to implement it.
The VN and Open RAN breakthrough may eventually be comparable to the personal computer and internet revolution which unseated the central computer dominance that characterized computing from the 1940s through 1970s. But resistance results from the economic attractiveness of the subsidized Huawei business, and the reality that most current operating companies have legacy systems, with huge amounts of invested capital which must be amortized. The increasing recognition around the world in the wake of Chinese suppression of Hong Kong democracy and its military incursions into India, has added to momentum to finding an alternative to Huawei. This is especially true in Europe and India. As the newer technologies are proven in both urban and rural settings, and as integrators learn how to adapt at least part of existing legacy systems to the virtualized technologies, and as the superior economics and flexibility of the new offerings are recognized, the resistance to change will erode. The Rakuten, DISH, Bharti Airtel and Vodafone rollouts of 4G and 5G will also be important in proving the new technologies at scale. But, in the words of a study for the big three U.S. system integrators: “Clearly, Open RAN is no longer a science experiment, nor one that only applies to greenfield operators or MNOs (wireless operators) in developing regions of the world.”
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