Most of the CAPEX required to build a wireless network is related to the RAN segment, reaching as high as 80% of the total network cost. Any reduction in the RAN equipment cost will significantly help the bottom line of wireless operators as they struggle to cope with the challenges of ever-increasing mobile traffic, flat revenues and rising costs to maintain their networks.
Open RAN first was deployed in rural areas and emerging markets. But, solely rural Open RAN is no more - in a recent investor briefing, Vodafone CEO Nick Read spoke about Open RAN getting ready for urban. "We think we'll have a rural Open RAN ready for 2021 and we are looking to an urban, which is a more complex execution, in 2022, but we need governments and we need operators to scale this to improve functionality and efficiency going forward," he said. This statement highlights the importance of the “village,” or an ecosystem that has been establishing itself for the last few years: from MNOs, vendors, hardware and software, to system integrators, governments and regulators, in every region of the world: from emerging markets all the way to developed markets like Europe and the US.
In the past, the deployment focus for MNOs was placed on addressing urban issues to increase capacity or spectrum efficiency for densification. Uncertainty in the rural business case on the demand side, and operational complexity on the cost side, and competitive pressure in urban markets resulted in MNOs deprioritizing investment in rural in favor of urban. The rural challenge is now being solved across the globe with Open RAN delivering a new business approach. As Open RAN has proven itself in the most challenging rural locations, now it is getting ready for prime time in urban markets.
In developed economies, US mobile operators were looking at Open RAN for rural at first, but current geopolitics on vendors from a certain jurisdiction has created a much bigger opportunity for Open RAN. The Open RAN Policy Coalition, formed just a few months ago with many operators as its members, looks to educate the US government on Open RAN as a viable alternative to these vendors. DISH is planning on building their 5G network and covering 50% of the US population by 2023, based on Open RAN. DISH decided to collaborate with many new vendors and also with wireless chip giant Qualcomm “to test open and virtualized RAN 5G solutions containing the new Qualcomm 5G RAN Platforms to help fast track DISH's rollout.” Qualcomm unveiled its 5G RAN portfolio just last month. “By further expanding its portfolio of 5G infrastructure solutions to include O-RAN specifications that are compliant with DISH’s open architecture and implementation, Qualcomm Technologies will enable greater flexibility in the deployment of our 5G vRAN equipment,” noted DISH chief network officer Marc Rouanne.
O-RAN specifications are becoming more and more important to operators in developed markets when they consider deploying Open RAN. Vodafone is asking for O-RAN functional split 7.2 compliance from all of their suppliers in their RFPs, and Vodafone is leading the Open RAN pack. Vodafone announced last year their intent to deploy Open RAN across their European operations. Recently, Vodafone committed to deploying 2,600 sites in the UK alone.
In the US, Samsung, who is one of the Open RAN suppliers, has been announced as one of AT&T's and Verizon’s 5G suppliers.
Smaller US operators are already using Open RAN to expand their 4G networks. Inland Cellular in Idaho is already expanding their 4G networks with Open RAN, proving that it is a strong contender for any RAN replacements. It has been in the news lately for pioneering the use of Open RAN technology that might give the United States an advantage on its stand against certain vendors. Asked by The Lewiston Tribune, Richard Jackson, vice president of network operations, explained why Open RAN: “It drops the cost of each cell site by about 40 percent. That’s important because we need more sites per square mile to serve our region than in companies that operate where the terrain is flatter. It was price and features. Before, we were locked in. We had to pay what our suppliers asked if we wanted to expand our network or add services. They were driving the network, not us.” With smaller US operators required to remove certain vendors from their networks in a few years, the last thing they want is to be locked into another RAN supplier that will be “driving their networks.” This echoes the sentiment that started the Open RAN movement.
In APAC, we see Open RAN gaining momentum for greenfield deployment with Rakuten. Smartfren, Ooredo among others plan on using Open RAN under the TIP umbrella for brownfield as well. These operators are using deployment learnings from TIP, Vodafone and plan to use Open RAN in variety of scenarios.
In early 2019, Rakuten in Japan announces world’s first virtualized, cloud-native greenfield 4G network. It has become a poster child for Open RAN though it doesn’t use O-RAN Alliance defined “open” interfaces. What interfaces do they use? Rakuten’s radio vendor (Nokia) opened up their X2 interfaces to the software from another vendor.
Around the world, there are many more major operators looking to add Open RAN technology to their production networks, including AT&T, BT, the three major Chinese operators, Deutsche Telekom, Dish Network, NTT DoCoMo, Orange, Reliance Jio, SK Telecom, Telus, TIM, Turkcell, Verizon, Vodafone, MTN, Orange, Etisalat and Tier 2 and 3 operators in the US.
That’s likely why industry analysts are becoming much more bullish about the prospects for the Open RAN market. Dell'Oro Group predicts that by 2024, operators will spend somewhere north of $3 billion on Open RAN products, which is a double-digit share of the market in the next five years.
ABI Research expects significant CAPEX to be heading towards Open RAN vendors by the end of this decade. By 2026, ABI Research predicts that for public outdoor networks, sales of Open RAN will reach $40.7 billion, or 45% share. These figures do not include any capital expenditure projections for the transport or core networks. But they do include tower rental charges and labor expenses. This RAN outlook also reflects a 5G spending increase in China, where operators are putting up hundreds of thousands of 5G base stations (including Massive MIMOs) this year alone. In China, construction fees and electricity-related costs are adding substantial amounts to the 5G base station costs.
RAN Research, part of Rethink Technology Research, expects Open RAN to “account for 58% of total RAN CAPEX (for Open RAN hardware, software and services) spending at $32.3 billion and to be deployed at 65% of all sites by 2026.” Secondly, according to Rethink's projections, traditional RAN sales will be declining, to just $23.4 billion in 2026. Thirdly, they predict that in 2020-2023, only 17% of established (brownfield) MNOs will deploy Open RAN, while 39% of alternative and greenfield operators that have no legacy technologies will adopt it fully in this early phase.
As the market evolves, one thing is becoming apparent - more and more operators see Open RAN as the only alternative to get them into the driver’s seat to deploy and manage their networks, and Open RAN suppliers are poised to grow with them to meet their needs.
