A trend is taking shape where open RAN is made of canned solutions – I call this Canned RAN. The concept of interoperable RAN elements is yielding the path for a subset of integrated solutions from a few vendors that plan to dominate the open RAN market (additional perspective here). After a couple of years of initial buildup, the time for open RAN to deliver is here and now. Open RAN vendors sensing the challenge are steering towards greater integration among a subset of partners. Moreover, some players are starting to carve a firm position by embedding of their IP into partners’ solutions. Why is this important? Because the trend gives clues on the level of open RAN maturity, and the challenges that vendors are facing at this stage. I will address some of the consequences to vendors and operators here.
Narrow Partnerships
Open RAN started with non-incumbent vendors leading the charge with their own, non-interoperable solutions. The early solutions catered to specific market trials and deployments. Product and vendor variety was limited; and the interface protocol standards were not ready.
As O-RAN Alliance began defining the fronthaul and other interfaces, the ecosystem grew rapidly to include over 25 radio vendors and more than half-a-dozen baseband vendors – I can count 7 at different levels of maturity. To each combination of radio/baseband there is the dimension of spectrum band: low, mid and high. The permutation of these three parameters leads to a large number of products that is too costly for any organization to manage.
As a result, the leading vendors and system integrators are in a situation where they have to be selective in their partnerships. This leads to tight partnerships between select group of vendors such in the case of Rakuten/Altiostar, NEC and Fujitsu. I call this narrow partnerships for the lack of a better word.
Islands on Interoperability
To streamline the system integration, some players are opting to license and use the same hardware and/or software modules to facilitate interoperability between their solutions. Mavenir provides an example of this approach which coexists with the narrow partnership approach. The coalition of vendors creates islands of interoperable solutions of varying degrees of maturity.
Consequences for Vendors
The canned solutions offer specific profiles or system configuration. These solutions undergo more rigorous tests by vendors and operator. Vendors who are not part of these partnerships risk being left out, and have to find a different path to market which can take different forms, including a play outside the service provider space. But ultimately, the vendor field could dwindle at a speed relative to that of the market traction of Open RAN.
Consequences for Operators
Few operators have so far put money behind Open RAN. Only the largest incumbent operators would have the financial and technical capabilities in addition to market interest. Greenfields have to focus on a subset of vendors and solutions as they face a monumental task ahead. This favors the canned solutions as global interoperability is expensive and not easy. In fact, the current Covid climate has a negative impact on “open” concepts.
The incumbent operators would not mind the rise of canned solutions. After all, their main objectives are diversification of supply chain and potential savings in RAN costs.
Concluding Thoughts
Open RAN is a tool by operators to put pressure incumbent vendors on RAN pricing. RAN capex stands at around $65 billion or 40% of operators’ total products and service-related capex. The three major RAN vendor – Huawei, Ericsson and Nokia – have a combined average operating margin of 6%. Their R&D spending stands at an average 17% of revenue. By comparison, the average operating margin of a group of 7 operators from the US, Europe and Asia Pacific is 15%. I wonder if Open RAN in the service provider sector is like pushing on a wet noodle?