(Bloomberg) -- For as long as Finland’s Nokia Oyj, Sweden’s Ericsson AB and China’s Huawei Technologies Co. have dominated the market for telecom network equipment, customers have looked for ways to break their hold. Now, wireless operators may get their wish. An initiative called OpenRAN, short for open radio access networks, is aimed at making different bits of mobile equipment work together regardless of which company they came from. A breakthrough $14 billion supply deal in late 2023 gave the enterprise a kick start, opening the door to more competition.
1. What is telecom network equipment?
The systems that allow you to watch the latest TikTok video on your phone from just about anywhere consist of a complex network of servers, processing boards, antennas and base stations loaded with radios and software. Up until now, mobile phone operators such as Verizon Communications Inc., Vodafone Group Plc and AT&T Inc. have generally had to pick a single vendor to supply all of those parts. And there aren’t many to choose from. Ericsson, Nokia and Huawei dominate the global market for proprietary radio access networks, with Samsung Electronics Co. and ZTE Corp. providing such equipment on a much smaller scale.
2. What does OpenRAN change?
OpenRAN promises to give mobile phone companies far more options by setting a common standard for making network architecture compatible. This would allow telecom operators to mix and match suppliers rather than having to buy all the software and hardware from a single vendor. In theory, this greater flexibility opens the door for operators to assemble their own servers from, say, Nvidia Corp. chips or buy them directly from Dell Technologies Inc., while any number of smaller players could become niche suppliers.
3. Who wants OpenRAN?
Mobile service providers want OpenRAN because it will usher in more competition and, they hope, lower prices. The risk of relying on a handful of powerful equipment manufacturers has been laid bare as tensions between Beijing and the West grew, pushing some governments to demand that mobile operators remove Chinese equipment from their networks due to national security considerations. That’s left many operators in the US and Europe even more reliant on Nokia and Ericsson as Huawei is no longer an option. This state of affairs hasn’t necessarily served the interests of the Nordic companies as the uncertainty has hampered the industry’s switch to the next generation of mobile technology, known as 5G. A more nimble market driven by OpenRAN could fuel innovation and spending. OpenRAN’s potential to help operators swap out Huawei and promote new companies on the market has made the US one of the technology’s biggest backers. There’s no major US telecom equipment supplier, and officials in Washington see OpenRAN as a chance for domestic companies like Mavenir Systems Inc. to get in the game.
4. What do the incumbents think?
The top telecom equipment vendors were long skeptical of ceding control over an industry they dominate. Samsung was the first to develop OpenRAN technology and start testing it. More recently, Nokia and then Ericsson changed their attitude as they saw the shift was inevitable and they might even benefit from it. The pivot has already provided a boost for Ericsson, which won a $14 billion contract with AT&T in 2023 to become the single supplier for its planned OpenRAN rollout. That deal sent shock waves through the industry as it was the first time an operator committed to OpenRAN on such a large scale. Some in the industry have criticized AT&T for picking just one supplier to build out OpenRAN, when the technology allows for multiple vendors. AT&T technology chief Jeremy Legg said in June that the US operator was seeking to “move toward a multi-vendor environment.”
5. So when will OpenRAN really get going?
One of the major issues holding up OpenRAN is that the technology isn’t entirely ready. While AT&T has gone big with its Ericsson OpenRAN contract, other major operators such as Deutsche Telekom AG and Vodafone are still testing it in small parts of their networks. A number of interoperability issues are holding it back. For one, it’s hard to get certain key parts, like software, to work seamlessly together. Companies regularly trade accusations of not sharing their technology roadmaps with each other, or of making OpenRAN equipment that is actually closed. Though many in the industry say it could be as much as a decade before OpenRAN is a reality, the shift is already underway.
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