Current RAN market has become highly centralised. The three big ones, namely Ericsson, Nokia, and Huawei, control over 80 % of the global market. Further, since Huawei has been banned in several Western markets, many operators are left with only two options. This has raised concerns among operators and authorities alike. Operators have become concerned about limited options in production, authorities about national resilience.
From only few integrated vendors to tens of HW andSW suppliers
To some extent concentration in the RAN markets is reasonable due to high R&D investments and sunk costs. Economies of scale are needed to develop more and more advanced mobile technology generations and to deliver benefits of digitalisation to majority of people. Efficiency gains can make both mobile operators and mobile subscribers better off. However, when concentration goes as far as to having only two vendors left, negative impacts may become prevalent. High concentration often translates into lack of competition that in turn leads to excessive prices as well as lack of innovation and investments. Consequently, leading mobile operators are actively driving development of Open RAN.
Operators want to cut dependency on only few vendors to improve their own market power and to ensure that the best available components can be introduced in the networks in a flexible and timely manner. Open RAN introduces open interfaces between different network components and decoupled HW and SW. Moreover, HW does not need to be purpose-built; instead, general-purpose HW can be used (often referred to as Commercial Off-the-Shelf, or COTS, hardware). The beauty is in that Open RAN lowers entry barriers to new players including e.g., highly specialised RAN software vendors or highly efficient HW vendors. A switch to general-purpose HW is a good source of scale benefits. Thus, instead of having only few integrated RAN vendors, operators can have tens of different HW and SW vendors to choose from. At its best Open RAN can provide both diversity and efficiency. It is an appealing option.
Open RAN improves national resilience
Market concentration is not only a business concern, but also a political one. Mobile networks are seen as part of critical national infrastructure and thus authorities want to ensure high level of resilience. In the current setting one integrated RAN vendor typically serves as a sole or primary supplier of network gear in any network. Consequently, a big share of mobile users in any country are served by one RAN vendor only. Thus, a possible failure during an upgrade process or similar occasion might leave substantial areas and subscriber groups without mobile services. This poses a threat to national resilience.
Perhaps most notably, national security concerns due to market concentration have been raised by the UK government in its 5G Supply Chain Diversification Strategy. They state their position rather clearly: “The lack of diversity across the telecoms supply chain creates the possibility of national dependence on single suppliers, which itself poses a range of risks to the security and resilience of UK telecoms networks.” The situation is seen as a market failure that the markets themselves are not likely to cure. In consequence, they say, governmental intervention is needed. UK government’s remedy to the national security concerns is built around three themes. First, they plan to support the remaining vendors to ensure that they continue to contribute to security of mobile networks. Second, they wish to attract new entrants via incentivising operators to integrate new suppliers in their networks to support diversification. Finally, the government takes a strong supportive position on Open RAN development and, among other initiatives, has allocated public funding to boost development of interoperable solutions.
As a concrete action towards Open RAN deployments, the UK government, together with the leading UK mobile operators, announced in December 2021 “a joint ambition for35 % of the UK’s mobile network traffic to be carried over open and interoperable Radio Access Network (RAN) architectures by 2030”. Credibility of the announcement is increased by the fact that the leading UK mobile operators are strongly involved in Open RAN development. Authorities in other big markets are active, too, and Open RAN is gaining support and public funding e.g., in France, Germany and the USA.
It is safe to expect that the current rigid RAN vendor market will need to change. Extreme concentration can be seen as a market failure that is likely hamper development and sustainability of mobile markets. Open RAN is a possible remedy since it lowers entry barriers to new entrants and enables co-existence of several specialised vendors in a network. Open RAN is a candidate to disrupt the current status quo and can provide both operators and governments with more flexible and secure solutions. Open RAN as an idea makes sense technically, economically, and politically, and it has very strong supporters, including the biggest operator groups and important public authorities. In fact, the strong support for Open RAN has already forced the current incumbent vendors move towards at least partial openness, and new players are emerging. In sum, operators are likely to get more options in mobile network deployments which in turn improves resilience. On the other hand, greater diversity in network deployments asks for more co-ordination between different vendors, both technically and contractually.
Omnitele’s expertise in telecom covers technology, market knowledge, regulation, and policy issues. During our over 30 years’ history we have studied every technology generation, witnessed evolution of the telecom market, and worked actively with different stakeholders in the value chain. While the markets in general have developed very positively, there are now signs of a possible market failure that has prompted actions from both operators and policy makers. There is no single quick remedy, but Omnitele is well-equipped to address all new initiatives within the industry, including Open RAN. We are prepared to advice operators in reviewing production options and policy makers in ensuring national resilience.
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