Is OpenRAN the answer to a telecom duopoly?
The announcement that the UK’s mobile network operator Vodafone is replacing 2,600 5G telecom receivers from Huawei to OpenRAN, has ramped up industry discussion regarding the potential of the emerging technology.
According to reports, an estimated 2,600 Vodafone sites in rural Wales, UK, will be switched to OpenRAN by the government-imposed deadline of 2022. The telecom will be a trailblazer for the technology in the wake of Huawei’s blacklisting. Vodafone has used the Chinese provider’s equipment in a significant proportion of its network and has until 2028 to replace it with equipment from other vendors.
While many countries are turning to Ericsson and Nokia to fulfil their 5G network projects, there is a growing alliance of telecoms, vendors and countries that support OpenRAN.
Traditionally, network infrastructure was designed to be proprietary, lacking interoperability with any third party software or hardware, and therefore leading to the current situation where megalithic end-to-end suppliers like Ericsson and Nokia control the vast majority of the market. In contrast, OpenRAN allows telecom operators to assemble their own infrastructure piecemeal, creating a much more diverse - and therefore more competitive - supplier marketplace.
It’s an alternative way of building networks offering greater interoperability and cultivating more competition to help smaller telecom vendors gain a foothold in the market.
Advocates of OpenRAN argue that the methodology will create the necessary competition to shake the duopoly of Nokia and Ericsson, which control the lion’s share of mobile network infrastructure projects in Europe and the US, now that Huawei has been largely constrained to the Chinese market alone. OpenRAN also provides an option to countries looking to remove infrastructure already installed by Huawei.
, CTO of Vodafone UK, said of the move, “There is one big goal; to introduce much-needed diversification into the supply of telecom equipment. Separation – or disaggregation in the jargon – of hardware and software means a telecoms company would not have to use the same supplier for both hardware and software on a mobile site. By separating these two components, specialist software companies can be brought into the fray, while general-purpose hardware can be created for deployment.”
Petty believes the development of OpenRAN is critical to the telecom industry, expecting it to spur creativity and competition in what is currently a stagnant market. He explains, “Expanding the supplier ecosystem is critical for a couple of reasons. Firstly, a greater number of suppliers encourages competition and therefore innovation. It is also very important to keep the cost of sourcing products and services as low as sustainably possible for the ecosystem to thrive.”
He continues: “Secondly, the greater the number of suppliers, the more resilient Vodafone’s network will become as it lowers the risk of a single supplier’s change of circumstances negatively impacting the business.”
However, some experts believe OpenRAN is not the Holy Grail of the telecoms industry yet, as the tech is very new and has some challenges to overcome. , International Editor for telecom industry title, , believes OpenRAN requires far more development before it's adopted as 'the next big thing'.
He says, “OpenRAN still needs to clear some major hurdles. Above all, its ecosystem is still relatively undeveloped. On the hardware side, it lacks the manufacturing capability of the traditional kit vendors. Until it scales up, it may struggle to meet telco demands or be as economical as mainstream technologies, now used to serve billions of mobile customers worldwide.”
Morris also points out that the tech has not yet delivered in a challenging situation, as the 2,600 sites Vodafone will overhaul, serves an undemanding and rural community. Densely populated urban areas may well present issues for 5G services.
He writes, “Another concern is that OpenRAN still falls short in more challenging deployment scenarios. The 2,600 sites that Vodafone has promised to overhaul lie in western rural parts of the UK. Using OpenRAN to support 5G services in more densely populated communities would be difficult. Vodafone's goal, however, is to ensure that OpenRAN can work anywhere, across all the different generations of mobile technology.”
Morris has also gone as far as accusing telecom representatives that formed the OpenRAN Policy Commission of "protectionism" in his article entitled 'Is O-RAN a protectionist scam?' The consortium of network operators was formed in 2020 to promote open interfaces and interoperability.
But industry giants can see the potential of the technology, which looks set to become an integral part of the world’s future telecom networks.
, CEO of Ericsson believes OpenRAN will affect revenues for the telecom by 2022 if the company is not well-positioned, noting that “I don't really see OpenRAN having a major impact in the 2021-22 timeframe, but after that I think it will start to impact revenues for us. It will start to impact the way business models evolve going forward. So, one should think of this as an opportunity where we will position ourselves as well. It's no different than other technology shifts that have happened in the industry – it’s all about leading on that development and leading on that front, and then we have a very good opportunity.”
Ekholm adds; “Ericsson is a strong supporter of openness and actively engages in alliances, such as 3GPP, ONAP and the O-RAN alliance. In the years to come, networks will gradually evolve, as will the current open standards. At the same time 5G is ready and happening now so focus must be on providing early access to 5G networks to enable the broader ecosystem to innovate at scale.”
Verizon’s 5G adoption rises as Q2 success hits record high
Verizon has reported record success in the second quarter of 2021 caused by an increase in the adoption of its 5G phone service, customer and sequential wireless service revenue growth, and network reliability. The company revised its revenue and adjusted EPS guidance upward for the full year as a result.
Hans Vestberg, Chairman and CEO of Verizon, said: “We are executing on our multipurpose network strategy and producing positive results in each of our five growth vectors, recording strong second-quarter results. With more connections on our network than anyone else, our already excellent network performance improved in the quarter and was recognized by RootMetrics as the best overall network performance for the 16th time in a row. We are also expanding our 5G Ultra-Wideband and 5G Home markets”.
He added that that the company “is excited about its momentum leading into the second half of the year”, and that it is “on track” to close the Tracfone and Verizon Media transactions.
Verizon’s Q2 2021 highlights
- US$1.40 in earnings per share (EPS); adjusted EPS*, excluding special items, of US$1.37.
- Operating revenue of US$33.8bn, a result of strong sequential wireless revenue growth.
- Net income of US$5.9bn and adjusted EBITDA* of US$12.2bn.
- Total wireless service revenue of US$16.9bn, a 5.9% increase year over year, and a 4.0 percent increase from second-quarter 2019.
- Total retail postpaid churn of 0.94 percent, and retail postpaid phone churn of 0.72 percent.
- 528,000 retail postpaid net additions, including 275,000 phone net additions, resulting in 121.3mn total retail connections.
- Total revenue of US$23.5 bn, an increase of 11.2% year over year, and an increase of 6.7% from second-quarter 2019.
- Total retail postpaid churn of 0.83%, and retail postpaid phone churn of 0.65 percent, a record-low retail postpaid phone churn outside of second-quarter 2020 and third-quarter 2020, which were heavily impacted by the COVID-19 pandemic.
- 350,000 retail postpaid net additions, including 197,000 phone net additions, driving 5G-phone adoption to approximately 20% of Consumer wireless phone customers and step-ups to premium unlimited plans.
- 92,000 Consumer Fios Internet net additions. The company's trailing 12-month total Fios Internet net addition performance is the highest since 2015.
- Total revenue of US$7.8bn, an increase of 3.7% year over year, and relatively flat from second-quarter 2019.
- Total retail postpaid churn of 1.30%, and retail postpaid phone churn of 1.07%.
- 178,000 retail postpaid net additions, including 78,000 phone net additions.
“Second quarter results were exceptional, both financially and operationally,” said Verizon Chief Financial Officer Matt Ellis. “Our strong first-half performance and the momentum in our business gives us the confidence to raise our total wireless service revenue growth guidance to between 3.5% and 4%, an update from prior guidance for 2021 total wireless service revenue growth of at least 3%. We are also raising our adjusted EPS guidance* to the range of US$5.25 to US$5.35, an update from prior guidance for 2021 adjusted EPS* of US$5.00 to US$5.15”.
Also in Q2, Verizon came to an agreement with Apollo funds to sell Verizon Media, the expected close date being in the second half of 2021. Following this, the Verizon Media business classified certain assets as “Held for Sale”, which the company no longer depreciated or paid off. According to Verizon, this led to a partial quarter benefit of three cents per share in Q2, which will continue as a benefit until the deal is closed.