At whose expense will Open RAN thrive?

Figures for 2022 show that while the telecoms equipment market grew in 2022 by 3%, it’s a declining rate of growth. For an influx of firms to turn up on the scene and make everything more diverse, someone’s surely got to loose market share.

Open RAN in a nutshell is an approach to building out mobile networks that makes bits and pieces of kit from different vendors work together, the point of this being an operator can pick a set of manufacturers to work with when planning infrastructure builds as opposed to going to one to do the whole lot.

Without interoperability of equipment this wasn’t really possible before, so it’s something like introducing a common language that chips and RANs and RICs can all use, creating a kind of plug and play approach to building out networks where previously most of the work went wholesale to the big three kit vendors of Nokia, Ericsson and Huawei.

The main reason all this is a hot topic and not a fairly mundane technical choice that in some situations an operator might want to take is because since Huawei became persona non grata in many Western nations when it comes to current and future 5G builds, you are left with only two choices – Nokia and Ericsson.

It could have been left at that of course, but Government entities, particularly in the US, didn’t seem to like the Nordic duopoly that that would create either, and so started the banging the drum about Open RAN as the future of mobile network infrastructure.

Last week here in the UK, the Department for Science, Innovation and Technology announced a competition to award up to £80 million of funding for projects around Open RAN. The overall goal of this we’re told is to ‘tackle barriers to the adoption of open mobile networks’ – or to put it another way, throw money at the problems associated with Open RAN to make it more viable, more quickly.

While there maybe technical or economic reasons a telco might want to have a spread of firms build out its future towers, the impetus behind it is all tied up with politics. And with global tensions between the US and China not looking like they are getting any better, Huawei kit is going to remain barred from many international markets for the foreseeable future, if it ever is allowed in again. So we are where we are.

It’s very easy to talk about things like interoperability and market choice in general, but if we take the vision at its face value – that the proper implementation of Open RAN will allow a much wider set of vendors to enter the market and make it more competitive by creating a more diverse set of options – then for it to happen either the overall market is going to have to grow or the current players are going to have less of a share of it.

According to the latest figures from Dell’Oro, the worldwide telecoms equipment market was up 3% in 2022 – less than the 4% it predicted. For 2023 it’s predicting growth of 1% – which would be the sixth consecutive year of growth, but considering figures for 2021 clocked 8% growth, the curve is bending towards flat.

In terms of the market players, Dell’Oro estimates the top 7 suppliers (Huawei, Ericsson, Nokia, ZTE, Cisco, Ciena and Samsung) control around 80% of the overall market, with Huawei still leading the pack despite all the bans. So there isn’t a ton left for anyone else as the market stands.

If the picture were one of massive growth, you can perhaps see new firms weaving their way into the gold rush and rustling up various niche solutions to problems and service differentiators, and everyone’s still making money. But if the market looks basically flat, either these firms are not going to expand their presence much or they will and the current leaders who control the bulk of it are going to have their share decline.

To be fair to firms like Nokia and Ericsson they seem to mostly go along with the rhetoric around Open RAN, but if it works as its supposed to it can surely only eat into their business. It wouldn’t have been surprising to see them take a more negative approach to it than they have – if you were to find yourself in charge of the numbers, pouring over revenue sheets with a furrowed brow preparing for an investor call, you might find it hard to see an expanding set of rivals riding a wave of government investment as the bright future Open Ran’s advocates describe it as. So we’ll ask the question for them – in a relatively flat equipment market, how much of a decline in business should the current market leaders expect if the ambitions of Open RAN are realised?