This month, Japanese e-commerce giant Rakuten will roll out the world’s first greenfield 5G network built with fully modular Open Radio Access Network (O-RAN) technology. Originally set for March, the rollout—which will begin in three Japanese urban markets (Tokyo, Osaka and Nagoya)—was pushed to the fall due to the covid-19 pandemic.
What this means is that, for the first time, mobile network access—fully loaded for 5G deployment and packaged under the cloud-based Rakuten Communication Platform—will be offered through carrier-agnostic equipment.
Until now, cellular network service on a “closed-RAN” network kept telecom carriers tethered to the equipment of specific producers whose gear was not interoperable. This bolstered the dominance of a small handful of network equipment makers: Huawei, Ericsson, Nokia, Samsung and very few others.
The coming 5G (fifth-generation) wireless network era, with its daunting potential for industrial, economic and cultural transformation, has heightened national sensitivities about the outsized influence wielded by the leading equipment makers (none of which are American).
And it has cast new questions (and uncomfortable doubts) about what constitutes “trusted” equipment, and who can be trusted to make it.
An “end run”
In the U.S., Huawei’s rising global market share—especially its prevalence in the telecom infrastructure of emerging markets—has been especially threatening. Its market position has tested the country’s ability to influence market decisions among its European counterparts, forcing traditional allies (like Spain, Germany and the U.K.) to “pick a side”—in ideology, not just price—when selecting partners for 5G build-outs.
And it’s fed speculation that the U.S., without a homegrown competitor to Huawei, might try to buy a stake in Finland’s Nokia and/or Sweden’s Ericsson as a strategic counterweight: cue images of a “5G curtain” dividing the world along U.S.-China lines.
But the Open RAN (O-RAN) movement proposes something different: an end-run around the politically-charged equipment issue. Rather than equipment protectionism, Open RAN adherents favor interoperable, standardized interfaces for carrier equipment. Standardized interfaces enable users to plug-in and plug-out of network infrastructure, allowing for greater customizability.
Lowering the barrier…on purpose
Diane Rinaldo is one of the United States’ leading 5G experts, currently a Senior Vice President at Beacon Global Strategies, a Washington D.C. political consultancy specializing in national security issues. Until December 2019, she was acting head of the National Telecommunications and Information Administration, lead adviser to the White House on telecommunications and spectrum policy affairs. Prior to serving the White House, she served on the House Permanent Select Committee on Intelligence, where she focused on the Cybersecurity Act of 2015.
Rinaldo is also Executive Director of the Open RAN Policy Coalition, a consortium of leading private-sector companies united in their conviction that a market-based, open system that maximizes innovation in the 5G application space is the best way forward.
“Our coalition members support policies that promote the development and adoption of open and interoperable interfaces in the RAN,” said Rinaldo. “Open interfaces will help ensure interoperability across different players in the ecosystem, which will lower the barrier to entry for new innovators and bring more options for creative solutions.”
The 54 members of the Open RAN Policy Coalition cover a full spectrum of 5G stakeholders, including global telecoms Rakuten, Reliance Jio, Telefónica, cell tower operator Crown Castle, equipment makers Samsung, Nokia, and Qualcomm, U.S. tech bellwethers Facebook, Google, Microsoft, Intel, IBM, and newer cloud startups like telecom software makers Mavenir and Altiostar.
A different playbook
Members support a global deployment of 5G through inter-market collaboration on Open RAN among private sector companies. In this model, governments provide support through stamp-of-approval upscaling (rather than strong-arming) of 5G initiatives.
The hope is that a string of Open RAN success stories will kick-start momentum around the paradigm. Rakuten’s story has already converted a new acolyte: earlier this spring, DISH Network committed to Open RAN for its own 5G rollout.
While some observers have bemoaned the lack of strategic telecom M&A in prior decades that may have cost the U.S. its own version of Huawei, Rakuten offers a different playbook for growth in the 5G universe—one based on a dynamic patchwork of multiple vendor relationships and strategic stake building: contractual hookups, rather than bloated acquisitions.
In short order, under Amin’s leadership, Rakuten has contracted with NEC to develop its 5G core, acquired U.S. engineering tech firm Innoeye to obtain its operation support system, partnered with Qualcomm for its Small Cell transmitters, partnered with Mavenir for its cloud-based voice and messaging system, and opened a 5G applications lab with Tech Mahindra.
Many of these vendors are industry newcomers that have been funded to scale by private equity or venture capital. Mavenir—initially merger-led through smaller acquisitions—was scaled by venture capital firms August Capital, Alloy Ventures and Cross Creek, before IPO’ing in 2013, being acquired and then being merged again. 5G small-cell and macro-cell maker Airspan is a privately held company with a single controlling fund shareholder, Oak Investment Partners. Open RAN software maker Altiostar is a private company whose shareholders are other telecom companies—most notably, Rakuten, who joined Altiostar’s Series C funding round in May 2019 as a new investor.
All of this innovation has occurred within the span of very few years, across national borders, among private companies, and without a hegemonic investor or “SoftBank of 5G” to underwrite the process (…granted, SoftBank, which also offers telecom services in Japan, launched its own 5G telecom service earlier this year).
So what does this mean for the future of 5G? According to Rinaldo, “Standardizing interfaces encourages a variety of different models to emerge and compete. Open RAN is not a technology, but rather an ongoing shift in mobile network architecture that has allowed for the creation of a vibrant marketplace that will drive advanced wireless networks for 5G and beyond.”
And yet, it seems, diplomatic forces may still be in play, with Rakuten’s Open RAN model scoring another coup just this week. On Wednesday, Spain’s Telefónica—which operates in Germany and the U.K. as O2 and in Brazil as Vivo, announced that it has signed a memorandum of understanding with Rakuten to cooperate on “a shared vision” for Open RAN, 5G Core, and operations support systems.