Will O-RAN be the game changer it promises to be?

Today, telecommunication carriers have built out virtualized mobile networks that have enabled new vendors to come into the 5G ecosystem, and spurred new growth opportunities. It is expected that 70 percent of the cost of the next-generation 5G network would be for software and system integration, the rest for hardware. And such ecosystems built on maturing open standards as O-RAN can be built independently of any vendor or any technology.

In the last six months, the level of commitment by major operating and equipment-manufacturing companies for O-RAN networks, and of government support for these new, disaggregated networks, has picked up. The US Congress authorized a USD 750 million program; Germany, a USD 2 billion and the UK its own USD 350 million project. The largest greenfield system in place is Rakuten in Japan with over 3 million users.

Consider this. Large-scale deployment of O-RAN will not happen until 2025, and O-RAN cannot replace existing RAN on a 1:1 basis today. The 5G networks rolled out today use the standards from 3GPP Release 15, with increased functionality forthcoming in Releases 16 and 17 within two years. If O-RAN is to increase 5G innovation, it must evolve faster than 5G itself. The 5G networks to be built in 2021 and 2022 already have the standards roadmap in place; by 2025, O-RAN may be too little, too late for 5G operators. It may be that some O-RAN providers can offer equipment more competitively on some parameters, but the cost advantage may not be significant when considering all the costs, such as supply, availability, energy consumption, security, warranty, network integration, equipment matching, new contracts, and service-level agreements. As a principle, too many vendors not only increase cost, but also complexity. Open architectures require managing portfolios of 5–50 vendors, whereas vendor reduction increases shareholder value.

All three big telecom equipment vendors, Nokia, Huawei and Ericsson are a part of the specifications group, and will begin supply­ing O-RAN-compliant equipment starting later this year, frustra­ting efforts to nurture competitors. In fact, Appledore Research reckons O-RAN will generate USD 11.1 billion in revenues in 2026, and as much as USD 8 billion will go to the incumbents.

As the three Indian telcos upgrade their networks to 5G technology, while ensuring they maintain the same high level of performance at scale, the verdict of how O-RAN will impact the CapEx and OpEx will only be out in a four to five-year timeline.