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Is Rakuten the best or worst example of Open RAN?

Rakuten earned a lot of respect and goodwill for its bold decision to build a mobile network on completely different and largely unproven architecture, but are its challenges doing more harm than good to the open RAN vision at large?

Rakuten reported a loss of $887 million on its Rakuten Mobile unit during the first quarter of 2021. The compounding losses suggest that Rakuten may not earn a profit on its greenfield mobile network soon, if ever.

It also presents a negative data point, albeit unique in many respects, of what other operators might encounter if they fully embrace an open radio access network topology. Building a nationwide network is hard and expensive regardless of the infrastructure involved, but translating that work and investment into a strong, profit-generating business is not to be overlooked.

The e-commerce giant activated a cloud native, open RAN serving 4G LTE in April 2020, and followed up with 5G service in September 2020.

Rakuten’s pioneering status magnifies successes, mistakes

Rakuten is, for better and worse, serving as the poster child for open RAN. Its successes and mistakes are being magnified because hundreds of network operators and vendors are looking at Rakuten as an example for what can and can’t be achieved with open RAN.

“I think we need to resist the urge to equate open RAN to Rakuten because Rakuten is so different, so innovative, and it’s taking a completely different approach,” said Monica Paolini, principal analyst at Senza Fili. “To reduce that to open RAN or to see Rakuten as the open RAN operator, I think is doing a disservice to both Rakuten and open RAN. Having said that, it clearly is the highest profile open RAN deployment.”

While Rakuten does provide an example of open RAN, it isn’t fostering a model that any other operator can follow because Rakuten is uniquely positioned as a greenfield operator backed by a massive e-commerce business, she explained. “Whether they fail or succeed in the industry, we’re going to learn a lot from it.”

The mobile network operator market will, amid the rise of open RAN, break into pools of innovators and traditional players, according to Grant Lenahan, partner and principal analyst at Appledore Research. “While both seek to gain agility and cost advantage from open RAN, firms like Rakuten have the benefit of greenfields and a financial market that rewards risk taking and market share grabs, as opposed to rewarding and therefore reinforcing stable utility behavior,” he said.

“Rakuten is still the largest, most advanced realization of a network based on open RAN principles. Their learnings and experiences, together with their key vendors, are actively feeding back into the wider open RAN movement,” Lenahan explained. “Every operator’s open RAN journey is a function of its own particular market conditions and ambitions. It would be a mistake to see Rakuten’s challenges at this stage as reflecting negatively on open RAN. Far too early to make such a judgement.”

Legacy network operators confront truer open RAN test
Matt Walker, chief analyst and CEO at MTN Consulting, pointed to Vodafone as a more realistic poster child for open RAN because its networks reflect a typical mobile network operation. Other legacy network operators in Europe like Deutsche Telekom, Orange, and Telefónica are actively pursuing open RAN, collectively calling it “the technology of choice for future networks.”

Rakuten Mobile’s losses are to be expected and come as no surprise to a group of analysts interviewed by SDxCentral. “I believe that open RAN will eventually deliver on its capex and opex promises, but it is still very early and ecosystem participants will need time to mature their platforms,” said Will Townsend, senior analyst at Moor Insights & Strategy.

“They are the lead open RAN poster child, but they underestimated the difficulty of the integration effort given the highly disaggregated nature of open RAN,” he explained.

Network construction and integration costs have probably come in higher than planned, but “Rakuten’s hope is that these costs can ultimately be spread” with a large customer base in Japan or a successful global expansion of its Rakuten Communication Platform (RCP), Walker said. RCP acts as a customizable platform for other network operators to use for open RAN planning, deployment, and management.

Moreover, Walker said, “the potential tie-ins with the other parts of Rakuten could be important.” For that reason and others, Rakuten is in the mobile business for the long haul, according to Walker. “At this point, it would damage the overall Rakuten brand if the telecom arm fails. It’s risky, but companies from the internet sector are used to accepting more risk than telecom in hopes of huge reward.”

It’s important for industry observers, vendors, and operators to realize that open RAN is defined by how an operator plans to introduce it, including the architecture and topology chosen, asset structure, and transport cost of each respective operator. All of those factors impact the potential cost savings and effectiveness of open RAN on a per-network basis, Paolini explained.

Open RAN not defined by one operator or vendor
“We need to start understanding that open RAN is not a single, monolithic thing that you drop in your network. It’s not like ‘do you have open RAN or not?’” she said.

The longer term open RAN vision, and “one of the primary drivers of open RAN is truly to address the supplier diversity and to reduce any potential swap costs down the road in the event there is more consolidation,” Dell’Oro Group VP Stefan Pongratz said.

“In general, I think the narrative has changed. Open RAN is no longer about total cost of ownership savings, and it is more about improving the supplier diversity without impacting the performance,” he said.

Rakuten’s impact on the wider telecommunications industry is just beginning, according to Lenahan. “This is an extremely committed, ambitious company with a truly disruptive vision for the industry. There are already multiple goals for open RAN projects that vary from operator to operator: connect the unconnected, urban densificiation, private networks, vendor diversification,” he said.

“Rakuten is doing all of those at once, and with a vision for how any operator can make these goals more achievable. That’s what’s really different,” Lenahan concluded. SDXcentral

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