The Global State of the O-RAN Market in 2021

As mobile network operators (MNOs) face increasing operating costs and competitive pressures, they are increasingly veering away from legacy proprietary networks. Instead, they are moving towards open and virtualized architectures in an effort to increase flexibility, reduce costs and break away from vendor lock-in, allowing them to achieve operational gains and boost return on investment (ROI). The introduction of 5G is the ideal opportunity to accelerate this transition.

Since the evolution to 5G requires MNOs to replace or enhance radio access network (RAN) equipment, we are now seeing more operators worldwide adopting Open RAN (O-RAN) architectures. In addition to facilitating the switch to 5G, infrastructure compliant with O-RAN standards enables MNOs to enhance network flexibility, lower deployment costs and improve innovation cycles. As a result, although the O-RAN market is in its nascent stage, it is projected to be worth more than $3 billion by 2024.

The Road to O-RAN

Because traditional RAN architecture uses proprietary equipment and vendor-defined interfaces, even the slightest changes to a wireless network are costly, labor-intensive and time-consuming for MNOs. Proprietary interfaces have traditionally prevented network operators from competitively shopping for equipment, locking them in to a single network equipment vendor.  By adopting O-RAN standards-based interfaces, MNOs have more flexibility to choose equipment from multiple vendors, helping to reduce costs and fuel innovation through competition.

Open RAN is not new. For decades, MNOs have been exploring the idea of an open, standards-based interface. However, technical and integration challenges prevented them from taking it further. Yet, over the past year, significant strides have been made. Suppliers are increasing investments in the field, while operators are committing to experimentation and trials. Moreover, some countries are implementing policy measures supporting O-RAN to reduce reliance on foreign vendors.

As of now, there might be only 35 active O-RAN deployments around the globe, according to Deloitte. Many of these involve testing in rural, greenfield and emerging markets. However, this figure can easily double within the year and continue to accelerate. In fact, Deloitte projects that O-RAN could represent 10% of the RAN market by 2025.

Plus, the growth rate of O-RAN could potentially be higher—that is, if government policies require MNOs to replace existing equipment from restricted vendors.

What Is Fueling O-RAN Growth?

Several factors are actively pushing O-RAN closer to reality, from increasing capital costs and favorable government policies, to technological advancements like 5G and cloud virtualization. Here are the most compelling value propositions of Open RAN architectures.

Low upfront costs

Virtual RAN architectures have the potential to lower upfront deployment expenses and operating costs. These reductions are very compelling during this time of peak demand for 5G wireless.

Each time the mobile network generation transitions, such as 4G to 5G and eventually 5G to 6G, additional frequency bands are also made available.  Presently, many MNOs are using higher frequency bands to deploy 5G, requiring greater cell density due to lower propagation distances.  Therefore, the networks require many more cell sites to achieve the expected coverage, capacity and data speeds. In the US alone, to deploy 5G will require about 2 million new cell sites and upgrades at all existing sites.  Additionally, in-building wireless upgrades must also occur to ensure seamless coverage.

Open RAN architecture can help operators minimize capital costs by aggregating baseband functionality through a single baseband unit (BBU) with multi-radio compatibility. Aside from lowering hardware costs, O-RAN architectures also are more adaptable and flexible to the ever-changing landscape of technology. Instead of replacing entire physical systems to cater to new market conditions, they can introduce new features and functionalities using software, reducing downtime for maintenance as well as increasing scalability.

Fast innovation cycles

Software-driven RAN enables smart automation, which changes the way operators manage their networks. It can eliminate the manual work involved in maintaining and optimizing the networks, leading to faster innovation cycles.

By unlocking a new level of interoperability, vendors can come up with products and solutions that cater to multiple operators. They can also focus on their specializations instead of having to create an end-to-end system.

Furthermore, O-RAN systems provide operators with deep insights into their network, allowing them to create solutions to optimize their network.

Vendor diversity

For years, the Multiple Input Multiple Output (MIMO) RAN vendor market has been dominated by five main players: Huawei, Ericsson, Nokia, Samsung and ZTE. They control up to 95% of the RAN market. Its top three players—Huawei, Ericsson, and Nokia—make up about 80% of the market.

In the US, federal funds can no longer be used on communications equipment or services from untrusted vendors, particularly ones that may pose a national security risk. Two of the largest RAN vendors in the world—Huawei and ZTE—fall into this category.

Other countries are following this move. The United Kingdom, for instance, has not only banned new purchases but has also authorized the removal of unrestricted kits from their networks. Japan, New Zealand, and Australia are also banning untrusted vendors from their 5G networks. Likewise, European operators want authorities to create local Open RAN supply chains so that they are not limited to Asian and US vendors. Such developments can lead to a more diverse and competitive global market.

What Are the Barriers to O-RAN Adoption?

O-RAN might sound like a promising solution for existing network challenges. However, it comes with many challenges and barriers as well. One of the main concerns involving O-RAN adoption is system integration.

In a traditional architecture, vendors are responsible for implementation and upgrades. If operators veer away from this setup, they need system integrators to ensure interoperability and performance of the network. The challenge is that since O-RAN is still in its initial stages, not many system integrators are well-versed and experienced in its architecture.

Moreover, Open RAN experiments are mostly limited to local and regional developments at this stage. The complexity of the architecture’s integration is manageable at a smaller scale, but it is still unclear if O-RAN will be truly scalable to larger networks, particularly with heavier traffic and higher performance requirements.

How Is O-Ran Adoption Varying by Region?

Due to the ban on Chinese tech giants in the US and a few European countries, Asia, Africa, and South America are prospective markets for Chinese equipment. According to Dell’Oro Group, the Asia-Pacific region is driving the growth of the market. One factor behind its surge is the shift from proprietary RAN to Open RAN in Japan. Although macro developments are dominating the O-RAN revenue mix on the global scale, the rise of millimeter-wave deployments in Japan is fueling the growth of small cell activity.

In India, two of the top three major operators are developing O-RAN network technology. They are working alongside equipment manufacturers and system integrators from the US and Japan. With a billion mobile users, this underdeveloped market’s O-RAN technology might prompt faster and less costly deployment of 5G.

A number of large telecom operators in Europe – Deutsche Telekom, Orange, Telefonica, TIM and Vodafone — are hard at work to advance adoption of O-RAN. They announced that they will seek funding from European governments to develop and deploy O-RAN technologies, and they have signed a memorandum of understanding promising to support O-RAN technologies and urge further investments.

Germany has already established a $2 billion program to support O-RAN solutions, which welcomes other European operators to join its alliance. The United Kingdom has its own $350 million initiative as well, which is aimed at developing O-RAN systems and equipment.

The State of the O-RAN Market in the US

Interest in O-RAN architecture is building up in the US, and all three major mobile operators in the country are part of the O-RAN Alliance, as well as the Open RAN Policy Coalition.

The O-RAN Alliance, which was launched in 2018 by Deutsche Telekom, NTT DoCoMo, AT&T, Orange and China Mobile, is working to further a common interest: a more Open RAN. In the past few years, this alliance has grown significantly, and now has 237 telecom equipment operators and manufacturers, many of which are based in the US.

Earlier this year, the US Department of Defense announced that they are looking into different ways to speed up the development of open 5G systems in order to enhance the DoD’s ability to achieve its missions, as well as veer away from equipment from Huawei, as well as other Chinese vendors. Tech giants also are urging the US government to implement O-RAN testing and certification facilities to help accelerate innovation. In a statement to the Federal Communications Commission (FCC), Intel expressed the importance of financial incentives and other program-based funding. These can benefit companies within the O-RAN ecosystem, such as those in the RAN hardware and virtualized software market.

Takeaway

Open RAN is still in its early stages, but it is evident that there is growing global interest in the technology. O-RAN’s potential to lower costs, promote vendor diversity and drive innovation cycles is pushing operators to move away from closed, proprietary systems and embrace open architectures.

Companies from all corners of the telecom industry are banding together to support Open RAN, ranging from traditional RAN equipment vendors to new O-RAN innovators. Network hardware, software and component vendors, chipset vendors, and cloud service providers are also crucial to this growing ecosystem.

There are, however, a few challenges that are hindering the growth of O-RAN. For starters, its ability to accommodate larger networks with large volumes of traffic and high-performance requirements has yet to be proven. On top of that, multivendor system integration, which possibly entails significant time, money, and effort for validating equipment vendors, might offset all the advantages of vendor diversity.

For this reason, O-RAN developments are mostly concentrated on local and regional deployments. Small-scale deployments make it easier for MNOs to handle the integration complexity. However, as O-RAN technology matures, the global market is bound to see rapid and widespread adoption.

As a member of the O-RAN ALLIANCE, SOLiD is dedicated to development of the Open RAN ecosystem for the advancement of open, interoperable interfaces and RAN virtualization.  The SOLiD SURF™ platform of O-RAN compliant radio solutions allows operators to diversify their ecosystem and speed the delivery of commercial 5G services in an all-in-one configuration compliant with open, multi-vendor specifications. For more information, visit: https://solid.com/us/solid-reveals-surf-platform-for-o-ran-compliant-ran-solutions/.

by dyanne