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5G

A Kodak moment may await Ericsson, Huawei and Nokia

It has become a reference point for anyone facing disruption. In January 2012, Kodak, a company synonymous with photography, filed for bankruptcy after years of decline. Its error was to miss the shift from photographic film to screens, or so the story goes.

The truth is more nuanced, and there was arguably no answer for Kodak to the arrival of camera-equipped smartphones in the late 2000s. But the expression "Kodak moment," once used to describe the perfect snapshot opportunity, has today become a cruel joke, told at the expense of any company in a similar predicament.

Parts of the telecom industry are now staring at their own Kodak moment. Following years of consolidation, just three companies provide most of the equipment used in today's mobile networks: China's Huawei, Finland's Nokia and Sweden's Ericsson. Their dominance is not unlike that of Kodak and Fuji, a Japanese rival, in the 1980s. And just like Kodak and Fuji, they are being threatened by a seismic technological shift.

Kodak Moment
Storm clouds gather over the big kit vendors, as they once did over the photography giant.
Storm clouds gather over the big kit vendors, as they once did over the photography giant.

In Kodak's case it was the digital camera. For the mobile equipment vendors, it is software. More specifically, it is software that diminishes the value and importance of the underlying hardware. Already used in other parts of telecom, a technique called "virtualization" is now entering the radio access network (RAN), where most telco investment goes. Virtualization means software does not have to be tied to a specific box. Ideally, it should allow an operator to run network functions on any commodity server.

It is being helped by a backlash against proprietary technologies. With the development of more open interfaces, operators are now promised the ability to use products from different vendors at the same mobile site -- something not possible in older networks. The O-RAN Alliance, an operator-led group, has already finalized new "open RAN" specifications.

Virtualization and the open RAN are potentially a huge challenge to Ericsson, Huawei and Nokia. In the old-fashioned RAN, an operator is forced to buy dedicated equipment at some expense from one of those companies or a smaller rival. The lack of interoperability means all the RAN products at a mobile site must come from the same vendor's system, including the radio units and the "baseband" products that process signals. Taking advantage of the latest upheaval, an operator could theoretically use a tiny software company and standardized equipment (so-called "white boxes") in preference to a RAN giant.

It is already happening. In Japan, Rakuten, an ecommerce company, is building a new mobile network on virtualization, open RAN principles. It started out using radio units from Nokia in conjunction with software developed by Altiostar, a US company with just 220 employees, according to market-research site Owler. But Nokia will have no role in the second phase of Rakuten's deployment, according to The Mobile Network, another industry site. Instead, the Japanese operator will use equipment developed by KMW and Flex (formerly Flextronics).

NTT DoCoMo, Japan's biggest mobile operator, appears to have similar goals. Announcing a trial 5G service in the run-up to the Rugby World Cup, DoCoMo said it would use baseband systems from Nokia in conjunction with radio units provided by Fujitsu and NEC.

Operators in other markets are also trying to break the stranglehold of Ericsson, Huawei and Nokia. In the UK, notably, Vodafone has kicked off open RAN trials with Mavenir and Parallel Wireless, competitors to Altiostar, as well as a UK startup called Lime Microsystems. Vodafone CEO Nick Read, who has previously grumbled about supplier concentration, said the aim was to "actively expand our vendor ecosystem." Spain's Telefónica, meanwhile, has joined Rakuten as an investor in Altiostar.

Read at the Ready
Vodafone's Nick Read has taken a keen interest in the open RAN as he tries to find alternatives to Ericsson, Huawei and Nokia.
Vodafone's Nick Read has taken a keen interest in the open RAN as he tries to find alternatives to Ericsson, Huawei and Nokia.

Reasons to be open
Service providers have several motives for backing virtualization and open RAN technologies. The first, as Vodafone's Read indicates, is to bring more competition into the supplier market. That should spur innovation and lower prices for debt-burdened operators struggling to boost sales. It would also address industry and government concern that a few big vendors have become too powerful. If 5G turns out to be as economically important as cheerleaders insist, dependency on one or two organizations would look risky.

Recent developments have exacerbated those risks. Huawei is currently fighting US efforts to have it blocked from Western 5G markets on security grounds. Its absence would leave operators with even less choice. Ericsson, meanwhile, is set to pay a $1 billion fine to US authorities for corruption under previous management, and investigations by other countries could follow. Nokia's share price has plummeted in the last week after setbacks in the 5G market.


For all the latest news from the wireless networking and services sector, check out our dedicated Mobile content channel here on Light Reading.


Telcos also remain hopeful that commodity servers and open-source code will shrink the equipment bill. According to Parallel Wireless, industry forecasts show 5G deployment costs between now and 2022 falling 30% if a network is built in the traditional way but 50% if open architecture is used. "Twenty percent is a huge difference when we are talking about billions of dollars," said Eugina Jordan, the company's vice president of marketing. It may prove essential in low-income markets.

Even some government bodies appear keen. US officials determined to wrench Huawei out of the country's rural networks have reportedly been in funding discussions with Altiostar. Given the obvious barriers to entry in the network equipment sector, open RAN specialists may seem like the only viable alternative to policymakers. Parallel Wireless says it is in talks with numerous US operators about replacing foreign equipment providers. Deals involving Altiostar, Mavenir or Parallel Wireless may be imminent.

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