According to the latest report from market research company Omdia, cloud native and open source have become synonymous with emerging digital service providers that are subverting the Asian market. Now in Asia, there are many companies following the market entry strategy of Reliance Jio, the trend leader. Rakuten Mobile has launched commercial LTE services on its end-to-end cloud native mobile network, and its service price is only half of that of the old Japanese telecom operators. The pressure to break into the saturated mobile market led by the old operators is prompting the new entrants to innovate in both network and market strategies.
Emerging operators see the advantages of open source
The biggest challenge faced by global telecom operators depends on a core issue brought about by the verticalization of the supplier community. Both hardware and software come from the same supplier. These software and hardware have their own private protocols and interfaces, and few operators change their proprietary technology. The cost of network deployment is higher and higher. Every technology upgrade requires a large amount of capital expenditure from telecom operators. According to Omdia’s research, since 2010, global operators have invested $3132 billion in mobile and fixed networks, with an average annual investment of $313 billion. This accounts for a large part of the operator’s total revenue (about 17%).
Large Internet and technology companies such as alphabet, Facebook, Microsoft and Amazon spent a total of US $264 billion in capital expenditure and US $373.6 billion in R & D between 2010 and 2019, which provides an urgent answer for telecom operators to seek optimization of capital expenditure. As a result, some emerging operators are getting inspiration from these technology companies. Looking back at operator announcements in 2019, we can see that many global and regional operators are now willing to turn to open source technology. However, old operators are still not fully committed to this concept, which is indeed the right approach, because they have to deal with existing networks with legacy devices and architectures.
Among the emerging operators, Rakuten of Japan is leading the development of this field by virtue of its completely virtualized, automated and software centric LTE network announced for commercial use in April 2020. The Ran of the operator is fully virtualized, in which each mobile site carries only one remote RF head from Nokia, while all other components are implemented as virtual machines running in 4000 edge data centers.
Now, Rakuten plans to adopt the same strategy in 5g development. The operator said the level of virtualization it has achieved means that its 5g deployment costs will be reduced by about 50% compared with traditional telecom operators. In a market like Japan, this represents a huge opportunity, as Rakuten will be able to take advantage of its low cost to provide a highly competitive service plan.
This is not an unproven business model. India’s reliance Jio used a similar approach in building its new pan India LTE network, which is fully automated, software driven and distributed. For Rakuten and Reliance Jio, suppliers Nokia and Samsung have opened proprietary interfaces to Altiostar and RadiSys, thanks to the benefits of open source
Internal software development capabilities are critical
Different from the traditional method that operators rely on one or two major suppliers, a software centered decoupling network may require operators to manage multiple suppliers, which increases the complexity of network operation. Rakuten and reliance jio emphasized the importance of building strong capabilities in software and system integration to fully manage multi vendor deployments involving traditional and new vendors integrated through open interfaces.
In addition to Nokia’s customized services, Rakuten works with a number of suppliers, including Altiostar, Cisco, Intel, red hat, Oki, Fujitsu, Ciena, Netcracker, Qualcomm, Mavenir, Quanta computers, Sercomm, allot, Innoeye and Viavi. Reliance Industries acquired RadiSys, while Rakuten acquired an equity stake in Altiostar, one of its many key suppliers. Vran is provided by Altiostar, which divides the functions of virtual baseband and into those of cellular base station. Its base station unit is purchased from Taiwan quanta computer company (QCT).
If telecom operators want to change the value chain, they must have these key software development capabilities. That’s what Reliance Jio’s blueprint is for.
In 2014, Reliance Industries merged Rancore technologies, one of its technology subsidiaries, with reliance jio to promote the research and development of 4G delivery platform using open source technology. As early as 2013, Rancore developed an integrated billing and charging solution for telecom operators, providing ready to use rich API and standard interface, which can be integrated with third-party OSS and BSS systems. When Reliance Jio chose SAP as BSS (online / offline charging, CRM, billing and invoicing), it was not surprising because SAP adapted the solution to meet the operator’s needs.
To further enhance its software stack, Reliance Jio joined the ONAP project of Linux foundation in 2018. The move aims to jointly develop OSS and BSS systems, which can be easily expanded as the operator expands its Internet of things capabilities. In addition, reliance jio’s parent company, Reliance Industries, announced the acquisition of RadiSys, a network system provider, with a view to accelerating Reliance Jio’s internal strength in 5g, the Internet of things and open source architecture.
Telecom operators must weigh 5g strategy and business case
In most markets where 5g has been deployed and is developing, 5g business model is just beginning to appear, which may take several years to generate considerable revenue. But for telecom operators, 5g is still an important means to maintain market position.
In emerging Asian markets such as India, service pricing is the key to high service adoption. Operators have learned from their 4G experience. Although 4G services were launched in India as early as 2012, it took eight years for the country’s market to reach 45% 4G penetration. By contrast, the average time spent in developed Asian markets is four years. As operators want to maintain profitability, reducing network deployment costs is still very important.
The first mock exam for Rakuten is that the Rakuten launch is an important milepost, but the effect of this model is only time will tell us the answer, said Inderpreet Kaur, a senior analyst at the Asia Pacific region. However, one of the impacts that telecom operators should determine is that in addition to the initial network deployment cost, the overall cost of the network in its entire life cycle is also very important.