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Wireless communication networks are very complex, subject to rapid technological change, costly to develop and protected by extensive intellectual property. Only a few companies in the world are able to produce them economically. This has forced extensive industry consolidation.
Huawei, with annual revenues of about $100 billion, has become the clear technology and sales leader, followed after a big gap by Ericsson, Nokia and ZTE. There are no US vendors left. Hence, the latest technology 5G equipment market is controlled by a small number of vendors who sell proprietary products.
Carrier customers must commit to one supplier exclusively because key products are not interchangeable. This gives vendors enormous leverage. As a result, network operators are concerned about high equipment prices and governments are concerned about protecting data security on equipment from foreign sources.
Their wish is to open the equipment market to allow compatible products from more vendors to become available. A new open-sourced intellectual property approach has been proposed that would level the playing field the way the introduction of open-sourced Linux displaced the proprietary Unix computer operating system.
To this end, the Open Radio Access Network Policy Coalition has been established by a large group of US and international companies with the intent to “accelerate open standards for RAN and promote a network ecosystem based on more diverse, secure, compatible and competitive elements.”
As envisioned by the consortium, this new ecosystem would use new open sourced software operating on elements built to international standards that would allow new suppliers to enter the equipment market. Products from different vendors would be interchangeable, freeing the carriers from dealing from only one vendor while emulating the network function now performed on proprietary equipment from Huawei and others.
The O-RAN initiative is based on two factors. The first is that no corporation or government is in a position to challenge Huawei’s lead. The second is the belief that new software technology will challenge the current hardware.
President Donald Trump’s economic advisor Larry Kudlow told the Wall Street Journal last February:” Dell and Microsoft are now moving very rapidly to develop software and cloud capabilities that will, in fact, replace a lot of the equipment. And to quote Michael Dell, ‘Software is eating the hardware in 5G.’”
That is an overstatement. To be specific, O-RAN proposes to open up only part of the proprietary wireless network, namely the part that goes from the antenna to the delivery of transportable data packets to the extended interconnection network that routs the packets to their ultimate destination. These functions are currently performed using equipment and software proprietary to each equipment vendor.
This is a big multiyear project that requires the collaborative efforts of industry and governments. These technologies are complex and require extremely high levels of reliability – hence, extensive and costly testing.
The O-RAN Coalition has recommended that US federal sources put $1 billion into the project. But even if government money is forthcoming, it will be only the beginning of a costly development project. One estimate from a reliable industry expert states that at least five years might be needed before competitive products meeting the new standards could reach the market.
Another issue deals with attracting new competitors willing to challenge the incumbents. Would new vendors emerge offering these new non-proprietary products at competitive prices and change the competitive dynamics?
History has shown that it takes a great deal of money and time to compete in this equipment market. The market is hard to penetrate. The overwhelming concerns of carrier customers are the reliable operation of equipment, the capital cost of equipment, and the operating cost. This means that new vendors may have years of burning capital before they can persuade mobile carriers to buy their products and eventually reach financial viability
From the standpoint of execution, there are several vulnerabilities in the O-RAN approach.
The first, as Ericsson observed in a Sept. 10, 2020, post, is security. The Swedish company warned: “The introduction of new and additional touch points in O-RAN architecture, along with the decoupling of hardware and software, has the potential to expand the threat and attack surface of the network in numerous ways.” Ericsson’s concerns are elaborated in its report “Security Considerations of Open RAN.”
Data security is built into the proprietary hardware produced by the current dominant equipment providers. That is a matter of intense controversy; the US government has alleged that equipment vendors might enable customer data to be stolen through “back doors” implanted in their hardware.
The Chinese companies, Huawei and ZTE, reject the charge and have called on governments to employ independent laboratories to test their data security; the US government has rejected this offer, claiming that “back doors” are nearly impossible to detect and arguing that hardware needs to be produced under secure conditions. It remains to be seen whether the complex code required for O-RAN is, in fact, more immune to breach.
The second problem lies in the inherent limitation of O-RAN, which addresses the routing of data packets from the antenna that transmits and receives mobile signals. To a growing extent, computing power is migrating to the periphery of mobile systems, that is, to the ground stations containing the antenna.
As 5G opens up the internet of things, allowing industrial robots, autonomous vehicles, and other machines to communicate directly, more computing power is required at the interface between the mobile network and its mechanical clients in order to reduce latency.
Crucial to the functionality of 5G is low latency, that is, a shorter time interval between transmission and response to signals. A complex software suite that uses generic hardware may increase latency – that is, delay signals processing, and undermine the network’s usefulness for many applications.
Finally, the timing of this project is a competitive problem. Based on the current technology, Huawei and other Chinese firms haves already launched a set of promising applications made possible by 5G – for example, “Smart City” traffic management, “smart” farms and self-programming industrial robots.
China expects to emplace 10 million 5G base stations by 2024, making 5G broadband available to most of the country. Long before an O-RAN suite has been completed, China, and others that deploy the current technology, will have rolled out the downstream applications that harvest the real potential of 5G.
It is obviously too early to predict how this initiative will develop, but don’t expect a big change in the industry dynamics anytime soon.
Dr. Henry Kressel is a technologist, inventor and private equity investor. Among his technological achievements is the pioneering of the modern semiconductor laser device that enables modern communications systems. His most recent book (with Norman Winarsky) is: If you really want to change the world: A guide to creating and sustaining breakthrough ventures (Harvard Business Review Press, 2015).