Press play to listen to this article
After a decade of fierce rivalry with Chinese tech giant Huawei, European telecommunications equipment champions Nokia and Ericsson may soon face a myriad of new competitors.
As Europe reduces the use of Huawei equipment in its 5G networks, mobile operators are looking for companies to replace them. The continent’s “big four” telecom operators, Deutsche Telekom, Telefónica, Vodafone and Orange, on Wednesday published a joint “memorandum of understanding” committing to prioritize the development of “Open RAN” technology, a concept that would benefit small hardware and software manufacturers.
Open RAN embraces the idea of slicing the 5G supply chain into smaller pieces and imposing standards on hardware and software companies so that their products can work together – a ‘Lego approach’, as has been described. called an expert, to digital infrastructure. This would allow operators to procure specialized kits and services under smaller contracts with different players to assemble a 5G network, thereby breaking the market power of “end-to-end” providers like Ericsson and Nokia.
The operators’ public campaign for the standards comes after years of lobbying against 5G security laws that will drastically reduce Huawei’s presence in the European market for years to come. Operators, now barred by governments from using Huawei in several European markets, see Open RAN as a solution to what they see as a duopoly in the supplier market that allows Ericsson and Nokia to charge higher prices. high for 5G equipment.
Once in place, Open RAN could help equipment makers like Samsung in South Korea and NEC in Japan, cloud providers and tech giants like Amazon, Google, and Microsoft, as well as smaller specialist software companies. like Altiostar and Mavenir to establish a stronger foothold in the growing 5G market in Europe. .
The Big Four said they would “also promote to European policymakers and industry that adopting a competitive Open RAN ecosystem will put Europe and European industry ahead in the race. technological leadership “.
But for Europe’s two main suppliers, Ericsson and Nokia, the political push to stimulate new competitors could put more pressure on already tight profit margins and struggling finances.
Geopolitics of standards
Operators around the world started working on new standards in 2018 in an association called the O-RAN Alliance. It is a standards body that includes participants from more than 200 companies in the technology sector, including Microsoft, Facebook, chipmakers, software companies and major European suppliers Ericsson and Nokia.
The O-RAN Alliance includes Chinese operators but not its tech giant Huawei – which is telling.
The Chinese giant has always viewed Open RAN as a challenge to its dominance: “O-RAN is currently being hijacked for geopolitical reasons. It has been militarized, especially against Huawei,” a company official said at the meeting. ‘a conversation in June, asking not to. be named because of the sensitivity of the problem.
The push for Open RAN standards quickly gathered pace in the United States, where lawmakers realized the country’s tech industry had missed the boat on developing 5G equipment.
The US Congress passed a bill in November approving $ 750 billion in public funding to develop Open RAN technologies.
The US tech industry has also leaned on European capitals through a lobby group called the Open RAN Policy Coalition, formed in May last year. It brings together smaller US software companies like Altiostar and Mavenir with well-known names like Cisco and Juniper and tech giants Facebook, Google, Microsoft, Intel and others. Non-US names include Samsung, NEC, Fujitsu, Rakuten, as well as the three biggest European telecommunications operators and Nokia.
“One thing we’ve heard from European governments … is that a diverse ecosystem is very important and they want to see European suppliers have market share,” said Alex Botting, senior director of Venable, a lobbying which represents the coalition in discussions with the European authorities.
In London, the initiative won government backing when it presented its “diversification strategy” in November. He pledged £ 250million in funding to spur innovation in Open RAN and try to introduce new manufacturers of smaller 5G equipment. He also pledged to fund a new trial with Japanese telecommunications provider NEC.
The gain of Europe, the loss of Europe
For European lawmakers, the question is which specific European companies would gain from Open RAN – besides operators who expect it to lower purchase prices.
The concept carries risks for its own leaders in the field, Ericsson and Nokia, who have more and more freedom in markets that have blocked or bypassed Chinese suppliers.
“If you break this duopoly and you have a lot of new suppliers, what does that do to the two European incumbents?” said Alex Sinclair, technical director of the global association of telecommunications operators GSMA.
Nokia may have been more receptive to the idea of Open RAN, but Ericsson has been lukewarm.
Its chief technology officer, Erik Ekudden, said in an interview in July that the technology is “still maturing”. He said the telecommunications network market was already open to competitors, but few of them were successful because it is a tough market. “We have a consolidated market, we have relatively few radio access network providers… But it’s still an extremely competitive market,” Ekudden said.
European lawmakers have always sought to diversify telecom providers as part of the EU’s “5G security toolkit” process that aimed to reduce reliance on Huawei.
Regulators, lawmakers and industry officials are exploring policy options to ease the shock of Huawei phasing out, in working groups within the EU’s digital services department as well as within the group NIS Cooperation, a roundtable of cybersecurity experts from EU countries and the Commission.
In Berlin, the government has also expressed support for Open RAN in recent updates to telecommunications security rules, and operators have already started pilot projects with new providers.
The technical challenges ahead
Above all, the operators’ document on Wednesday is a signal to both the industry’s supply chain and the regulators overseeing it that they are taking Open RAN seriously.
In the document, they pledged to work together on Open RAN standards, invest in technology development, and push governments and regulators to help fund research and “policy support.”
The four telecom operators, along with their US and Chinese counterparts like AT&T, Verizon, China Mobile, China Telecom and China Unicom and others, buy the most network equipment. The choice of a certain technology will certainly stimulate supplier research in the years to come, which could speed up the process of commissioning large Open RANs.
“Left to its natural course, it would probably take many years to become meaningful,” said Sinclair of the GSMA, adding that public support from operators “is to accelerate this.”
But running a network of smaller building blocks also increases technical headaches, he said, “If you are dealing with smaller vendors you have a lot of supply issues,” adding that Open Networks RAN would require a “systems integrator” company to manage all the different parts – a role that operators over the past decades have handed over to vendors like Huawei, Ericsson and Nokia.
You want more analysis of POLITICO? POLITICO Pro is our premium intelligence service for professionals. From financial services to commerce, technology, cybersecurity and more, Pro delivers the real-time intelligence, in-depth insights and the scoops you need to stay ahead of the curve. E-mail [email protected] to request a free trial.