RIL, others are building their own 5G: What it means for telecom industry?

The oil-to-telecom major's ambitious indigenous initiative is one of several projects around the world to break the monopoly of incumbent telecom gear manufacturers

A silent revolution is sweeping the global telecom industry. For the first time, mobile operators are building their own 5G virtualised networks, breaking the stranglehold of incumbent telecom gear makers such as Ericsson, Nokia or Huawei. The new networks are based on “open platforms”, are no longer hardware-centric and potentially much cheaper. And these emerging players won’t use these networks to power their own mobile services only; they are planning to sell their 5G technology to competing mobile players across the globe and set it up as a new profit centre.

That is precisely what Mukesh Ambani announced at the Reliance Industries Ltd (RIL) AGM a few weeks ago. His telecom subsidiary, Reliance Jio, was ready with an indigenously developed 5G network solution that it could sell to the world. A few days later the company put in a request with the Department of Telecom for spectrum in both the 26.5-29.5 GHz and the millimetre bands in Delhi and Mumbai for just this purpose.

The plans appear ambitious but they’re still a work in progress. Reliance Jio has asked for spectrum for two years so that it can test its systems in dense urban environments. Also, the commercial launch of 5G in India will be delayed since the government is planning not to conduct 5G auctions in the latest round because providing contiguous spectrum is still a problem. Analysts reckon it will take at least three years before commercial launch.

To put the announcement in context, Japanese e-commerce giant Rakuten appears to be well ahead in the game. It has already put together the first open platform network (known as O-RAN or open radio access network) and will offer 5G from September in Tokyo, Osaka and Nagoya. It has signed up around one million customers. This will be the first time that the technology will be live tested and with scale. Driving this project is Tareq Amin, who was once Ambani’s key man in technology development and also worked in Huawei as a salesman.

 

 

A dozen-odd telcos that want to buy Rakuten’s technology — such as Dish Network in the US — and governments across the world are closely watching the rollout. Even if it succeeds, the company’s targets are moderate — cover 70 per cent of Japan by 2025.
 

Meanwhile, service providers are moving in, too. For instance, French telco Orange has signed up with system integrator Parallel Wireless to roll out an open platform-powered 5G in the Central African Republic.

Back home, Tech Mahindra is doing the same. It is positioning itself as a system integrator in the new 5G technology space — the sort of services IBM, NEC and Cisco offer. Tech Mahindra has also invested in Altiostar, a small company that is providing software to Rakuten. Sterlite, which is already working on a 5G radio, is approaching telcos in India and abroad to test their solutions.

To the uninitiated, current networks are based on proprietary technology, requiring both hardware and software to be bought from the same vendor, which then maintains and upgrades the system, giving operators limited flexibility. The open platforms on which new networks are being developed will allow operators the flexibility to choose hardware or software from different vendors or even building the latter on their own, or by allying with IT companies for system integration between the hardware and software. The new networks are more software-centric rather than being hardware-dependent.

Open platforms also bring down network costs substantially for 5G. According to software company Mavernir, the new virtualised networks would lead to a saving of 40 per cent in capex and 34 per cent in terms of operation cost for operators.

RIL has been working for over four years to hone its 5G offering, and reportedly has around 1,000 engineers on the project. Two years ago, it paid $69 million for US-based Radisys, which specialises in Voice over New Radio (VoNR) software. The company recently tied up with Qualcomm to combine the latter’s 5G platform with Radisys’ new radio software to power cells that are a key element of the network.

On an analysts’ call, Kiran Thomas, RIL president, said the company has built an end-to-end suite of products for 5G. The advantage of this approach is that RIL gets to own the intellectual rights over these products.

Conscious of the fact that building these networks is a collaborative effort, RIL has also roped in many investors and strategic partners — Google, Facebook, Intel and Qualcomm — which are already Reliance’s financial partners through Jio Platforms. These partners are also part of the Open RAN Policy Coalition — a grouping of US companies — formed in May (to take on the Chinese, many say). Reliance Jio, the telecom subsidiary, is a member of the O-RAN Alliance, which has all leading operators as its members and is working on fixing the standards for the 5G virtualised network.

The question is: Can companies such as RIL and Rakuten disrupt the market? Many argue that there is too much hype about the new technology because it is being pitted as an alternative to Huawei’s domination. Says a senior executive of a Chinese gear maker: “It is untested technology and will fail just as US attempts to bolster CDMA and WiMAX technology to support US companies failed to make a dent globally. It is a US attempt to challenge China’s technology edge in 5G in which they have invested time and money.”

There are others who fear that these 5G alliances will merely replace the domination of incumbent gear makers with a new set of dominant players — the mobile operator-cum-technology provider.

Which is why incumbent telecom gear manufacturers are readying to fight back. Nokia, for instance, has already joined the O-RAN Alliance and is supporting open platforms. “We offer stable 5G networks that are already being deployed; what Rakuten and Jio have announced is untested technology,” says a senior executive in one of the big telecom gear companies. European gear makers also argue that if the market dynamics change, even they will offer software and hardware separately.

Incumbent gear makers also argue that the cost savings are theoretical — they might save capex but operating costs will go up because they will have to pay the system integrator on a continuous basis.

Among other questions are whether any domestic telecom service provider will buy Jio’s 5G technology when they are involved in a bitter battle in the market.