Stefan Pongratz

Stefan Pongratz

Vice President

In recent decades, mobile communications have completely transformed the way that human beings communicate and interact with one another. New technology generations introduced on average every ten years have consistently and fundamentally improved the overall user experience, paving the way for innovation beyond anyone’s wildest imagination.

This end user transformation from the initial voice centric models to today’s data and video driven end user applications has had a profound impact on the network with mobile data traffic capacity increasing roughly 500-fold over the past ten years.

At the same time, the innovation and the progress on the supply side to cope with the explosion in data traffic has not translated to any revenue upside for the radio access network (RAN) infrastructure suppliers—per Dell’Oro Groups’ RAN report, the RAN market has advanced at a 0% CAGR since the year 2000.

Operators have also struggled to extract more revenue from their customers – per Dell’Oro Groups Telecom Capex Report, currency adjusted wireless revenues increased at a 0% CAGR over the past six years, reflecting slowing subscription growth and lack of revenue upside from new sources.

The strong coupling between wireless capital intensity and the RAN market implies that constrained operator revenue growth will remain one of the primary inhibitors of further telco capex acceleration.  In other words, operators are comfortable with some decoupling in the short-term to accommodate the rollout of new technologies. At the same time, operators are fully aware of the demand side challenges and have no plans to return to historical capital intensity ratios. Instead, they will continue to operate within a constrained capex envelope and rely on all the tools in the toolkit to do more with a confined budget.

One of the key drivers with the shift from proprietary RAN toward Open RAN is that it should ideally address the competitive landscape and increase the likelihood of a market concentration trend reversal. Per Dell’Oro Group estimates, the worldwide Herfindahl-Hirschman Index (HHI) has advanced nearly 50% over the past 19 years. Preliminary estimates suggest the HHI index for the 2019 RAN market topped 4000 in both North America and China, reflecting the state of the competitive dynamics in these highly concentrated markets.

As a result, there are three broad parallel tracks aimed at addressing the shortcomings of the current architecture, including: 1), Centralized-RAN (C-RAN), 2) Virtualized RAN (V-RAN), and 3) Open RAN.

These efforts to move compute resources to a central location (C-RAN), use more general purpose processors (V-RAN), and open up the interfaces (Open RAN) in hope of simplifying the ability to mix and match baseband and radio suppliers are not new and have been around for a long time.

While the standard Dell’Oro RAN report includes RAN systems using centralized, virtualized, and Open RAN, the splits are not provided in depth with the standard report.

In this report, it is our objective to dig deeper about the Open RAN opportunity and assess if this time is any different—is there enough momentum and progress with Open RAN to ensure this technology will play a significant role in future 4G and 5G rollouts?

The report addresses such questions as:

  • What is Virtualized and Open RAN?
  • What is the Open RAN vision?
  • What are the benefits of using Virtualized and Open RAN?
  • What is the market opportunity and forecast for Virtualized and Open RAN?
  • Will adoption happen at a faster or slower pace than previous technology shifts?
  • What regions will likely be the early adopters?
  • What are the key risks with Open RAN and Virtualized RAN?
  • What will be the impact on the network and the market?

The report includes a 5-year forecast for the following areas:

  • Open RAN – RAN Function
  • Open RAN – RF Output Power
  • Virtualized RAN – Baseband Function
  • Virtualized RAN – RF Output Power