Why Open RAN can be the next big hit for startups

Open radio access network technology (Open RAN) is currently a hot topic in the telco industry and is pushed to become more mature in coming years by leading network providers. As investments and revenues will increase in the future, it is now time for startups to consider stepping in the market and taking the leap of inventing new business applications and technology solutions. This blog article shall help to better understand the Open RAN concept and provides hints about key areas where startups could make an impact that might matter for mobile network operators (MNO).

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Executive Summary

• The radio access network (RAN) provides access to the services of both the mobile network and other networks like internet or the fixed network, while supporting the mobility of the user. For achieving this objective, it employs radio frequency (RF) spectrum that is arranged in a lattice of cells that provide coverage to a given area, while supporting the movement of users, both active and inactive, among them.
• Open RAN follows architectural principles that fundamentally change the design, deployment, and operation of RAN for new generations of mobile networks (mainly 5G, but also 4G), especially due to its decoupling of software and hardware components connected via open interfaces and APIs.
• The modular and open architecture allows startups to step in the market with innovative business applications and technology solutions
• MNOs will benefit, as Open RAN allows to develop new business models and to reduce costs in installing and operating mobile networks.

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What is Open RAN and how does it differentiate from traditional radio access network (RAN) architecture?

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A mobile telecommunication network roughly divides in three segments:  

• The Radio Access Network (RAN),
• the Transport Network as well as  
• the Core Network that establishes connection to the Internet, among others.

The RAN links wireless capable devices, via specific mobile communication standards (identified as 2G, 3G, 4G, 5G, that support different technological solutions) and through a transport network, to the core network, that is in charge (among other functions) of providing connectivity with other networks, e.g., the internet. Most people simply picture the RAN as a cellular mast, but it covers various network elements. Examples are functional components like antennas, remote radio units, baseband units, and other transmission and reception technology including the corresponding software, all installed on top of or nearby the tower of a cellular base station.

The traditional RAN architecture is a closed system and shares in this market have been mainly split between large companies like Huawei and ZTE from China, Samsung from South Korea or Nokia, and Ericsson from Europe. The main disadvantage of traditional RAN architecture is that components from one vendor cannot be easily combined with third-party vendor solutions mainly due to manufacturer-specific interfaces and functions. Thus, in the past mobile network operators were usually dependent on specific vendors per site that provided both, software, and hardware components out of one hand.

The Open RAN architecture is designed to end this dependency and fosters a multivendor environment. It is built on standard hardware and cloud-based software with open interfaces and application interfaces (APIs) between network elements. Consequently, its modular and flexible architecture allows interoperability of components, thereby letting MNOs to source hardware and software from a greater pool of vendors.

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What are the benefits for mobile network operators?

The multinational telco company Telefónica is an early adopter of Open RAN technology and has been one of the first network operator in Germany to experiment the technology in live operation of its mobile network. It is driven by the belief that operators might greatly benefit by adopting the new technology; Open RAN allows network operators to develop new business models and to reduce operational expenses, both directly influencing operator’s profit. Value drivers are, among others:

• Reduced vendor lock-in and flexibility in the choice of manufacturers, as Open RAN technology allows to combine components from different vendors
• Enriched choice of network elements and functions in the RAN ecosystem due to the entry of new companies and corresponding market forces
• Faster and separated hardware and software innovation, due to the decouple of software and hardware components
• Lower swap efforts thanks to the reusability of hardware with different software providers
• Eased network exposure to third-party Multi-access Edge Computing (MEC) applications via APIs ‍
• Increased network flexibility due to virtualized and flexible RAN architecture ‍
• Better customer experience as virtualized and flexible RAN architectures allow to provide new B2C, B2B and B2P use cases, differentiated network functions and service agility, for example using network slicing  
• Improved time-to-market, as it strengthens the ability to faster integrate new services and products or even new generations of mobile communication standards into the network  

However, to fully leverage the benefits, MNOs need to play a very active role in open networks. Therefore, it is essential that operators carry out Open RAN trials together with new partners to specify needs that further help to mature the technology and develop industry-wide standards. Moreover, success stories need to be communicated: On the one hand, to attract startups to manufacture new solutions, on the other hand, to push investors to increase their investments. Both the entry of new startups and increased investment volume will stimulate market growth.

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Why should startups enter the growing Open RAN market?

In his keynote speech during the “The Funding Cocktail” - a Munich-based investor conference organized by Telefónica’s innovation-hub Wayra Germany- Telefónica Germany CTIO Mallikarjun Rao stated that Open RAN opens a lot of opportunities and that small companies can provide big value for problems operators are facing in current technology development. Thus, small companies can feel encouraged to enter the telco market and to question the status-quo. This is especially important as Open RAN needs to overcome several barriers before becoming the top dog in the radio access network. There are several areas that small companies can tackle and where innovative hardware and software solution may create great value, especially if interconnected with the opportunities of the new 5G cellular standard. Solutions could tackle following areas, among others:

• Speed up the time to deploy and integrate an Open RAN site with legacy infrastructure by automating required tasks and processes, including interoperability tests of network elements  
• Ease end-to-end operation and orchestration of Open RAN components, including automated detection and self-healing of network issues
• Ensure security and reliability of networks, as the increase of open network components enlarges the attack surface
• Enable new customer-facing services, for example based on network slicing ‍
• Improve energy efficiency and performance of specific network elements or processors required to run Open RAN software in a multivendor environment.

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How can startups use Telefónica’s innovation hub as a vehicle to scale their solutions?

Wayra, Telefónica’s innovation-hub, is one of the largest global corporate accelerators. Its mission is to drive corporate innovation by scouting, scaling, and investing in tech startups and to pave the way for a mutually beneficial collaboration. The Wayra team supports entrepreneurs to bring innovative ideas to the telco industry and provides a platform that connects the entrepreneurial community to industry experts and investors. Thus, founders who have a solution in the Open RAN sphere can use the innovation hub as a stage to present solutions in front of top decision-makers and technical specialists to get feedback regarding their business and technological fit, respectively. Moreover, Wayra serves as an input gateway to the corporate world by enabling proof-of-concept projects and provides industry specific advices that help founders to define the right next steps for scaling.