Why are the US government and DoD in particular interested in Open RAN?

Over the last 24 months, it has been very interesting to see that the US Government has been moving from keen interest in Open RAN to make it policy for its procurement of connectivity technology.

As I am preparing to present for next week's RIC Forum, organized by NTIA and the US Department of Defense, many of my clients have been asking why the US Government seems so invested in Open RAN.

Supply chain diversification:

The first reason for this interest is the observation that the pool of network equipment provider has been growing increasingly shallow. The race from 3G to 4G to 5G has required vendors to attain a high level of industrialization and economy of scale, that has been achieved through many rounds of concentration. A limited supply chain with few vendors per category represents a strategic risk for the actor relying on this supply chain to operate economically. Open RAN allows the emergence of new vendors in specific categories that do not necessitate the industrial capacity to be delivering end to end RAN networks.

Cost effectiveness:

The lack of vendor choice has shifted negotiating power from network operators to vendors, which has negatively impacted margins and capacity to make changes. The emergence of new Open RAN vendors puts pressure on incumbents and traditional vendors to reduce their margins.

Geostrategic interest:

The growth of Huawei, ZTE and other Chinese vendors, with their suspected links to the Chinese government and Army, together with the somewhat obscure privacy and security laws there, has prompted the US government and many allies to ban or severely restraint the categories of Telecom Products that can be deployed in many telecom networks.

Furthermore, while US companies dominate traffic management, routing, data centers and hyperscalers space, the RAN, core network and general telco infrastructure remains dominated by European and Asian vendors. Open RAN has been an instrument to facilitate and accelerate Chinese vendors replacement, but also to stimulate the US vendors to emerge and grow.

DoD use case example: Spectrum Dominance

This area is less well understood and recognized but is an integral part of US Government generally and DoD's in particular interest in Open RAN. Private networks require connectivity products adapted for specific use cases, devices and geographies. Commercial macro networks offer "one size fits all" solution that are difficult and costly to adapt for that purpose. Essentially DoD runs hundreds of private networks, whether on its bases, its carriers or in ad hoc tactical environments. Being able to setup a secure, programmable, cost effective network, either permanently or ad hoc is an essential requirement, and can also become a differentiator or a force multiplier. A tactical unit deploying an ad hoc network might look at means not only to create a secure subnet, but also to establish spectrum dominance by manipulating waveforms and effectively interfering with adverse networks. This is one example where programmability at the RAN level can turn into an asset for battlefield dominance. There are many more use cases, but their classification might not enable us to publicly comment them. They illustrate though how technological dominance can extend to every aspect of telecom.

Open RAN in that respect provides programmability, cost effectiveness and modularity to create fit for purpose connectivity experiences in a multi vendor environment.

Video Monetization 2015 report and market shares released

Live from Las Vegas, where I am at NAB, for the week, the mobile video monetization and optimization 2015 report is now released. You can find the updated description and executive summary there, as usual, table of contents and terms are available upon request, do not hesitate to contact me (patrick.lopez@coreanalysis.ca).

As usual, I provide market share calculations in term of deployment per vendor, the unit being one operator / country. For instance, Verizon Wireless counts for one deployment, even though the operator might deploy 40+ data centres. Groups such as Vodafone, Deutsche Telekom or Telefonica count for each of the properties where the technology is deployed.

For this 2015 edition, we have seen quite a lot of changes year on year and an acceleration from the trends highlighted in last update, ranging from the continuing growth of mobile data and video traffic, complicated by the increasing encryption and privacy concerns. 

Emerging markets and MVNO with smaller volumes fuel the growth with lower price points and tier 1 replacements are slowing down due to regulatory uncertainty. It is hard to predict how long this is going to last, but I am betting on a protracted battle and operators slowly having to take investment decisions despite uncertainty because their network is under too much pressure. TCP optimization, caching, throttling will continue to lead engagements in countries under strong regulatory mandate or uncertainty, while transcoding, DBRA and other lossy technologies will continue to lead in emerging and weak regulatory environments.

The mobile video monetization and optimization market segment researched in this report is composed of 8 primary vendors.

2015 has seen a great change in market shares, as indicated in the previous reports and throughout my quarterly updates. You can find the fall's market shares here, if you want to track the vendors' progression.

1. Citrix keeps its historical market leader spot, with a slight progression to 32%. 
2. Flash Networks had lost the number 1 spot last update and is maintaining itself at 31%. 
3. Openwave is solidly in third place, growing to 13%.
4. Fourth place is now claimed by Allot, with the fastest progression this update to 7%, 
5. Vantrix is in a slight decline at 6%. 
6. Nokia declines to 5% and has decided to resell Flash networks going forward. 
7. Opera has declined to 4%. 
8. Avvasi closes the market share with a growth to 2%.

The market share calculations are based on a proprietary {Core Analysis} database, collecting data such as vendors, re-sellers, value of the deployment in term of total cost of ownership for the operator, operator name, country, region and number of mobile broadband subscribers. These data are cross-referenced from vendors' and operators' individual disclosures. This database also includes over 130 opportunities in video optimization that are at different stage of maturity (internal evaluation, vendor trial, RFI, RFx...) and will close over the next 18 months.

To understand the vendors' trajectory, velocity and strategy better, contact me.

Mobile video 2015 executive summary

As is now traditional, I return from Mobile World Congress with a head full of ideas and views on market evolution, fueled by dozens of meetings and impromptu discussions. The 2015 mobile video monetization report, now in its fourth year, reflects the trends and my analysis of the mobile video market, its growth, opportunities and challenges.

Here is the executive summary from the report to be released this month.

2014 has been a contrasted year for deployments of video monetization platforms in mobile networks. The market in deployments and value has grown, but there has been an unease that has gripped some of its protagonists, forcing exits and pivot strategies, while players with new value proposition have emerged. This transition year is due to several factors.

On the growth front, we have seen the emergence of MVNOs and interconnect / clearing houses as a buying target, together with the natural turnover and replacement of now aging and fully amortized platforms deployed 5/6 years ago.

Additionally, the market leaders upgrade strategies have naturally also created some space for challengers and new entrants. Mature markets have seen mostly replacements and MVNO green field deployments, while emerging markets have added new units in markets that are either too early for 3G or already saturated in 4G. Volume growth has been particularly sustained in Eastern / Central Europe, North Africa, Middle East and South East Asia.

On the other hand, the emergence and growth of traffic encryption, coupled with persisting legal and regulatory threat surrounding the net neutrality debate has cooled down, delayed and in some cases shut down optimization projects as operators are trying to rethink their options. Western Europe and North America have seen a marked slowdown, while South America is just about starting to show interest.

The value of the deals has been in line with last year, after sharp erosions due to the competitive environment. The leading vendors have consolidated their approach, taken on new strategies and overall capitalizing on installed base, while many new deals have gone to new entrants and market challengers.

2014 has also been the first year of a commercial public cloud deployment, which should be followed soon by others. Network function virtualization has captivated many network operators’ imagination and science experiment budget, which has prompted the emergence of the notion of traffic classification and management as a service.

Video streaming, specifically, has shown great growth in 2014, consolidating its place as the fastest growing service in mobile networks and digital content altogether. 2014 and early 2015 have seen many acquisitions of video streaming, packaging, encoding technology company. What is new however, is that a good portion of these acquisitions were not performed by other technology companies but by OTT such as FaceBook and Twitter.

Mobile video advertising is starting to become a “thing” again, as investments, inventory and views show triple digit growth. The trend shows mobile video advertising becoming possibly the single largest revenue opportunity for mobile operators within a 5 years timeframe, but its implementation demands a change in attitude, organization, approach that is alien to most operators DNA. The transformation, akin to a heart transplant will probably leave many dead on the operating table before the graft takes on and the technique is refined, but they might not have much choice, looking at Google’ and Facebook’s announcements at Mobile World Congress 2015.

Will new technologies such as LTE Multicast, for instance, which are due to make their start in earnest this year, promising quality assured HD content, via streaming or download, be able to unlock the value chain? 

The mobile industry is embattled and find itself looking at some great threats to its business model, as the saying goes, those who will survive are not necessarily the strongest, but rather those who will adapt the fastest.

Mobile network 2030

It is summer, nice and warm. England and Italy are out of the world cup, France will beat Germany on Friday, then Brazil and Argentina in the coming weeks to obtain their second FIFA trophy. It sounds like a perfect time for a little daydreaming and telecom fiction...

The date is February 15, 2030

The mobile world congress is a couple of weeks away and has returned to Cannes, as the attendance and indeed the investments in what used to be mobile networks have reduced drastically over the last few years. Finished are the years of opulence and extravagant launches in Barcelona, the show now looks closer to a medium sized textile convention than the great mass of flashy technology and gadgets it used to be in its heyday. 

When did it start to devolve? What was the signal that killed what used to be a trillion dollar industry in the 90's and early 2000's. As usual, there is not one cause but a sort of convergence of events that took a momentum that few saw coming and fewer tried to stop. 

Net neutrality was certainly one of these events. If you remember, back in 2011, people started to realize the level of penetration fixed and wireless networks were exposed to from legal and illegal interception. Following the various NSA scandals, public pressure mounted to protect digital privacy. 
In North America, the battle was fierce between pro and con neutrality, eventually leading to a status quo of sorts, with many content providers and network operators in an uneasy collaborative dynamic. Originally, content providers unwilling to pay for traffic delivery in wireless networks attempted to secure superior user experience by implementing increasingly bandwidth hungry apps. When these started to come in contention for network resources, carriers started to step in and aggressively throttle, cap or otherwise "optimize" traffic. In reaction, premium content providers moved to an encrypted traffic model as a means to obfuscate traffic and prevent interception, mitigation and optimization by carriers. Soon enough, though, the encryption-added costs and latency proved impractical. Furthermore, some carriers started to throttle and cap all traffic equally, claiming to adhere to the letter of net neutrality, which ended up having a terrible effect on  user experience. In the end cooler heads prevailed and content providers and carriers created integrated video networks, where transport, encryption and ad insertion were performed at the edge, while targeting, recommendation, fulfillment ended up in the content provider's infrastructure. 

In Europe, content and service providers saw at the same time "net neutrality" as the perfect excuse to pressure political and regulatory organizations to force network providers to deliver digital content unfiltered, un-prioritized at best possible effort. The result ended up being quite disastrous, as we know, with content being produced mostly outside Europe and encrypted, operators became true utility service providers. They discovered overnight that their pipes could become even dumber than they were.

Of course, the free voice and texting services launched by some of the 5G licensees new entrants in the 2020's accelerated the trend and nationalization of many of the pan European network operator groups.

The transition was relatively easy, since many had transcended to full virtual networks and contracted ALUSSON the last "european" Telecom Equipment Manufacturer to manage their networks. After they had spent collectively over 100 billion euros to virtualize it in the first place, ALUSSON emerged as the only clear winner of the cost benefits brought by virtualization. 
Indeed, virtualization was attractive and very cost effective on paper but proved very complex and organizationally intensive to implement in the end. Operators had miscalculated their capacity to shift their workforce from telecom engineering to IT when they found out that the skill-set to manage their networks always had been in the vendors' hands. Few groups were able to massively retool their workforce, if you remember the great telco strikes of 2021-2022.
In the end, most ended up contracting and transitioning their assets to their network vendor. Obviously, liberated from the task of managing their network, most were eager to launch new services, which was one of the initial rationale for virtualization. Unfortunately, they found out that service creation was much better implemented by small, agile, young entrepreneurial structures than large, unionized, middle aged ones... With a couple of notable exceptions, broadband networks were written off as broadband access was written in the European countries' constitutions and networks aggregated at the pan European level to become pure utilities when they were not downright nationalized.

Outside Europe and North America, Goopple and HuaTE dominate, after voraciously acquiring licenses in emerging countries, ill-equipped to negotiate the long term values of these licenses versus the free network infrastructures these companies provided. The launch of their proprietary SATERR (Satellite Aerial Terrestrial Relay) technology proved instrumental to creating the first fully vertical service /network/ content / device conglomerates.  

Few were the operators who have been able to discern the importance of evolving their core asset "enabling communication" into a dominant position in their market. Those who have succeeded share a few common attributes:

They realized first that their business was not about counting calls, bites or texts but enabling communication. They first started to think in term of services and not technology and understood that the key was in service enablement. Understating that services come and go and die in a matter of months in the new economy, they strove not to provide the services but to create the platform to enable them.

In some cases, they transitioned to full advertising, personal digital management agency, harnessing big data and analytics to enrich digital services with presence, location, preference, privacy, corporate awareness. This required much changes organizationally, but as it turned out, marketing analyst were much easier and cost effective to recruit than network and telecom engineers. Network management became the toolset, not the vocation. 

In other cases, operators became abstraction layers, enabling content and service providers to better target, advertise, aggregate, obfuscate, disambiguate, contextualize, physical and virtual communication between people and machines.

In all cases they understood that the "value chain" as they used to know it and the consumer need for communication services was better served by an ever changing ecosystem, where there was no "position of strength" and where coopetition was the rule, rather than the exception.