The economic impact of open and disaggregated technologies and the role of TIP
21 July 2021 | Consulting
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Since the start of the Covid-19 pandemic, it has become clear just how vital the telecoms industry has become to the functioning of our societies. From Oslo to Santiago, San Francisco to Manila, every person with the means to connect to the internet now relies heavily on the fibre, copper and radio networks that carry work, social, leisure and other vital information.
In advanced economies, mobile operators are on the cusp of introducing 5G, but face the challenge of justifying large investments, particularly in the radio network, with an unproven business case and uncertain demand. In emerging markets, many people still cannot access, or afford, mobile broadband. Meanwhile, operators’ margins are under pressure, due to commoditisation, competition and upwards pressure on investments brought about by explosive demand growth, an increased focus on security and resilience of networks, and tight and concentrated equipment supply chains.
Improved network cost efficiency is key to making these investments possible, in particular through infrastructure sharing, carve-out of passive infrastructure1 and radio access network (RAN) sharing models, including innovations such as ‘network as a service’.
In this context, telecoms stakeholders are coming together in a number of industry initiatives to open up and standardise interfaces between different network components, which would allow solutions from different vendors to work together or ‘interoperate’. This would open up networks to new vendors, and would also allow ‘traditional’ vendors to continue innovating by focusing on areas where they have unparalleled expertise. The vision that stakeholders including the Telecom Infra Project (TIP) are promoting is one where vendors and operators come together to innovate and bring to market solutions that respond directly to operators’ requirements, in a quick and cost-effective manner.
In a new report, Analysys Mason looks at the economic impact of open and disaggregated networks, and we quantify what this impact could be on global GDP by focusing on Open RAN. Other initiatives we explore in the report include Open Optical and Packet Transport (OOPT), and the recently launched OpenWiFi initiative. The impact of all of these technologies on networks globally could be transformational.
Standardised solutions, built by a range of suppliers based on industry requirements, could unlock greater cost efficiency and faster deployment of new network functions than proprietary solutions.
This new way of innovating around networks could enable faster and lower-cost greenfield deployment, in rural and hard-to-reach areas. It could also improve the time to market for new network functions in urban areas (e.g. smart-city use cases), and therefore accelerate testing of new business models, and therefore innovation.
Security and resilience are increasingly at the forefront of operators’ and policy makers’ thinking. There has been some debate about whether open and disaggregated networks would be better or worse than proprietary systems from this perspective, but the debate seems to have settled decisively in favour of the former. There are challenges to overcome, but it is clear that supplier diversity is key to the resilience and robustness of supply chains. Security risks are being mitigated through rigorous testing.
Our report finds that the economic benefits of a successful open and disaggregated network supply chain could be significant. More cost-effective RANs, built on the basis of operators’ requirements rather than vendors’ roadmaps, could lead to over USD285 billion in additional GDP globally over the next ten years, and over USD90 billion annually from 2030. This assumes that Open RAN will be deployed in about half the global footprint of mobile networks by 2030, with a total cost of ownership (TCO) benefit of 10–15%. This is conservative, and if Open RAN principles are adopted globally, benefits could triple.
How can the industry and policy makers support the development and deployment of open and disaggregated networks? We identified three main areas of focus, which will accelerate technology deployment and allow operators to have confidence in deploying disaggregated technologies at scale.
- First, an expansion of platforms for testing and integration of disaggregated solutions through more active collaboration between operators, vendors and systems integrators, together with support for full adherence to open standards and interoperability of solutions.
- Second, transparent product development and testing (e.g. through TIP Community Labs) with a clear focus on full interoperability, security and resilience; this will prevent inefficient duplication of efforts, avoid fragmentation of standards and ‘proprietary “creep”’, and allow networks to support mission-critical use cases.
- Finally, clear policy and fiscal support by governments and policy makers; supply chain strategies focused on resilience, security, vendor diversity, and accelerated network transformation are all fully aligned with the objectives of the open and disaggregated network movement.
We are already seeing momentum building in all these areas: five major European operators recently signed a memorandum of understanding to implement Open RAN,2,3 which sends a strong signal for vendors to accelerate investments; the UK government expressed explicit support for Open RAN adoption as part of its recently published vendor diversification strategy; and ecosystem organisations including TIP are continuing to play an active role in helping the industry on its way to commercialisation and deployment of open solutions at scale. Increased active participation of more vendors and operators in the open ecosystem will further accelerate the development of the multi-vendor supply chain, which will be crucial for maximising the potential benefits of open and disaggregated technologies.
Proactive involvement of policy makers will also be key to unlocking even larger economic benefits. Conversely, a lack of co-ordination on key issues (such as a lack of alignment on the adoption of open standards and refragmentation, resulting in implementations that are not interoperable), would result in a reduction in the potential for open and disaggregated technologies to generate the envisioned impact and to help achieve policy objectives.
After publishing our initial global report in May 2021, we subsequently published another report in July 2021, looking specifically at developments related to open and disaggregated technologies in India.
In India, mobile operators have been actively exploring the use of open and disaggregated technologies in their networks, and have also started to develop in-house solutions that can be exported globally (if and when proven) and scale beyond India to the world. The government of India is also taking steps to strengthen local manufacturing capabilities. This involves incentivising large global players to set up production facilities in India. More importantly in the context of open and disaggregated network technology, the government’s efforts also include supporting homegrown companies to develop solutions that could meet local demand for network equipment and software for years to come, while also exploiting opportunities in the global export market. The supply chain ecosystem in India, made up of original design manufacturers (ODMs), vendors and systems integrators, is also responding to growing demand and government-backed initiatives by developing new disaggregated solutions spanning various network parts and by continuing to foster relationships with international customers to capitalise on emerging export opportunities.
India is expected to be at the forefront of open and disaggregated technology adoption and production in years to come due to the amount of activity driven by its operators, the government and supply chain participants in developing open and disaggregated technologies. For Open RAN alone, we estimate that the incremental GDP impact in India could reach USD18 billion per annum in 2030 (USD58 billion cumulatively from 2021–30), driven by enhancements to mobile internet penetration and data usage. Modelling suggests that these impacts could more than double over the period from 2021–30, should industry facilitation initiatives driven by operators, the government, as well as organisations such as TIP be as successful as envisaged by many of the stakeholders driving Open RAN in India today.
We look forward to continuing to support stakeholders across the ecosystem to develop and execute strategies that will achieve the best possible outcome for the telecoms industry in these times of rapid change.
1 A passive infrastructure ‘carve-out’ in the mobile sector usually refers to a process where a mobile operator sells some or all of its towers to a third-party infrastructure provider, who then markets tenancies on these towers to all operators in the market, facilitating infrastructure sharing