Last week was crucial for Mukesh Ambani's Reliance Jio, and the global telecommunications industry. The largest telecom firm Jio announced that it's expanding the partnership with US-based wireless tech firm Qualcomm to develop 5G solutions. Jio's official statement also said that Qualcomm and Jio have achieved over 1 Gbps (gigabits) on the Jio 5GNR solution using Qualcomm's 5G RAN Platforms.
This is the second big move from Jio towards building its own 5G solutions after this year's announcement by Ambani on the telco's 5G foray. "I have great pride in announcing that Jio has designed and developed a complete 5G solution from scratch...This made-in-India 5G solution will be ready for trials as soon as 5G spectrum is available and can be ready for field deployment next year...Once Jio's 5G solution is proven at India-scale, Jio Platforms would be well positioned to be an exporter of 5G solutions to other telecom operators globally, as a complete managed service," Ambani said in 2020 AGM (annual general meeting).
Jio, for the uninitiated, is building its 5G solutions on a new global initiative called O-RAN (Open RAN). Unlike the proprietary networks provided by Huawei, Ericsson, Nokia, Samsung and others, the O-RAN networks are open and include elements from different vendors. So if a network includes broadly two components - hardware and software - both can come from different set of vendors.
Jio, for instance, had bought US-based software vendor Radisys over two years ago because it has system integration and network virtualisation capabilities. Experts say that Jio has strengths on the software side and it needs to put together hardware components in place - either through alliances or acquisitions - and the Qualcomm partnership is exactly on those lines.
"Because of Open RAN, it's possible for Jio to build, design and integrate its own network. They become more like a system integrator - buying multiple elements of the network like radio from one vendor, antenna from another vendor and software from third person. Some they can develop in-house," says Neil Shah, partner at Counterpoint Research.
The Time is Right
The genesis of ORAN can be traced back to Japanese telecom operator Rakuten Mobile. As the story goes, the company was purchasing branded routers from large companies for $1,000 apiece. The same router would cost a household consumer $50 apiece. The company asked engineers to compare enterprise and consumer-grade routers, and found out that there was hardly any difference. Rakuten thought that it can go to China, buy components and develop routers with its own specifications. Then it started thinking on a bigger scale - how to build telecom networks where they have control over everything - costs, components, maintenance, etc.
Today, the telco has developed a platform - RCP (Rakuten Communications Platform), a first of its kind - which has the secret recipe on how to integrate all parts of an open network together, and it is licensing this platform to other operators.
But it would not have been easy for Rakuten, and other operators like Jio, US-based Dish Network, to build their own 5G network. Their ambitions, to a great extent, have been helped by the large-scale changes in the global telecom network ecosystem. How?
The networks of the future - 5G, 6G and onwards - are going to be highly automated. What does that mean? They will be completely virtualised and cloud-driven. Let's take an example. Till about 1990s, an affluent household would need a lot of hardware for work and recreational purposes. This included camera, landline phone, a computer, music devices, video player, et al. When the smartphones came along, all these devices turned into an app. Everything became software-driven and they are now supported by cloud tech.
A similar change is happening in the telecom network space. In a 2G/3G cell tower, there are antennas, transceivers, control circuitry, GPS receiver, power source, etc. The telcos would need to put a lot of boxes to make a network work. But as we evolve from 2G to 3G to 4G and 5G, the number of hardware devices has been reducing at every stage.
"The entire network is transitioning from maximum hardware to more software. In 5G, base station has just antenna. The data processing (how to connect, how much speed to allot, how to hand over call from one tower to another) is entirely done in the cloud. It's not done in the equipments at the tower. With the power of cloudification, SDN (software-defined networking) and virtualisation, the role of hardware is going to be minimal. Telcos just have to invest in RAN (radio access network)," says a telecom analyst.
It helps telcos like Jio in two ways: They don't have to get locked in to multi-year contracts with Nokias, Ericssons or Huaweis of the world. Instead, they can do mix and match, and buy the best in the market to build own network. It is likely that Jio will buy white label solutions from someone like Fujitsu in Japan or Comba Telecom in China. There are a lot of different players who supply hardware for O-RAN. Think of this like Qualcomm and Apple. While Qualcomm is way ahead of Apple in chipsets but Apple putting together different pieces, including best chipsets, to produce widely-popular devices.
Secondly, the telcos gain on opex and capex costs. As per brokerage UBS, Jio's self-built 5G solutions could bring down network rollout cost by 10-15 per cent as compared to legacy networks, and open up $10 billion export opportunities for the telco.
For Jio, there's an additional advantage because of its Greenfield 4G network which means that the telco doesn't have 2G/3G baggage like incumbents (Vodafone Idea and Airtel). That makes it easier for Jio to upgrade from 4G to 5G because most of the things are virtualised and app-based, and the telco would just have to add 5G towers with advanced antennas.
Yet, executing its 5G strategy would take more than putting the pieces together. There are challenges galore for Jio. The biggest of all is to deploy its O-RAN network at a scale. The open interfaces in an O-RAN network do allow Jio to bring down costs, but since the model is still at a nascent stage globally, Jio cannot risk its vast customer base.
For instance, there's reportedly just one live O-RAN network (of Rakuten) that caters to about 3 million users in four cities, and too in a market where fiberisation is high. Jio, on the other hand, has over 400 million users. Ideally, experts say, Jio should not go entirely with O-RAN because it's still unproven at its scale. "Jio has to be prudent because if they bring 10 different vendors and integrate. For whatever reasons, if one vendor breaks off, who will support the network? They should go with 50 per cent branded network," says an industry consultant.
Despite the growth of independent vendors in the telecom space, many elements of a telecom network still remains protected by IPs (intellectual property), particularly on the radio side. Radio part is how a phone connects to the network. A lot of algorithms are built into the radios by Ericsson, Huawei, and others who are generations ahead of O-RAN players in terms of specifications and performance. Now these companies have substantially invested in 5G IPs, and they would be seeking ROI (return on investment) on their research and development.
"While we will see a greater level of a shift to software and cloudification in the 5G era, the Intellectual Property could be a potential hanging sword, considering most of the RAN- and 5G signalling-level IP is owned by a few big players which could put pressure on the O-RAN hardware suppliers moving forward. As the O-RAN ecosystem grows and adoption increases, the issues around IP infringement could also crop up which could slow down the adoption," says Counterpoint Research's Shah.
While there's no official date from Jio for launching its "complete 5G solutions", and despite the rise in anti-China sentiments which will likely tilt the balance in favour of new players, the telco is still some time away from grabbing a share in the $80-billion-a-year telecom equipment export market.