Late last year, AT&T announced a deal to source its entire radio access network (RAN) from a single vendor, Ericsson. We wrote about it when the news broke, and concluded that:
In the end, if AT&T’s goal is to open up its network, moving to a single vendor is a very roundabout way to get there. Instead, what we could be seeing is Ericsson making a bet that by agreeing to AT&T’s ‘openness’ goals it could still find ways to profit and at the same time take the reins in defining what “open” really means in the RAN.
Over the holidays we talked to a few friends in the industry about the topic, read a bunch of coverage including listening to the always informative Light Reading Podcast on the subject. And we came up with a few thoughts on the subject.
From what we can tell, AT&T remains aware of the perils of relying on a single vendor, however instead of using the traditional path of two competitive suppliers, they see Open RAN (O-RAN) as a new form of leverage in the relationship. Their thinking seems to be that instead of using the threat of Nokia as negotiating leverage, instead they will be able to draw on the pool of ORAN compliant vendors. Their network will be built to facilitate this kind of switching, after all that is the intended goal of the whole O-RAN project. And as an added bonus they get a sweet discount from Ericsson of some sort. There is logic in this, but it relies very heavily on O-RAN having a sufficiently robust ecosystem to support the growth of multiple vendors in critical categories.
That will likely prove to be a fatal flaw in the plan. We think a big part of Ericsson’s motivation for what looks to be a very expensive contract is that it puts them very much in the driver’s seat for ORAN. AT&T’s O-RAN deployment will be the largest in the world, and that conveys a fair amount of ‘Street Cred’ to the vendor providing it. Ericsson can go to future O-RAN planning meetings backed by the argument that whatever they are asking for is just what their customer wants, and by the way that customer is probably larger than all other O-RAN deployemtns combined.
Ericsson has already shown that it has the potential to be disruptive to Open RAN planning, making multiple proposals and getting very involved in the nitty gritty of the process. Powered by the responsibility of managing a major deployment Ericsson can more easily get its way in any dispute. We would not want to accuse Ericsson of deploying stalling tactics or fragmenting the ORAN standards to further their own strategic objectives. That being said, they have done exactly that many times in the past.
So the risk for AT&T is that somewhere down the road, when they object to some Ericsson proposal, and then seek an alternative vendor they may find that no suitable vendor exists. Other ORAN providers may be too small or have products that went down some other technical path rendering them unsuitable to AT&T’s needs. We imagine that one of the other ORAN vendors will eventually throw in the towel and exit the market, and the next day Ericsson decides to raise its prices.
Maybe we are reading too much into this, And we definitely do not have all the facts yet. But from where we sit now, it looks a lot like AT&T is playing checkers and Ericsson is playing 5D chess.
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