Summary
In recent decades, mobile communications have completely transformed the way that human beings communicate and interact with one another. New technology generations introduced on average every ten years have consistently and fundamentally improved the overall user experience, paving the way for innovation beyond anyone’s wildest imagination.
This end user transformation from the initial voice-centric models to today’s data and video-driven end-user applications has had a profound impact on the network with mobile data traffic capacity increasing roughly 500-fold over the past ten years.
At the same time, the innovation and the progress on the supply side to cope with the explosion in data traffic has not translated to any revenue upside for the radio access network (RAN) infrastructure suppliers—per Dell’Oro Groups’ RAN report, the RAN market has advanced at a 0% CAGR since the year 2000.
Operators have also struggled to extract more revenue from their customers – per Dell’Oro Groups Telecom Capex Report, currency adjusted wireless revenues increased at a 0% CAGR over the past six years, reflecting slowing subscription growth and lack of revenue upside from new sources.
The strong coupling between wireless capital intensity and the RAN market implies that constrained operator revenue growth will remain one of the primary inhibitors of further telco capex acceleration. In other words, operators are comfortable with some decoupling in the short-term to accommodate the rollout of new technologies. At the same time, operators are fully aware of the demand side challenges and have no plans to return to historical capital intensity ratios. Instead, they will continue to operate within a constrained capex envelope and rely on all the tools in the toolkit to do more with a confined budget.
One of the key drivers with the shift from proprietary RAN toward Open RAN is that it should ideally address the competitive landscape and increase the likelihood of a market concentration trend reversal. Per Dell’Oro Group estimates, the worldwide Herfindahl-Hirschman Index (HHI) has advanced nearly 50% over the past 19 years. Preliminary estimates suggest the HHI index for the 2019 RAN market topped 4000 in both North America and China, reflecting the state of the competitive dynamics in these highly concentrated markets.
As a result, there are three broad parallel tracks aimed at addressing the shortcomings of the current architecture, including 1), Centralized-RAN (C-RAN), 2) Virtualized RAN (V-RAN), and 3) Open RAN.
These efforts to move compute resources to a central location (C-RAN), use more general-purpose processors (V-RAN), and open up the interfaces (Open RAN) in hope of simplifying the ability to mix and match baseband and radio suppliers are not new and have been around for a long time.
While the standard Dell’Oro RAN report includes RAN systems using centralized, virtualized, and Open RAN, the splits are not provided in-depth with the standard report.
In this report, it is our objective to dig deeper about the Open RAN opportunity and assess if this time is any different—is there enough momentum and progress with Open RAN to ensure this technology will play a significant role in the future 4G and 5G rollouts?
The report addresses such questions as:
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What is Virtualized and Open RAN?
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What is the Open RAN vision?
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What are the benefits of using Virtualized and Open RAN?
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What is the market opportunity and forecast for Virtualized and Open RAN?
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Will adoption happen at a faster or slower pace than previous technology shifts?
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What regions will likely be the early adopters?
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What are the key risks with Open RAN and Virtualized RAN?
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What will be the impact on the network and the market?
The report includes a 5-year forecast for the following areas:
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Open RAN – RAN Function
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Open RAN – RF Output Power
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Virtualized RAN – Baseband Function
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Virtualized RAN – RF Output Power
Press Release
August 8, 2024 | Press Release
North America Leading the Open RAN Movement, According to Dell’Oro Group
Open RAN to Account for More than 25 Percent of Total RAN
REDWOOD CITY, Calif. – August 8, 2024 –
According to a recently published report by Dell’Oro Group, the trusted source for market information about the telecommunications, security, networks, and data center industries, the broader Open RAN movement has come a long way in just a few years, but the results have been mixed.
“Open RAN is happening, but this vision that Open RAN will significantly change the vendor dynamics is fading,” said Stefan Pongratz, Vice President of RAN market research at the Dell’Oro Group. “With most of the leading RAN suppliers now committed to the latest O-RAN fronthaul interfaces, the question now is more about the timing and the adoption curve for the various RAN segments,” continued Pongratz.
Additional highlights from the August 2024 Open RAN Report:
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The long-term position remains favorable and mostly unchanged. Despite ongoing challenges, most operators will gradually incorporate more openness, virtualization, intelligence, and automation into their RAN roadmaps. The pace will differ slightly between the radios and the baseband, while the multi-vendor RAN business case is less compelling.
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The estimates for open RAN, Cloud RAN, and Multi-vendor RAN are mostly unchanged relative to the February update. By 2028, they are expected to account for >25 percent, 20 to 25 percent, and <10 percent of the total RAN market, respectively.
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The forecast is more favorable outside of China, with Open RAN projected to comprise 30 to 40 percent of the revenues by 2028.
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North America was the largest region in 2023 and is expected to lead the broader Open RAN movement throughout the forecast period.
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North America stumbled in 2023 but is set to lead the Open RAN market over the forecast period.
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After a slow start, Europe is projected to account for 15 to 20 percent of worldwide Open RAN revenues by 2028.
About the Report
The Dell’Oro Group Open RAN Advanced Research Report offers an overview of the Open RAN and Virtualized RAN potential with a 5-year forecast for various Open RAN segments including multi-vendor & single-vendor, macro and small cell, regions, and baseband/radio. The report also includes projections for virtualized RAN along with a discussion about the state of the market, forecast drivers, and the risks.
