A 5G Network Cheaper Than Huawei

Author: Ricardo Tavares
Published: 2019-05-20

The Trump Administration’s recent telecom networks security executive order, which has the practical effect of a comprehensive ban on Chinese companies such as Huawei and ZTE, is just one of the significant challenges China is facing as a center of telecom manufacturing.  Less obvious is the fact that China is facing another headwind: its primary source of competitiveness—low-cost industrial production—is eroding in importance with the emergence of cloud-centric and soon fully-virtualized wireless networks.

Wireless networks are becoming software-based, hardware-commoditized, and moving to the cloud as a first step to entirely virtual radio access networks (vRANs).  The traditional network supplier model of a complete solution with embedded hardware and software gives vendors commercial leverage and exclusive control over software, which in turn creates a significant advantage for Chinese vendors thanks to lower hardware-production costs. 

Low cost, an ok performance, and Chinese government financing have driven a company like Huawei to control a third of the global wireless-network equipment market.  A perfect storm of security-focused bans—including blocking Huawei’s purchases of American components—and a faster shift to software could change that very quickly.

Security analysts are calling for economic incentives to nudge mobile operators away from Chinese 5G vendors.  It turns out markets are ahead with the development of innovative, cost-effective cloud-based virtual-radio access networks (vRAN) which decouple hardware and software.

Moving networks to the cloud means that only remote radio heads (RRH) are deployed at the cell sites, and baseband units (BBU) are virtualized and centrally deployed in a network or private cloud.  Shortly, only fiber will link the cloud and radio heads, with even less equipment. vRANs are software-defined (SDN) and deploy Network Function Virtualization (NFV) so that operators can pick the functions they want, and look independently for software providers, including for orchestration of all of these programs. 

As the U.K.’s Huawei Cyber Security Centre Oversight Board recently concluded, security risks lie in subpar software provided by Huawei.  U.S. tech companies—who lead the global software industry, including in AI and cloud computing—can take advantage of hardware/software decoupling by focusing on software, since Chinese companies won’t build competitive advantage in this area overnight.  U.S. companies have invented cloud-based, virtualized 5G networks, with considerable influence from the European Telecom Standardization Institute (ETSI), and R&D support from India.  Its most radical implementation so far is in Japan.

“We’re building a network that is 40% cheaper than Huawei,” stated Tariq Amin, Rakuten’s CTO, during a presentation last February at the Mobile World Congress in Barcelona.  Rakuten is a new green-field operator in Japan launching a cloud-native network in October.  Once Rakuten proves this concept with a commercial system—they are betting a $6 bn investment on it—a model for other operators will emerge.  The savings come from capital expenditures—emphasizing software and commoditizing hardware—as well as lower operational costs thanks to widespread automation, the use of machine learning and AI. 

Well-targeted economic incentives for mobile operators to evolve network architectures to the cloud, and then to full virtualization, would strengthen vendors headquartered in the U.S. and its strategic allies.  These incentives should target resolving market challenges to accelerating the adoption of virtual radio access networks. vRANs have inherent economic and technological advantages, providing the flexibility operators need to run a 5G multi-services platform—and at a lower cost than the cheapest current vendors in the market.

Leave a Reply

Your email address will not be published. Required fields are marked *