The $214 billion market for telecommunications network infrastructure (telco NI) may have a couple of more suppliers soon, if claims from Mumbai and Tokyo are to be believed. Reliance Jio (now Jio Platforms) and the Rakuten Group, both telcos, have each signaled recently their interest in becoming vendors of mobile NI to telcos abroad.
Rakuten is positioning itself as a systems integrator of sorts with its Rakuten Communications Platform (RCP). Jio claims to aim for more, boasting that it will soon be ready to deploy a homegrown Indian 5G technology platform in its own network and then shop it around the globe. Both approaches are well-timed and funded, and it’s not purely a coincidence that they’re being pushed by these two specific companies: Rakuten’s CTO Tareq Amin served as Jio’s SVP of Technology Development from 2013-18, during the Indian greenfield operator’s crucial network planning and rollout phase.
The conventional wisdom gives Rakuten’s plans more credence, but I’d bet on Jio.
Telcos usually stick to their knitting
Ever since AT&T spun off its equipment arm in 1996 into Lucent Technologies (now part of Nokia), many telcos have been tempted to reverse the process. Most efforts have failed. Telcos prefer to buy from vendors, not actual or potential competitors. However, as networks become more software-centric, cloud-native architectures gain momentum, and open networking allows for disaggregation of the network into piece parts, this may be changing.
Another factor favoring the telco-as-vendor business model is Huawei’s recent reversal in fortunes, and the broader movement across many countries to reduce reliance on Chinese technology. Setting Chinese vendors aside, only a handful of telco NI vendors have global operations and scope across multiple product areas. Ericsson and Nokia dominate in mobile, while Cisco leads in IP.
There are other product segments that matter, and most have multiple vendors competing for telco business. But the telco NI market has consolidated, and that makes life challenging for cash-strapped telcos. Especially if you want to take advantage of the newfound competition emerging with network disaggregation and openness.
Market opportunity for Jio and Rakuten
Rakuten has been talking up its Rakuten Communications Platform approach to building open RAN networks since 2018, and it integrates a large number of vendors to provide the service. Now that Rakuten’s 4G network has launched (in April), and a 5G launch is slated for September, the Japanese company aims to sell its “expertise and technology stack” as a playbook to overseas telcos, with an app store-like interface allowing customization for local requirements.
Rakuten’s 4G network incorporates a long list of different vendors, including two for radios (NEC and Nokia), and the telco owns a stake in open RAN vendor Altiostar. It has plenty of experience integrating different technology into a network, at least one that lacks an installed base, and the company has received lots of praise. For instance the CEO of US-based Dish Network, Charlie Ergen, says Dish learned a lot from Rakuten’s greenfield open RAN build, adding that the Japanese operator is “designing the right kind of network for the future.” Notably, though, Dish is doing its own network design and integration, and has made no public claim of using the RCP.
Jio’s positioning as a vendor is more recent and ambiguous. It launched its own greenfield 4G operation in late 2016, and used aggressive pricing and careful planning to go from zero subscribers to 388 million less than 4 years later (March 2020). Jio is now well ahead of both Airtel and Vodafone Idea, on a subscriber basis. In 2019, Reliance set up Jio Platforms as a separate entity, housing the telecom operator unit (Jio Infocomm), and several other media, movie and music properties. Positioning it for growth, in the last 3 months this division has sold stakes to 14 outside companies worth over $15B (Figure 1).
Figure 1: Reorganized and newly-funded Jio Platforms: Position in the Reliance Group
After months of rumors, Reliance CEO Mukesh Ambani announced in mid-July that Jio Platforms was ready to build its own 5G network, using “homegrown” technology. This was a bit out of the blue considering that Jio’s 4G network was a relatively traditional one, supplied by a single macro RAN vendor, Samsung. Jio owns Radisys and Rancore, which gives it strength in open telecom and virtualization, and network design and testing, respectively. But has Jio secretly developed a 5G solution the world hasn’t heard of? Probably not. And Ambani has reason to exaggerate, as he clearly wants cheap spectrum and quick approvals for 5G trials while his competition is still figuring out to rid their networks of Chinese vendors.
Don’t disbelieve the hype
If you see through the hype, I believe what Jio is claiming is similar to Rakuten: Jio is building a playbook for 5G network implementation that leverages individual technology elements from multiple external vendors. This is speculation, but Jio may plan to leverage local services firm Tech Mahindra to oversee systems integration, and state-owned ITI Limited for manufacturing. Both companies are already bidding to supply state-owned BSNL with 4G infrastructure. ITI has limited manufacturing experience with high-end equipment, but Tech Mahindra is a serious player, and in fact runs a 5G-focused “Cloud Innovation” lab in concert with Rakuten in Japan. Tech Mahindra is also an investor in Altiostar, as is Rakuten and Telefonica.
Jio may be starting later than Rakuten, and its plans to date are amorphous, but Jio has a number of advantages that could smooth its path into the vendor universe:
• Network scale and operational experience: Jio began building its network several years ago, has a nationwide fiber network and nearly universal 4G coverage, and it has scaled its operations rapidly; Rakuten launched service on April 8.
• Complex multi-vendor network: It’s true that Rakuten also has multi-vendor experience, but Jio has actually scaled this network to reach a population of over 1.3 billion scattered across small towns and mega-cities. While Samsung supplies all the LTE RAN and most of the LTE core elements, Jio also buys from Nokia (FTTx; optical); Ceragon, NEC, Dragonwave, and Ericsson (microwave); Ciena and Tejas (optical); Airspan (LTE RAN WiFi); Arista (WiFi); Cisco (WiFi and routers); and Ruckus (WiFi). Jio also deploys servers from HP, IBM, Genband, and Dell; routers from RAD, Juniper, F5, and Citrix; and, IMS servers from Nokia and HP.
• Fixed service delivery experience: most telcos have a mix of mobile and fixed services in their network. Jio started with mobile, but its JioFiber user base is expanding, giving Jio’s design unit (Rancore) an understanding of the practical issues faced by operators running both fixed and mobile on a common network.
• Government policy support: Japan has a well-developed electronics sector with two large, established vendors in the telco NI market. NEC and Fujitsu are more likely to benefit from government help than Rakuten; in fact, NTT – in which the Japanese government still owns a large stake – recently did invest directly in NEC. India, by contrast, has no major player in the telco NI market, allowing Jio to lobby the government without much opposition. Jio’s lining up with local IT services vendors such as Tech Mahindra strengthen its appeal.
• Webscale connections: Jio signed a 10-year deal with Microsoft in 2019 to partner in the cloud, supporting the Azure platform with India-focused cloud solutions, and building two data centers for Microsoft. Nothing has been announced, but Jio could expand upon this partnership as it fleshes out its 5G solution, especially in the area of mobile edge computing.
• Systems integration capability: One reason Jio’s network got off the ground and scaled so rapidly was the support of its Rancore unit, which does network design, planning, procurement, and testing. External support from Tech Mahindra and/or Wipro/TCS/Infosys could also help Jio build a compelling 5G solution and do custom software development.
• Software and virtualization input from Radisys: This small vendor acquired in 2018 has made a strong push towards open RAN and virtualization, and offers a software stack and protocol expertise.
Finally, Jio may be better positioned to push open RAN in developing markets, similar to its home base, where price points must be low and telcos need a lot of hand-holding from suppliers. Rakuten’s base in Japan could be a challenge, even as it shows willingness to set up shop where its customers are. In the end, Rakuten and Jio may both find success as vendors, but probably in a different set of markets.
What happens next?
If Jio really aims for homegrown 5G, its weak spots are in manufacturing and radios.
The Reliance Group itself certainly has manufacturing capabilities, and a partnership with ITI Limited would enhance these. But ITI suddenly moving into a new, challenging area of manufacturing will have doubters.
Moreover, Jio is missing the radio piece of the puzzle. Let’s say Jio sticks with Samsung, and doesn’t go full open RAN. Jio hasn’t committed either way, even if it is a member of the O-RAN Alliance. Samsung’s baseband supports both LTE and NR 5G with the same hardware, so it would not likely need a swap. But the radios would need an upgrade to Samsung’s Massive MIMO version, at the least. These are not manufactured in India, so it’s hard to pitch them as homegrown. India has been trying to develop its manufacturing base, so perhaps we will see news on this front. Samsung does make handsets in India, at a plant in Noida.
Even with a Samsung manufacturing move, Jio would not have control over the 5G solution and it’s hard to call this is a "Made in India platform." Another possibility is that Jio is on the acquisition hunt, looking for open RAN players to fill the radio void. Altiostar and Mavenir just announced they would work together to develop a portfolio of open RAN-compliant radios designed for the U.S. market, produced by third party OEMs. Altiostar is likely not for sale, given its links to Telefonica and Rakuten, but Mavenir or a smaller option may be available. Short of acquisition, Jio might be content to just do as Altiostar and Mavenir are doing: draw up the specs (using Rancore) and commission a third-party OEM to manufacture.
Note: this column is based upon a forthcoming publication from MTN Consulting, scheduled for early August: Telecom Network Operator Playbook: Jio Platforms Limited.
Matt Walker is the founder and Chief Analyst of MTN Consulting, LLC, an independent market research firm. He has over 20 years of experience in telecom industry analysis, consulting and research program management. Based in Asia for most of his career, Matt currently lives in Chandler, Arizona. He can be reached by email at [email protected]. Follow him @mattwtelecom, or LinkedIn
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce staff. They do not represent the opinions of Fierce.