Talking Markets: Huawei Scrutiny Prompts Difficult Search for Alternative Telecom Vendors
March 13 2020 - 7:39AM
Dow Jones News
By Adria Calatayud
As the backlash against Huawei Technologies Co. continues,
cellphone operators worldwide are coming to terms with an
unpleasant truth: there aren't many rival equipment makers
around.
Accelerating the development of alternatives to established
vendors might help to diversify supply chains. However, industry
executives and analysts warn that these alternatives, which have
been years in the making, will take time to materialize.
U.S.-led scrutiny of Huawei has boosted interest in finding
alternative vendors. A bipartisan group of U.S. senators introduced
a bill to subsidize the development of open-architecture network
technologies--which would standardize networks to allow software to
run on equipment coming from nearly any hardware maker. This would
reduce reliance on Huawei and create opportunities for new players
to enter the market.
Scrutiny of Huawei has put the business of making telecom gear
in the spotlight as much as the Chinese company itself. The market
is currently dominated by a trio of vendors--Huawei, Sweden's
Ericsson AB and Finland's Nokia Corp.--which gives telecom
operators a limited choice as they start to invest in the
deployment of next-generation 5G networks.
In countries like the U.K.--where the government has limited the
role of Huawei in 5G networks--telecom operators that haven't
reduced their exposure to the Chinese company already are expected
to book extra costs to do so. The telecom industry is hoping that
having more players in the market will diversify supply chains,
reducing risk and lowering costs.
"There was more choice of network equipment suppliers 15 years
ago than there is now and the industry is keen on expanding that
vendor ecosystem," Vodafone Group PLC's Head of Network Strategy
and Architecture, Santiago Tenorio, told Dow Jones Newswires.
Telecom operators are pushing for change in the
telecom-equipment market. Two international alliances of tech and
telecom companies, universities and research centers are trying to
develop networks that source gear from multiple vendors, which
could attract new players to the market.
"Everybody wants it to happen," said Janardan Menon, technology
analyst at brokerage Liberum Capital. Mr. Menon expects progress to
be slow but steady, and cautioned that it could take years before
these open-architecture networks become a reality.
The O-RAN Alliance--which counts U.S. cell carriers Verizon
Communications Inc., AT&T Inc. and Sprint Corp. as well as
China Mobile Ltd. and Japan's SoftBank Corp. among its members--is
creating an ecosystem of new products that will support
multi-vendor, interoperable radio-access networks. Meanwhile, the
Telecom Infra Project, whose members include Facebook Inc. and
Vodafone among others, is working on similar projects. Tech giants
such as Intel Corp., Qualcomm Inc. and South Korea's Samsung
Electronics Co. are backing both groups.
Nokia is also a member of both the O-RAN Alliance and the
Telecom Infra Project. Ericsson has engaged with the O-RAN
Alliance, which the Swedish company sees as aligning closer to its
goals, but not with the Telecom Infra Project.
"Ericsson is actively contributing towards O-RAN specifications
to make it a viable alternative in the future," an Ericssson
spokesperson said. Nokia and Huawei didn't respond to requests for
comment.
The O-RAN Alliance and the Telecom Infra Project in February
agreed to collaborate on 5G radio-access networks. They reached a
liaison deal that allows for sharing information, referencing
specifications and conducting joint testing.
Although some 4G projects using these open-architecture are
already in operation, the technology isn't yet ready to be deployed
at scale. Facebook and Telefonica have launched a
telecom-infrastructure company in Peru called Internet para Todos,
which relies on so-called open radio-access network, or OpenRAN.
Meanwhile, Vodafone is testing OpenRAN in rural parts of the U.K.,
following trials in South Africa and Turkey.
"OpenRAN is ready to be deployed commercially in pockets of the
network, but not at scale throughout a market yet," Mr. Tenorio
said. "None of the smaller providers which OpenRAN is bringing into
the market are ready yet to compete at scale with the likes of
Nokia, Ericsson and Huawei," he added.
To be sure, the development of open-architecture networks began
before Huawei's woes. The Telecom Infra Project was launched four
years ago, and the O-RAN Alliance was formed in 2018 through the
combination of two projects with shared goals.
There is no major U.S. manufacturer of cellular equipment
currently, even though the U.S. is the biggest market in the
industry for telecom equipment. The rise of open-architecture
networks could create opportunities for smaller companies like
Parallel Wireless, Mavenir or Altiostar, all of them based in the
U.S., to have a say in the future of telecom networks.
It is unlikely that these new entrants take revenue from Huawei,
Ericsson or Nokia in the next few years, said Liberum's Mr. Menon.
However, as the market begins to perceive that there are
alternatives to the trio, their valuations could be hit, Mr. Menon
said.
Write to Adria Calatayud at adria.calatayud@dowjones.com
(END) Dow Jones Newswires
March 13, 2020 07:24 ET (11:24 GMT)
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