Open RAN Faces Hurdles in Achieving Mainstream Adoption in 2024

Despite promotion and aspirations within the telecom industry, open RAN technology encounters hurdles on its path to maturity and widespread commercial viability.
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A report from TBR highlights the existing gaps in feature parity, performance, and implementation cost when compared to traditional RAN systems. These gaps indicate that open RAN is not yet prepared to entirely replace or significantly supplement traditional RAN networks.

Current State of Open RAN

While some successful implementations of open RAN gear are operational in select commercial networks, mostly in greenfield environments across the globe, the technology remains in an immature phase. The limitations in addressing essential criteria prevent open RAN from reaching an inflection point where it can rival traditional RAN networks. According to TBR’s analysis, this critical stage is at least another year away from realization.

Limited Impact Expected in 2024

Considering these gaps, open RAN is projected to maintain a minimal share of the overall RAN market in 2024. Commercial scalability, especially in heavily trafficked macro layer areas, remains a challenge for open RAN, limiting its broader impact within the industry.

Predictions and CSP Responses

The prediction suggests that open RAN will not achieve mainstream adoption in 2024. However, CSPs, although recognizing the technology’s immaturity for large-scale deployment, remain committed to its potential benefits. As a compromise, CSPs are anticipated to continue deploying open RAN-compliant kits that possess the flexibility to evolve into true open RAN systems as the technology advances.

Current Deployment Strategies

Operators like Vodafone U.K. and KDDI are already leveraging open RAN-compliant solutions, primarily provided by Samsung, while strategically planning for future advancements in true open RAN capabilities. Open RAN trials and commercial deployments are likely to focus on non-macro locations, such as small cells, as the technology progresses towards enhanced maturity.

Anticipated Progress

The industry anticipates incremental advancements in open RAN’s technological maturity through continued trials and deployments in specific contexts. This gradual approach aims to pave the way for broader utilization once the technology aligns more closely with the demands and standards of traditional RAN systems.

Other predictions

As the telecom industry navigates through macroeconomic hurdles and technological complexities, 2024 is poised to witness significant shifts and responses from Communication Service Providers (CSPs) and their partners.

Macroeconomic Challenges Persist

The telecom sector grapples with the aftermath of macroeconomic challenges stemming from rising interest rates, inflation, and the conclusion of pivotal stimulus programs initiated during the pandemic. Central banks’ transition from quantitative easing to tightening has led to a notable surge in the cost of capital, significantly affecting heavily leveraged entities within the industry.

Financial Impact on CSPs

Companies are confronting interest rates two to three times higher than the pre-Great Recession era, prompting a financial reassessment among CSPs. Weaker positions are forcing cutbacks in fiber build targets, asset revaluation, and reduced capital expenditure. To secure new debt, some have resorted to stringent collateral measures, altering their operational strategies.

Anticipated Changes and M&A Activities

In 2024, even stronger CSPs are expected to recalibrate their strategies, potentially leading to various outcomes, including dividend cuts, reduced capex, or mergers and acquisitions. This evolving landscape prompts a shift towards cost optimization and cash flow management as CFOs face heightened pressure to meet objectives.

M&A Trends and Financial Transformations

Expectations of intensified M&A activities prevail among CSPs and vendors worldwide. Financially distressed entities may resort to transformative events like recapitalization, asset divestment, debt restructuring, or mergers to counter market changes. Notably, financial struggles primarily affect U.S., European, and select Southeast Asian players.

Notable Market Moves and Future Predictions

Instances such as Vodafone and Three UK’s merger, TDS Telecom’s UScellular sale, and potential changes in the India market reflect the ongoing market shifts.

Private equity firms are likely to remain active, injecting capital and influencing changes among operators, vendors, and infrastructure owners.

With increased interest rates, CSPs will focus on cash flow management, possibly leading to restructuring, tighter expense controls, and reduced shareholder payouts.

Conclusion

The telecom landscape in 2024 continues to be shaped by ongoing financial challenges, heightened M&A activities, and a cautious approach toward technological advancements. The industry braces for transformative changes while navigating the complexities of evolving macroeconomic conditions and technological innovation.