Industry Voices: Open RAN and vRAN tank in 2023

Industry Voices are op-eds from industry experts or analysts invited to contribute by Fierce staff. They do not represent the opinions of Fierce.

After four years of intense acceleration, Open RAN infrastructure revenues cooled off in 2023. Preliminary findings from our most recent RAN reports indicate that both Open RAN revenues (comprising virtualized or purpose-built baseband plus Open RAN radios) and vRAN (vCU and/or vDU, excluding radios) revenues experienced a double-digit decline in 2023. While moderation was anticipated, the rate of deceleration proved slightly steeper than expected at the outset of 2023.

Helping to explain this downturn is the state of the Open RAN market and the balance between the early adopters fueling the initial wave and the early majority deployments propelling the second wave. This transition is complicated by the fact that the volumes of Open RAN shipments among the leading operators characterizing the first wave – including Dish, KDDI, NTT DoCoMo, Rakuten, and Verizon – are quite substantial, numbering in the hundreds of thousands of radios collectively. Although growth prospects are strengthening outside of the US and Japan, this has not been sufficient to bridge the volume gap, as the first wave continues to account for over 90% of the overall Open RAN market.

Open RAN Revenue

Despite the disappointing performance in 4Q23 and throughout 2023, our long-term position remains unchanged. The core message we've consistently conveyed over the past few years, emphasizing the resilience of the Open RAN movement despite ongoing challenges with multi-vendor RAN, remains steadfast. We still anticipate that most operators will gradually incorporate more openness, virtualization, intelligence, and automation into their RAN roadmaps over time.

Challenging marketing conditions

Market conditions will likely remain challenging in 2024, with the broader 5G slowdown continuing to weigh on the market. However, we predict overall Open RAN and vRAN revenues to improve in 2024 as comparisons with early adopters stabilize and commercial volumes from "wave 2" Open RAN deployments, such as AT&T, Telus and 1&1, gradually increase. In total, Open RAN is forecasted to represent 7% to 10% of the broader 2024 RAN market. Long-term predictions remain unchanged and favorable, with worldwide Open RAN revenues projected to comprise 20% to 30% of total RAN by 2028.

Furthermore, there have been no changes to the assumptions supporting the multi-vendor outlook. Analysis in the latest 5-year forecast indicates that single-vendor Open RAN is projected to drive the majority of the Open RAN market. Multi-vendor Open RAN is projected to represent 5% to 10% of total RAN revenues by 2028.

Both Open RAN and vRAN investments are currently in an initial phase largely dominated by suppliers that embraced the Open RAN concept early on. Alternatively, the top three Open RAN and vRAN suppliers in 2023 are not among the top four RAN suppliers. Nevertheless, the vendor dynamics will likely shift as Ericsson and Nokia's Cloud RAN revenues constitute a greater share of their respective RAN portfolios. Additionally, the overlap ratio between Open RAN and vRAN is expected to evolve over time, influencing the vendor O-RAN/vRAN landscape. By 2028, the majority of Open RAN will also be Open vRAN.

RAN Revenue Ranking 2023 by Technology

2023: 'Not the most successful year'

In short, 2023 was not the most successful year in terms of commercial deployment and revenue. Revenues declined sharply in the North America region. RAN suppliers faced significant challenges, leading some of the smaller vendors to question the viability of focusing on the traditional MBB macro market using the feature parity and pricing approach. However, it was also a year of considerable progress.

Most major RAN vendors are now on-board with the movement. The vRAN chip ecosystem is rapidly improving. And there is a growing realization that the single-vendor Open RAN business case, with its potential to reduce swap costs if necessary, combined with the improved ability to ensure vendors remain competitive throughout the technology cycle, can be compelling. Importantly, some of the world's largest operators are now adopting various aspects of the Open RAN vision.

Furthermore, several Tier 1 operators are already recognizing that 6G will incorporate Open vRAN from the outset. In other words, while 2023 had its challenges, the trajectory of the movement is still forward.

Stefan Pongratz is VP and mobile infrastructure analyst at Dell'Oro Group, where he leads the company's research programs for the Radio Access Network (RAN) market and Telecom Capex. Pongratz joined Dell'Oro in 2010 and has written for the Dell'Oro blog, including a March 2024 article on the impact of the pandemic on the worldwide telecom equipment market.