Open RAN revenue looks better than ever: Dell’Oro

This might be reassuring to vendors trying to break into the open radio access network (RAN) space: Preliminary findings suggest total open RAN revenues, including O-RAN and open RAN radio and baseband, surprised on the upside both in 2020 and during 2021.

That gives credence to the theory that open RAN is here to say and the architecture will play an important role before 6G makes its arrival, according to Dell’Oro Group. (O-RAN refers to the open RAN specs developed by the O-RAN Alliance; open RAN includes open interfaces but not necessarily based on the O-RAN spec.)

“The Open RAN movement has come a long way in just a few years, surprising both proponents and skeptics,” said Stefan Pongratz, vice president and analyst with the Dell’Oro Group, in a statement. “While challenging comparisons will weigh a bit on the market over the short-term, it is unlikely that these divergences between the greenfields and the brownfields will leave lasting imprints on the long-term prospects.”

Part of the reason the open RAN movement is happening at a faster pace than expected might be that expectations were pretty low to begin with. The industry has talked about vRAN, C-RAN, cloud-RAN and open interfaces for a long time and some skepticism is clearly warranted, Pongratz said in answer to emailed questions.

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However, despite a lot of open RAN proponents in the U.S., the Asia Pacific region is dominating the open RAN market in its initial phase, and it’s expected to play a leading role throughout the forecast period, accounting for more than 40% of total 2021-2026 revenues.

One reason the APAC region is in the lead has to do with the fact that not all open RAN is the same. The implementations vary significantly, enabling some operators to speed up the transition by focusing on a narrower scope initially and excluding some of the open RAN pillars that might take more time to implement, such as vRAN and multi-vendor deployments, according to Pongratz.

In addition to Rakuten’s deployment in Japan, more operators are starting to deploy O-RAN radios before they’re going for open vRAN. And while the two are often intertwined and used interchangeably, they are not the same, he noted.  

Open RAN is about disaggregating the RAN while vRAN disaggregates the software from the hardware and enables software to run on vendor-agnostic commercial off-the-shelf hardware. “While the overlap ratio will evolve with time, the near-term business case drivers and challenges differ quite a bit between these two architectures,” he said.

“The business case for open RAN and vRAN will vary depending on a confluence of factors and so far some of the early adopters have prioritized open RAN more than vRAN,” he said. “We do expect this gap to narrow going forward and we actually project vRAN will grow at a faster pace than open RAN on a relative basis in 2022, supported by initial vRAN deployments in the U.S. market.”

Meanwhile, the shift toward virtualized RAN (vRAN) is progressing at a slightly slower pace than open RAN. Still, total vRAN projections remain mostly unchanged, with vRAN on track to account for 5% to 10% of the RAN market by 2026, according to Dell’Oro.

Dell’Oro Group at one point predicted cumulative open RAN revenue from 2020 to 2025 would hit as much as $10 billion and last year revised that upward to $15 billion, with open RAN revenues accounting for more than 10% of the overall RAN market by 2025.