Open radio access network, or Open RAN, was once projected to generate billions in revenue and constitute a large share of the developing 5G market. Now, Open RAN revenues have declined.
An August 2023 report from Dell'Oro Group found that, after Open RAN exceeded expectations for a few years, its revenue decreased for the first time since Dell'Oro started tracking its growth in 2019. Markets in the North American and Asia-Pacific (APAC) regions are primarily responsible for the slump, as revenues in Europe are increasing but not enough to offset the decline.
Dell'Oro Group Vice President Stefan Pongratz said the decline represents how operators in other regions are now catching up to early adopters who caused the initial upsurge, such as operators in the U.S. and China. Additional factors foreshadowed and contributed to the fatigue, such as data traffic patterns, 5G monetization challenges and inflation.
Despite these challenges, Open RAN will improve in the future. Although Open RAN is an important part of the overall RAN market, Pongratz said the revenue decline hasn't seriously affected the RAN market, and Open RAN revenues still accounted for 5% to 10% of the total market in 2023.
With the demand for one of the most promising RAN technologies now in decline, what does that mean for 5G development?
The potential of Open RAN
The RAN is an essential element of any mobile network because it serves as the component that delivers network connectivity to devices. 5G networks provide substantial advantages over previous generations of cellular networks -- offering higher speeds, lower latency and increased bandwidth capacity. But those features require expensive infrastructure and equipment to enable. The hefty cost is one of many factors that sparked interest in Open RAN, an open standard for RAN deployment.
Unlike a typical RAN system, which requires operators to purchase proprietary infrastructure from one vendor, Open RAN gives operators more options because it enables them to use generic equipment from any vendor. They can choose infrastructure components from different vendors and supplement them with approved protocols, interfaces and specifications. These features enable operators to reduce costs, prevent vendor lock-in, and create interoperability and ease of use.
These factors are appealing to operators that need to build standalone 5G infrastructure from the ground up -- instead of using non-standalone 5G that depends on existing 4G infrastructure.
5G in a similar position as Open RAN
Open RAN isn't the only telecom market in the middle of a downturn. Findings outlined in a June 2023 Dell'Oro press release show telecom operators also struggle to deliver true 5G. Early adopters in North America and APAC are still dealing with 5G complexities, such as COVID-19 pandemic delays, skills shortages and spectrum obstacles. Even though 5G adoption rates are increasing in some regions, they aren't enough to outweigh the decline.
But, just like the Open RAN market, 5G's outlook will improve in the future despite challenges and underwhelming adoption rates. 5G development hasn't completely stopped, but it's likely to take longer than anticipated. Pongratz said the decline of Open RAN has had little bearing on the 5G market. Dell'Oro Group predicted 5G will grow by another 20% to 30% by 2027, with Open RAN playing a role in its success.
"Operators will continue to roll out 5G as planned, using traditional RAN architectures," Pongratz said. "[They will] gradually introduce more Open RAN-compliant systems in the future when it makes sense from a timing, performance and cost perspective."
Open RAN outlook remains positive despite slump
While the market for Open RAN has stagnated slightly, it hasn't stalled. Projections from Dell'Oro Group indicated the numbers will continue to climb, although at a rate slower than expected. The numbers don't necessarily reflect a true decline, but show how operators in slower markets around the world are now catching up to faster markets.
"We remain optimistic about the Open RAN prospects in the future, especially single-vendor Open RAN," Pongratz said. "With the incumbents now committing to this interface and movement, we are projecting Open RAN to [constitute] 15% to 20% of the broader RAN market by 2027."