Reality is quickly catching up with the open radio access network (RAN) market as the broader ecosystem struggles to find stable financial footing, which is eroding away under retreating revenue trends.

The open RAN market has been riding a wave of opportunity and innovation, bolstered by the desire of operators to infuse new competition into a RAN market dominated by a handful of legacy vendors. However, that wave has been undercut by the inevitable undercurrent of operational and integration challenges.

Once touted as a necessary pillar to 5G network deployments, open RAN architectures have so far only been widely adopted by a few greenfield operators like Dish Network and Rakuten Mobile, while much larger established players continue to work through those operational and integration challenges.

This has led to open RAN-focused vendors having to scramble against more established rivals in navigating the market.

Dell’Oro Group this week reported the open RAN and virtualized RAN (vRAN) market posted a dip in revenues for the second quarter, “marking the first quarter of year-over-year contractions since the firm began tracking these next-generation architectures back in 2019,” the analyst firm noted.

Dell’Oro Group VP Stefan Pongratz added that the slowdown was expected, with the analyst firm earlier this year stating it expected open RAN equipment to account for between 15% and 20% of the global RAN market by 2027, which is 5% to 10% less than it had been previously expecting.

“After a couple of years where open RAN revenues exceeded expectations and advanced at an accelerated pace, the current slowdown doesn't come as a surprise,” Pongratz wrote. “Projections for 2023 were more tempered, considering that it would take time for the early majority operators to balance out the more challenging comparisons with the early adopters who fueled the initial open RAN wave. This is the trend we are witnessing now – growth decelerated in the first quarter and declined in the second quarter.”

Iyad Tarazi, president and CEO of private 5G network platform provider Federated Wireless, explained in an interview with SDxCentral that the open RAN market and broader ecosystem has indeed hit an inflection point.

“It’s to be seen. I'm sure that it is to be determined,” Tarazi said of the vitality of the overall open RAN ecosystem. “The defining moments of the last 12 months – and I can tell you because I am working it myself – is everybody has to transition from innovation companies thriving on easy money with low interest rates into companies that have solid, repeatable and profitable business models.”

Tarazi added that a sound business model will be essential for these open RAN firms to navigate the near-term turbulence.

“I view the business model innovation as important as the technology innovation,” Tarazi said. “Those companies that are smart enough and have the right support and help with the right, smart people and helpers that can help them innovate their business model as well as the technology, they will thrive in the future.”

Tarazi flatly stated that those that don’t have this level of support or have the right business model will suffer.

“We are going to see a rearrangement across the board, whether we like it or not. These rearrangements are healthy,” Tarazi said. “I think the [open RAN] ecosystem will continue to thrive and grow. The players themselves, it's an individual evolution piece. Every player either will have to find the right niche, the right plan, the right business model, the right alignment, the right arrangement. And my advice to everyone is the sooner you think of the business model, the sooner you'll thrive. Technology's not enough.”

Some have already caved to this pressure.

Parallel Wireless, for instance, was forced last year to cut jobs tied to a broader corporate strategy realignment focused on what it called a “marathon” rather than a “sprint.”

In a LinkedIn post, Parallel Wireless CEO, chairman and cofounder Steve Papa wrote that the “significant reset” of the company’s business plan would get the vendor back to a business model it had adopted prior to the COVID-19 pandemic. He indicated this included the job cuts and “re-organizing roles” as well as “correcting wrong assumptions made in haste.”

Published reports indicated that Parallel Wireless cut as many as half of its approximately 700 employees, which came just months after it had said it planned to double its headcount by the end of 2022.

“While there are plenty of forced and unforced errors in our sprint that we could debate, they are part and parcel to any ambitious undertaking,” Papa added.

Mavenir, which Dell’Oro Group singled out as posting a drop in open RAN revenue share over the past several quarters, managed earlier this year to score $100 million in new funding. That could be key as Dell’Oro Group replaced Mavenir with Rakuten Symphony as one of its “top four open RAN suppliers by revenue” for the first half of this year.

(Rakuten Symphony might not want to celebrate too loudly as it was recently rocked by the sudden departure of long-time open RAN advocate and top executive Tareq Amin, who left the company earlier this month.)

Samsung, NEC and Fujitsu remained as top open RAN vendors, according to Dell’Oro Group.

Tarazi noted that this next phase of the open RAN ecosystem has important support from government agencies that will help backstop too much of a slide, and that it will be important for the ecosystem partners to continue to work within established parameters to make sure operators are comfortable that future deployments will continue to have long-term support.

"I describe it like having a really good teenage daughter or son," Tarazi added. "You want them to thrive and do everything in the world that they need to do to learn. But at the same time you want to make sure that you have exerted whatever you need to guide them and make sure that these aren't bad decisions. And that's what needs to be done. ... The freedom to do everything that's needed, but the ability to guide and manage in order for people to get the right performance, the right support, the right monitoring, the right management, the right training, the right onboarding. ... I think that's the future."