DENVER – The open radio access network (RAN) market is in for some bumpy travel over the next couple of years due to 5G deployment dynamics that will only stabilize on smooth rails of more spectrum and greater open RAN maturity.

Joe Madden, lead analyst at Mobile Experts, explained to attendees at this week’s Cable-Tec Expo 2023 event that the open RAN market is currently riding the tail end of a deployment high that has been supported by large initial deployments from a handful of greenfield network operators. The most prominent of those is Dish Network in the U.S., which has deployed more than 15,000 open RAN sites, and Rakuten Mobile in Japan.

However, that initial surge is starting to slow, and Madden is predicting open RAN-related revenues will slump over the next several years.

“At least in the mobile operator market, we're going down to pilot programs,” Madden said, citing announced efforts by operators like Vodafone, which has announced plans to deploy 2,500 open RAN sites by 2027. “It will be hard to build back up to those same kind of numbers over the next two to three years.”

Others have noted similar near-term impacts.

Dell’Oro Group recently 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.”

Established operators remain open RAN backers, but technology maturity and their own investment cycles remain hurdles to near-term deployment commitments.

“At this point, what I typically say is we’re doing a lot of testing; we’re very interested in what that comes to be, but we don’t see it today at scale,” Joe Russo, EVP and president of Verizon’s global networks and technology business, told SDxCentral during an interview at the recent MWC Las Vegas event. “It’s not to say that it won’t be at some point, but I think there’s a lot of roads in front of us on the [open RAN] space, so we’ll see how that evolves.”

Russo noted that some of the bigger open RAN challenges remain around interoperability, software, the ability to scale and performance.

“We have very high-performance standards on the Verizon network when it comes to voice, when it comes to data, when it comes to getting on the network, staying on the network and being able to do what you have to do. Generally, you know, it’s a pretty high bar if you’re going to work inside of the Verizon network,” Russo said. “It’s been a challenge to make sure that those performance levels are met. … It’s early. I’m not saying that we’re not interested in it. I certainly will see where it takes us.”

Madden said that his firm still sees a performance gap between an optimized RAN architecture from a single vendor and a disaggregated open RAN architecture supported by several vendors. He said the initial hit was around 40%, but that has since been improved to around a 20% performance hit.

“I think the [applications] are going to continue to close that gap to where it'll become on par at some point in time,” Madden added.

Operators that are heavily invested in open RAN are trying to help close that gap.

David Zufall, VP wireless infrastructure development at Dish Network, said during a recent 5G Challenge event hosted by testing firm CableLabs that some of this can come from more stringent minimum standards for open RAN vendors.

“I think that’s going to be up to [operators] to force it among our vendors,” Zufall said. “We can define the basic layers, that it’s going to be a cloud-native environment and we have our principles, so I think we can define the environment. But I think we have to take the bold step and say ‘I am going to have a multivendor network and I am going to have a multicloud network and I’m not just going to use somebody’s middleware to enable the interoperability that happens to work on both of them.'

"We were willing to do it on the RAN and we saved some money," he continued. "We’re willing to do it on hardware, but we have to go to the next step, and I think that’s on the operator community to kind of force it across our vendors.”

Beyond the performance challenges, the open RAN ecosystem is being impacted by broader ecosystem dynamics and operator investment cycles.

Madden explained that his forecasts for growing open RAN investments starting in 2029 will be tied to the unleashing of new spectrum assets that operators will want to build out. This will also align with larger operators becoming more comfortable with open RAN performance.

“We do see growth in the long term when we get new spectrum into the market,” Madden said. “When Verizon or AT&T or some of the other bigger operators get new spectrum, let's say around the 2029 timeframe, I think they're going to go to open RAN from the very beginning … because they will have tested it thoroughly at that point in time and they're really bought into the process.”

These larger operators passed on using open RAN as part of their most recent 5G deployments that were tied to their mid-band spectrum holdings due to the maturity issues Russo mentioned.

Neville Ray, former president of technology at T-Mobile US, also cited this timing issue as to why his carrier passed on using open RAN for its most recent 5G expansion.

“For us, we didn’t go down on open RAN path when we made our big vendor decisions three years ago,” Ray said. “The pace and scale that we were moving on, features and capabilities we needed, the ecosystem just was not ready. And the O-RAN guys will tell you that.”

Most operators are curtailing their network investment plans as they look to now find services that can begin squeezing revenues from their enhanced 5G networks. This includes a focus on services like fixed-wireless access (FWA) and private 5G networks.

Madden noted that an eventual spectrum infusion will likely be the only reason for operators to take the financial hit of deploying open RAN.

“They need a vehicle if they're going to go out and touch every site,” Madden said. “Nobody saves money by ripping out the old equipment and putting in new equipment. That's not a way to save money. What they're going to do is wait until they have another train leaving the station and they're going to put open RAN on that train and they're going to deploy that nationwide. I think it'll take some time for that new spectrum to get here so that we can see that growth in open RAN.”