Vodafone UK seems to have had one of its busiest weeks ever and there is no sign of it slowing down. After announcing partners for its open RAN deployment, new pricing plans at its annual Reinvent show (online this year because of the pandemic) and the launch of its edge computing service with AWS, the operator today reveals the identity of the vendor that will provide the new core for its forthcoming "standalone" 5G service, one not hitched to the 4G network. That company is Ericsson.
It is a good deal for the Swedish vendor, partly because it follows a related contract with Vodafone's German operation. The other reason is that it gives Ericsson an even bigger role in the network of Vodafone UK, whose radio access network (RAN) equipment is already mainly Swedish. Until now, Vodafone has relied largely on Cisco as a core network vendor.
Ericsson's headquarters in Kista, Sweden.
Vodafone was obviously impressed by Ericsson's offer, and the Swedish firm has previously been able to land some important 5G standalone clients. They include Vodafone's local rival BT, which signed its own deal with Ericsson back in April last year. With O2 dividing core network jobs between Ericsson and Nokia, the UK industry will be heavily reliant on Ericsson for the brains of its mobile networks.
One core or two?
There are some big differences between BT and Vodafone, though. The incumbent operator came under pressure to find a new supplier when government authorities rounded on Huawei, the massive Chinese vendor they now regard with suspicion (or outright hostility, in some cases). Huawei provides the legacy mobile core for EE, the mobile network BT acquired in 2016. A looming ban means BT must shift everything to Ericsson and shut that Huawei system down.
Vodafone appears to be under no such pressure. Under a five-year partnership with Ericsson, therefore, it is likely to run a standalone 5G core and the older Cisco core in parallel for some time. Eventually, however, it may want to collapse everything onto a single core for reasons of efficiency, and that would presumably mean waving goodbye to Cisco, the legacy provider.
Most operators plan to operate a common 4G and 5G core at some stage, if not immediately, according to a survey recently carried out by Heavy Reading, Light Reading's sister company. Asked about the importance of the move, some 46% of respondents said their company needs "a fully converged 4G/5G core," while another 40% said it was "important and desirable, but not essential to start with."
Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.
Cisco has had a relatively low profile in the 5G core market and has not shown up in recent European deals. It also looks set to lose an important Asian client in the shape of Rakuten. The Japanese firm built a 4G core network with Cisco, but in June last year said it would move all network functions into a new 5G system it is developing with NEC, another Japanese company. "When we launch our 5G core, for a period of time we will run them in parallel, but the strategy we take is that the 5G core, once built with all functions and components, will collapse all of the 4G functions," said Tareq Amin, Rakuten Mobile's chief technology officer, last year.
BT intends to do the same thing with Ericsson when it ditches Huawei. "That new core will be 4G, 5G, non-standalone and 5G standalone – it will have the capability to do all three – and we will have to migrate our 4G customers onto that," said Howard Watson, BT's chief technology officer, during a conversation with Light Reading in mid-2019, when the operator was still weighing its choices. "We'll take most of 2021 doing that."
The standalone version of 5G promises greater efficiency as well as new features, according to Gabriel Brown, a principal analyst with Heavy Reading. "It modernizes your core infrastructure, which is important for the cost of operations, and it introduces new capabilities," he says. "Network slicing and edge services with remote gateway placement are the canonical examples, and in time critical IoT applications. In non-standalone, you are limited to the 4G product set, more or less."
A few good vendors
Service providers have a broader choice of vendors in the core than in the much costlier radio access network (RAN), but not much broader. For the recently ended first quarter, Dell'Oro Group, a market-research firm, named the five biggest vendors globally as Huawei, Ericsson, Nokia, ZTE and Mavenir, omitting any mention of Cisco. Besides NEC, other options include South Korea's Samsung as well as HPE and Oracle, both of which are relatively new players in this area.
Those companies will be fighting over a market that looks fairly small next to the RAN. Dell'Oro reckons the core market is worth about $8 billion annually, while the RAN generates between $30 billion and $35 billion. Ericsson has also been struggling with a turnaround at digital services, the unit responsible for core network technology. Last year, it made an operating loss of 2.2 billion Swedish kronor (US$260 million) and saw revenues fall 6%, to SEK37.3 billion ($4.5 billion), as the termination and rescoping of older, unprofitable contracts continued to hurt.
New deals with Vodafone and other European operators should help to reinvigorate the business later this year, and Ericsson CEO Börje Ekholm struck an upbeat note back in January. "Our cloud-native 5G core portfolio has a very high win ratio and will start to generate revenues in the next 12 to 18 months," he said. "So far, we've only seen R&D costs with this new portfolio, so we are encouraged by the traction we have."