“To offset 5G’s higher deployment and operating costs, operators are forcing the commoditization of RAN equipment and inviting new vendors to compete with traditional RAN vendors. These changes promise to make for a robust patent licensing market for RAN.”
Much has been said about how 5G will better use the airwaves, giving wings to new communications between people and between devices. Little has been said though about how 5G could change markets and industries. The equipment market for the radio access network (RAN) is a good example of just one market that is now caught in the updraft of such change. Another market bound to rise is the market for patent licensing—and, in particular, standard essential patent licensing for 5G RAN. To help make sense of the 5G patent licensing market, we have developed an AI-based 5G landscaping tool to help identify and weigh the relative patent portfolios (OPAL) and an indexed repository of all technical contributions made to 3GPP 2G-5G standardization work (OPEN).
5G as a technology promises to deliver greater broadband capacity, less network congestion, and decreased end-to-end latency over the Long-Term Evolution (LTE) standard. Of course, all of this comes at a higher price. The propagation characteristics of radio waves in the millimeter wave band necessary for 5G success and the ever-increasing usage of data are causing operators to deploy a significantly higher number of 5G radios and antennas than what was needed for LTE. Stringent latency requirements are also pushing radio units and servers to the edge of the network and thus increasing their numbers. To offset 5G’s higher deployment and operating costs, operators are forcing the commoditization of RAN equipment and inviting new vendors to compete with traditional RAN vendors. These changes promise to make for a robust patent licensing market for RAN, particularly when a large share of the applicable patents is held by the threatened traditional RAN vendors.
Historically, mobile network infrastructure, and in particular the RAN, has been the prerogative of operators that control radio spectrum and wireline and tower access rights and a handful of vendors that make purpose-specific equipment. In the past, access to RAN resources was gated through proprietary interfaces, communications privacy rules, and high equipment and spectrum costs leading to vendor lock-in. Now, 5G is lowering some of these barriers. Not because 5G networks are less expensive or communications privacy rules are being relaxed – they’re not –but because 5G is so expensive to build that operators are actively seeking substantial cost savings and efficient ways of collaboration in the RAN. Due to the high price tag of 5G, operators have championed network function virtualization (NFV) to force efficiencies in network architecture, commoditize equipment, and introduce more competition among equipment vendors.
The RAN is the costliest component in a mobile network. According to the GSM Association (GSMA), the RAN accounts for 45-50% of a LTE network’s total cost of ownership (TCO – includes CapEx and OpEx). 5G RAN promises to be even more costly as GSMA further estimates that the 5G RAN portion of TCO will rise to 65% for some networks. A lot of this increase is driven by the power hungry demands of Massive MIMO (16-fold and more increase in inputs and outputs over LTE MIMO), the expected increase in data traffic, as well as RAN densification (many fold increase in radio units, antennas, and expensive fiber optic fronthaul) due to 5G’s use of the millimeter wave band (30-300 GHz). The energy requirements of 5G are expected to increase by 3x over LTE and Huawei has estimated that the requirements of Massive MIMO and other 5G technologies will increase the monthly energy requirements of a cell site by 68%. If the 5G densification plan of 50 mmW base stations per km² for the North Bund of Shanghai’s Hongqiao District is any indication, operators’ costs to house, cool, and maintain radio units across urban networks will increase dramatically.
The Growth of DAS
RAN costs and the characteristics of radio waves spawned the growth of private mobile networks or distributed antenna systems (DAS) starting in the late 1980s. Today, private outdoor event venues, indoor public spaces, and business and education campuses are networked using DAS providers’ WiFi, GSM, WCDMA, and LTE solutions contracted by facility owners. These solutions are independent from mobile network operators and controlled largely by private facility owners. Mobile network operators who are constrained in their network deployments have welcomed these systems by leasing access from them. Today, DAS systems come in many different forms from passive systems that simply amplify and retransmit operators’ base station analog signals to digital systems that transport operators’ digital signals to DAS providers’ own capable radio units for digital-analog conversion and transmission.
The DAS industry is expected by Grandview Research to grow from $6.7 billion in 2018 to $13.7 billion in 2025. The growth should be broadly felt as a large number of companies provide DAS products, systems, and services to large venues, campuses, and corporations. Today, the DAS market is very competitive with a large number of DAS providers generating less than $100M in annual revenue. But the industry is also in the throes of consolidation and a few DAS providers generating annual DAS revenues far north of $1 billion stand to benefit. This has also attracted the attention of traditional RAN vendors like Huawei, Nokia, Ericsson, ZTE, and Samsung who now offer small-cell systems to private corporate networks.
DAS is democratizing RAN equipment. Equipment prices have fallen sharply largely due to competition but also because of innovation and cloudification of network functionality. More manufacturers of capable processors, servers, and transport gear have entered the market bringing innovation. A parallel can be drawn to the deregulation of telecommunications terminal equipment from the 1950s in the US which led the development from rotary dial phones to push-button phones to today’s thin touch-screen handsets. Operators are hoping that similar competition and innovation will break up vendor lock-in, lower equipment prices, facilitate cloudification of RAN functionality, and return to them control over updates and new service launches.
A Conflict in the Offing
Since 5G NR RAN is able to integrate multiple radio access technologies like GSM, WCDMA, LTE, WiFi, and low, mid, and high band 5G and answer the reliability, coverage, and low latency requirements of large enterprises, 5G poses a challenge and an opportunity for DAS. Starting in 2004, DAS providers have benefited under a royalty-free non-assert from access to traditional RAN equipment vendors’ now-standardized common public radio interface (CPRI) between their antennas and their controlling baseband units. This was extended in 2019 to 5G with enhanced CPRI or eCPRI to handle its increased capacity and latency requirements. While CPRI and eCPRI provide operators with the ability to multi-source their RAN procurements among traditional RAN vendors, they also give rise to digital DAS offerings that allow transmission of digital baseband signals over greater distances without having to perform digital-analog conversion until the radio unit. Today, the capabilities of digital DAS systems can compete head on with the offerings of traditional RAN vendors for at least private indoor networks. The big questions are whether the traditional RAN vendors will allow DAS providers to continue to compete for enterprise class DAS projects and conversely whether operators will increase the sourcing of their RAN requirements from DAS providers.
Under the direction of ETSI’s NFV industry group, the RAN is being disaggregated from base stations and controllers into centers of baseband signal processing called baseband units or pools (BBU), which can be further divided into centralized units (CU) and distributed units (DU), and radio units (RU). The goal is to allow for dynamic flexibility in allocating and controlling resources by concentrating intensive baseband computing into a small number of CUs and locate, for instance, latency-intensive processing and beamforming and digital-analog conversion in RUs closer to the antennas. Connecting these units together are fronthaul networks comprising high capacity fiber optic cables or point-to-point wireless links. It is anticipated that each 5G network operator will tailor its configuration of CUs, DUs, and RUs to the unique geographic and population distribution characteristics of its market.
Although baseband processing can be split into any number of configurations, O-RAN, an alliance of operators and component and equipment vendors, and OpenRAN, a project group designing and building RAN solutions, are designing, specifying, and building RAN configurations based on operator requirements using vendor-neutral hardware and software solutions. These solutions allow operators to break vendor lock-in and source from a wide variety of vendors.
One of the areas successfully specified and in which a plethora of equipment offerings is already available is a class of RUs built in accordance with a 7-2 split of the baseband physical layer processing. The functionality of these RUs is narrowed as shown above to discrete activities such as resource mapping, cyclic-prefixing, beamforming, fast fourier transforms, PRACH processing, and analog-digital conversion and filtering. The bulk of baseband processing in such 7-2 splits is performed by a combination of DUs and CUs located tens of miles away from the actual antenna sites. In such configurations, no one piece of equipment performs all the functions of the RAN – RUs in particular simply receive data streams from hierarchically superior equipment, perform their assigned tasks to such streams, and send the converted analog streams to antenna arrays.
Competition and Democratization Bode Well for Patents
The RAN network is undergoing significant changes with the launch of 5G. The cost of deploying and operating a 5G network that delivers on the promise of faster download speeds and response times and greater capacity and reliability is causing operators to introduce more competition into the RAN and spur the democratization of RAN equipment. Supplier competition and equipment democratization is naturally raising the interest of those who own the patents relevant to RAN equipment and operations. Some of the changes in the RAN equipment market bode well for patent monetization.
In Part II of this series, we will address the licensing challenges unique to the RAN market.
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