Japanese commuters may benefit from Barcelona FC sponsor Rakuten’s tech
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Hiroshi Mikitani wanted to rattle his rivals. After overseeing an incursion into Japan’s mobile market, the chief executive of Rakuten Mobile dialled up the pressure.
Prowling the stage at a Rakuten launch event in September, he announced customers on cut-price 4G plans would get an upgrade to 5G connectivity “at no extra cost”.
“Reducing cell phone fees has become a major topic in Japan – maybe even a national movement,” he added.
Mikitani’s promise is part of an attempt to break Japan’s mobile oligopoly of SoftBank, NTT Docomo and KDDI, which has become so powerful that prime minister Yoshihide Suga has rebuked the companies over their high prices.
It is a commercial tussle that is now threatening to spill into the courtroom.
A former SoftBank worker was arrested on Tuesday on suspicion of illegally revealing its network secrets to Rakuten, his new paymaster. Yet Rakuten’s assault on the telecoms industry could stretch far beyond the land of the rising sun.
The company, whose logo is emblazoned across the Barcelona football shirt, has set a precedent, which is attracting attention from telecoms giants left stung by bans on Chinese equipment supplier Huawei.
Barcelona signed a four-year deal with Rakuten lasting through till 2021 reportedly worth at least €220m
Credit: JON NAZCA/ REUTERS
Rakuten is forging its new mobile service using open radio access networks (OpenRan), a technology standard hyped as being cheaper and more innovative than the status quo. Vodafone is among the mobile titans to extol the virtues of OpenRan amid escalating concerns over the monopoly in telecoms equipment supply.
Here in the UK, BT’s mobile arm EE and Three had little choice when replacing Huawei kit but to ink deals with Nokia and Ericsson, the two companies considered capable of competing with the Chinese telecoms giant on cost and quality.
OpenRan offers some solutions to those problems. Rather than being restricted to buying expensive network equipment from a small bank of suppliers, it widens the net to allow an array of kit from different companies to be used in a single network, cutting costs by opening up competition and reducing the risk of swapping out equipment.
It has the potential to bring comfort to UK mobile networks, which are poised to spend an estimated £1.5bn to £2bn ripping out Huawei kit after Boris Johnson followed America’s lead and blacklisted the company over spying fears.
Rakuten Mobile – part of the wider Rakuten group that includes Japan’s biggest online retailer – claims OpenRan has made building and running a network cheaper, meaning it can pass on the cost savings to customers.
Rakuten’s ambitions have been bold, but its impact has not been stratospheric. The pandemic has dragged on its 5G rollout and analysts expect prices from rivals to fall in response to its arrival.
Yet its unique experience in OpenRan has still blazed a trail where others wish to follow.
In September, Rakuten struck a tie-up with Telefonica – the owner of mobile network O2 – to advance OpenRan technology.
That poses a threat to the market share of Huawei, Nokia and Ericsson, but those companies are not standing still. Nokia is already helping mobile networks experiment with OpenRan.
Eric Stonestrom, chief executive of Airspan, an OpenRan challenger backed by none other than SoftBank, still expects the dominance of the big suppliers to wane. “They should be very concerned,” he adds. “We put $400m [£294m] of equipment into the US when SoftBank acquired the mobile operator Sprint. A couple of competitors had offers in the range of $20bn to do the same job. We are a cost disrupter.”
The Florida-based company, which supported Rakuten’s network expansion, is now working with ministers to trial technology in the UK. Momentum is building behind OpenRan, but can the nation expect explosive growth akin to Rakuten?
BT has recently signed 5G equipment deals with both Ericsson and Nokia, meaning an industry-wide OpenRan push may take years to materialise.
Vodafone plans to use OpenRan in a fifth of its UK network by 2027, but does not believe it is ready to roll out across the whole network.
James Barford, of Enders Analysis, says Vodafone can use rural areas where there is less demand as a “sandbox” for testing OpenRan – but he also sounds a note of caution.
“The disadvantage is that you reduce your flexibility, because sometimes the most cutting-edge equipment might not be compatible with those standards.”
Rakuten’s market offensive has a long way to run as the uptake of 5G gathers steam, but UK mobile operators should be wary of twiddling their thumbs.
It may pose unanswered questions, but OpenRan could prove a sure-fire way for mobile operators to cut costs as their investors cry out for growth.
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