The United States government’s recent cellular equipment industry reshuffle has created a new competitive balance for U.S. telecom companies, The Wall Street Journal reports. China’s Huawei Technologies, Co, Sweden’s Ericsson and Finland’s Nokia have controlled 20% of revenue in the wireless equipment market, according to research firm Dell’Oro Group. Meanwhile, no other competitors have made into the top 10%.
The landscape could be changing, however. The U.S. government’s recent push to penalize Huawei over cybersecurity concerns has motivated countries that comprise more than 60% of the world’s cell equipment market to consider enacting restrictions against the company, according to Dell’Oro Group. Some of those countries have already put restrictions in place. Meanwhile, the U.S. government, as well as governments in the U.K. and European Union are considering financial support to help domestic cell equipment makers that want to loosen up Ericsson, Nokia and Huawei’s grip on the market, The Wall Street Journal reports. The push could lead to a competitive market the industry has not seen since the 1990s.
“It’s got a Wild West feel to it,” Bill Plummer, a former Nokia and Huawei executive now working at JMA Wireless, a Syracuse, N.Y., 5G company told The Wall Street Journal. “We haven’t seen this since probably the eve of the dot-com bust—this dynamic and thriving competitive environment in wireless.”
A more competitive environment could benefit all the players in the cell equipment industry—outside of the dominant incumbents of course. Competitive balance could give companies a chance to win business that would have been considered out of reach just a few years ago. A more balanced market could also increase innovation and drop costs for wireless carriers, which could lead to lower prices for customers.
The new competitive landscape is critical for the U.S.’s efforts to compete with China in the 5G technology development race, according to American officials. 5G wireless tech will likely serve as the engine for future innovations like robot-run factories and heart rate monitors. The nation that leads the 5G charge will also be set up to accumulate the highest profits and best talent in the future.
How the U.S. got back into the 5G game
In 2018, the U.S. government managed to decrease Huawei, Nokia and Ericsson’s dominance in the equipment manufacturing arena by convincing other countries to blacklist Huawei over national security concerns. Other nations heeded the U.S.’s advice and soon, Huawei lost market share outside of China to Ericsson and Nokia in 2020, per Dell’Oro Group.
“The big change over the past couple of years is pressure on Huawei,” James Barford, a telecom analyst for Enders Analysis told The Wall Street Journal. “Even in countries where there is no formal ban, you’re going to be thinking twice (about using equipment from the Chinese company.)”
Nokia getting expensive chips for its 5G equipment loosened the “Big Three’s” grip on the market even more. The miscue led to its equipment costing more upfront and consuming more power. The latter was a big problem for wireless carriers because they can only spend about 20% of their operating expenses on energy. Nokia says it’s now moved to more efficient and less expensive chips since, but some carriers had already started looking elsewhere for supplies.
Ericsson looked to be in a good spot with Nokia and Huawei having issues, but wireless carriers weren’t comfortable with only one major manufacturer controlling most of the market. They preferred some competition for innovation purposes and to lower costs. The desire for balance helped create a new group of competitors—including U.S. companies.
The rise of U.S. 5G equipment manufacturers
Purchasing 5G equipment using open-standards software could be the key to reshuffling the competitive balance in the industry, according to The Wall Street Journal. Technology based on open standards, known as Open RAN (radio access network) is attractive to wireless carriers because they can mix and match antennas, under-antenna hardware and centralized electronics, giving them more cost and quality options. Companies like Huawei’s equipment currently is not interoperable—a Huawei antenna would not work with Ericsson’s electronics for example.
Several smaller U.S. companies like Airspan Networks, Altiostar, JMA and Parallel wireless are focused on 5G equipment that uses open software. They’ve caught some of the major wireless carriers’ attention—AT&T is currently testing open-standards equipment and will gradually introduce it. Meanwhile, new wireless carrier DISH said its whole network will use an open software-based infrastructure. It could be some time before open standards equipment is the rule rather than the exception, however. Dell’Oro Group forecasts that equipment with open standards will grab 10% of the market by 2025.
“The operators say, ‘We need choice, we need a strong ecosystem,’” Altiostar’s Thierry Maupilé, told The Wall Street Journal. “You have a playing field that has been reduced to a few companies.”
Questions remain for open-standards equipment however, as it could be less energy efficient the current systems. It also has yet to prove it can hold up in densely populated urban areas. However, wireless carriers expect the technology to compete with Huawei, Ericsson and Nokia’s equipment within the next three to four years.
Joe Dyton can be reached at email@example.com.