1&1 Drillisch wants to rely on the support of a controversial partner in the future. Thus, Rakuten’s support is to help in the establishment of an independent network as well as the expansion of entrepreneurial success. The Japanese group is not entirely unknown and also controversial. After all, the Open RAN expansion caused a lot of furor. This has namely caused far higher costs than causally estimated.
5G network with Japanese support
The new mobile communications standard 5G is forcing providers to do a major rethink. Since much is new here, companies are seeking help from industry experts. For example, 1&1 Drillisch is now relying on support from Rakuten, a company founded in Japan. According to the Handelsblatt, the aim of the collaboration is to provide comprehensive help in planning the new network. It is not yet known which network suppliers 1&1 Drillisch will select. However, Handelsblatt also revealed insider information in this regard. There is likely to be an announcement to this effect in the next few weeks. The choice of Rakuten is by all means a surprising move. After all, there are other experts from the Far East whose support would certainly be more understandable. The major smartphone manufacturers Huawei, ZTE and Samsung are particularly worth mentioning as examples. But this is no coincidence. 1&1 Drillisch wants to make itself independent of these big players in the 5G network. Thus, the CEO of United Internet, Ralph Dommermuth, already let it be known in June of last year that the group wanted to “build an Open RAN 5G network.”
What is Open-RAN-5G?
Rakuten’s choice is no longer too surprising given United Internet’s plans. After all, the Japanese company is a prime example of Open-RAN-5G. This is a combination of a cloud, virtualized network elements, white-box hardware, standardized interfaces and open-source software. This technical arrangement is intended to enable 1&1 Drillisch to dispense with proprietary chips from equipment suppliers wherever possible.
Rakuten itself is a real pioneer in the field of open RAN-5G. However, the group had to suffer economically from taking a pioneering position. After all, there were no mistakes made by other companies that the Japanese corporation could learn from. Accordingly, it is not surprising that the mobile service, which was originally announced for September 2019, was only launched about half a year later. The reason was a delay in the construction of the company’s own base stations.
Open RAN means high costs
To be sure, 1&1 Drillisch is buying itself a measure of independence by moving toward an open RAN network. But at what price? One major disadvantage of Open RAN is the incredibly high cost. Rakuten Mobile had to experience this firsthand. At first, the company took a rather cautious step. After all, Open RAN-5G was initially available in a few selected Japanese metropolitan areas such as Tokyo, Hokkaido, Osaka and Kanagawa. Rakuten’s original goal was to build a 5G network much cheaper than its major competitors were doing. A look at the shares of the Japanese group makes it clear that the desired savings unfortunately did not materialize.
Instead, the standalone network revealed itself to be a real cost trap. For example, costs rose bit by bit as the Open RAN was built. In turn, Rakuten had to accept significant losses. In the course of this, a sale of group shares worth almost 2.2 billion US dollars was unavoidable. There was no other way to bear the Open RAN costs. However, Rakuten has to be credited for always informing its shareholders about the predicament. Just a few weeks before the share sale, the company warned that the network expansion would probably cost almost USD 2 billion more than previously assumed. Rakuten’s 4G network is said to have cost almost 5.7 billion by February alone. Experts now expect a total investment of up to USD 8 billion. Hopefully United Internet incl. 1&1 Drillisch has thought through this cooperation well.