AT&T's CEO explains his open RAN reasoning

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AT&T's CEO said the operator's new open RAN agreement with Ericsson allows AT&T to be more efficient, but "I don't think it's going to move the needle from a capital intensity perspective."

John Stankey, speaking at an investor event Tuesday morning, said AT&T's new $14 billion deal with Ericsson "allows us to operate our business more effectively. It's simpler for us. It's one network infrastructure at the core, there's one set of systems that support it, it's all those things that you want to do that allow us to be a more efficient business."

And he said that Ericsson agreed to lower its prices as part of the deal.

"I think what we're going to see is more efficiency on a unit level," he said of the new agreement. "The dynamic is that the units you're deploying right now don't give you quite as much yield and coverage, and so you tend to have to do more units, and so we're fighting this never ending battle of getting more efficient to keep up with traffic. I think that battle will continue."

Stankey's comments appear to indicate that AT&T has been successful in using open RAN to push its existing vendors to lower their prices.

But Stankey explained that AT&T's embrace of open RAN technology isn't going to dramatically affect its overall network spending. "I don't think I'm going to walk out and tell you that O-RAN is the secret sauce to take this down to a single-digit-teens as a percent of revenue capital intensity business," he said. "I don't believe that will be the case. It'll be a tool that we will use to continue to manage this and keep ourselves in this mid-teens level of capital intensity."

"I wouldn't blow this out of context," Stankey added. "This is a component of our [network] investment, it's not all of our investment. It's not all of our RAN investment either, it's a portion of it."

Preparing for the future

Stankey said that AT&T's new agreement with Ericsson – which stretches over the next five years – is part of the operator's future network planning.

"With the slowdown in the vendor markets we were able to step back and say, 'What can we do to get an opportunistic agreement where we can drive vendors into a position to move more aggressively on O-RAN to position us long term?'" Stankey explained. Indeed, Ericsson, Nokia and other vendors this year have reported a bigger-than-expected slowdown in their equipment sales.

"We can take advantage of a little bit of a lull right now," Stankey said.

"We had two really good suppliers, they both did good work for us," Stankey said of Nokia and Ericsson, AT&T's two main 5G equipment suppliers. The question, he said, was "how can we get to the most modernized network that gets the most amount of traffic across intentionally open interfaces. And it was this path that we chose with Ericsson."

As a result of AT&T's shift to Ericsson's open RAN, Stankey said the company hopes to eventually mix and match products from a variety of vendors. Indeed, that's the ultimate promise of O-RAN Alliance specifications.

"It's entirely possible Nokia could be one of those suppliers of that more diverse vendor base," Stankey said. "And that's going to be important as networks become more distributed, and you start dealing with smaller packages that have to get out, because the macro game has largely been played out."

"That's kind of the logic behind it," he said.

What the others are saying

"If I look at look at the performance of the O-RAN at this point, it can't do the kind of things like massive MIMO at 16T/16R [to] 64T/64R, those kind of performance measures, we're just not there yet," said Verizon's networking chief, Joe Russo, at a recent investor event. "And until we are, it doesn't have a place necessarily in the kind of performance that I want to deliver to my customers."

But AT&T officials said that massive MIMO will be possible via the operator's move to open RAN.

"I think generally people have presumed that the de-verticalization of the industry is just a matter of time, and that you want to be able to smartly buy different components up and down the stack, and that's certainly our hope and expectation," said T-Mobile CEO Mike Sievert Tuesday at an investor event in response to questions about AT&T's new deal with Ericsson. "We really deeply value our partnerships with both Nokia and Ericsson, and see that as an advantage that we can buy up and down the stack from multiple partners."

Indeed, T-Mobile officials have generally offered more positive comments around open RAN in recent years.

But Sievert indicated T-Mobile doesn't feel the need to quickly deploy its C-band and 3.45GHz spectrum holdings. He said the company can hold that spectrum "until we need it."

"We've got plenty of room to be able to get this [spectrum] deployed before customers need it from a capacity standpoint, and we'll just be really smart about how we do that and where we do that," Sievert said in response to questions about when T-Mobile might deploy its C-band and 3.45GHz spectrum holdings. He said T-Mobile has received the dual-band radios – ones that can handle both bands – that it has been waiting for since buying that spectrum.

The Dish angle

Dish Network has been a loud and vocal open RAN proponent since embarking on its nationwide 5G network buildout more than two years ago. Dish's primary 5G vendor is Samsung.

"This validates Dish's strategy," wrote the financial analysts at New Street Research. "It is not clear that the validation will help Dish much beyond providing bragging rights though."

Dish, for its part, has spent roughly $6 billion on its open RAN 5G network so far, and touts coverage across a total of 240 million people. The company expects to expand its coverage starting next year.

"With AT&T putting its weight behind open RAN, it should still bring scale benefits to the ecosystem," added the New Street analysts. "One of the benefits of open RAN is that operators will not be trapped within fixed vendor relationships; equipment from different vendors interoperates more easily. A $14 billion investment from AT&T should benefit the entire ecosystem."