Transitioning from End-to-End Integration to Vendor Diversity in Rollout of Standalone 5G

The Infocomm Media Development Authority (IMDA) has recently announced Singtel and the joint venture of Starhub and M1 as the winning bidders to operate Standalone (SA) 5G networks across Singapore. The Singtel and the Starhub-M1 joint venture will each receive 100 MHz of the 3.5 GHz band for their respective deployments. The IMDA will also allocate 800 MHz of millimeter-wave spectrum to these Mobile Network Operators (MNOs).

The winners will have to roll out their SA 5G networks starting in January 2021. They would also have to guarantee 50% island-wide coverage by the end of 2022 and full coverage by the end of 2025.

Interestingly enough, “vendor diversity” is a particular theme that the IMDA is emphasizing in its evaluations for allocation of 5G network licenses. The IMDA recognizes how 5G networks “will be supporting mission critical and essential services,” and therefore must “mitigate risks from dependency on any one vendor.”

IMDA’s dedicated focus on SA 5G networks represents the agency’s commitment to bringing the full potential of 5G to Singapore. While other nations (i.e., China, the United States) are making efforts to hasten the rollouts of 5G through their respective Non-Standalone (NSA) networks, the IMDA would prefer Singapore Communication Service Providers (CSPs) take the long view and ensure their networks can implement 5G New Radio (NR) features such as network slicing, massive Machine Type Communication (mMTC), and Ultra-Reliable Low Latency Communications (URLLC). NSA 5G is an interim solution that would only allow CSPs to provide enhanced Mobile Broadband (eMBB) services. As defined by the 3rd Generation Partnership Project (3GPP), an NSA deployment is upgrading legacy 4G equipment (specifically 4G evolved packet core) with 5G NR while an SA deployment involves 5G NR combined with a new 5G core.

Maximizing the 5G potential comes at a price. CSPs must be prepared to invest larger Capital Expenditure (CAPEX) as it requires a complete overhaul of the core network infrastructure. A silver lining for CSPs, however, can come from how SA 5G can help break the cycles of vendor lock-in and encourage competition among equipment vendors. In theory, the autonomy that comes with a multi-vendor approach puts MNOs in a better position to reduce CAPEX. SA 5G offers more options and autonomy through a modular approach, as opposed to an End-to-End (E2E) solution, in the development of their 5G core. The introduction of OpenRAN platforms would also serve to further boost the momentum of an MNO’s multi-vendor approach through the disaggregation of hardware and software components.

Vodafone is an example of a CSP that has been proactive in its pursuit of supply chain diversification, through OpenRAN, as it faces potential consequences (in terms of CAPEX and timeliness) from being very dependent on one equipment vendor. Vodafone does rely on Huawei equipment, but it has also taken steps to diversify its infrastructure equipment reliance. At present, 32% of Vodafone’s 18,000 base stations in the United Kingdom come from Huawei. A complete ban would have a material impact on Vodafone’s 5G plans.

The notion, however, that the costlier CAPEX considerations of SA 5G would be remedied by the supposed cost-savings of a multi-vendor approach is a contestable one given the complexities of supply chain procurement. Procuring from multiple vendors introduces additional complexities. CSPs must successfully attain true cost savings with multiple suppliers, integrate disparate components (hardware and software), and manage additional administrative coordination.

The importance of a capable procurement department in a CSP’s development of a multi-vendor network cannot be over emphasized. A number of CSPs have set up separate commercial entities to arrange procurement across the operator group. Companies such as Vodafone Procurement Company (VPC) and Telenor Procurement Company (TPC) have built a business model that can help operators traverse the challenges of procurement through their expertise, leveraging their existing relationships with Tier-1 vendors and, most importantly, ensuring savings. The procurement companies receive a revenue stream equivalent to 22% to 25% of the actual overall savings that the group of CSPs have made.

There are certain risks that CSPs that opt to outsource their procurement functions must be aware of. The CSP would need to make sure there is reliable, effective, and efficient governance in place to ensure accountability and minimum bottlenecks. The certainty of assured savings, however, provides considerable argument for CSPs, especially group CSPs, to consider procurement set ups like VPC/TPC.