Open 5G Technology Gives Policymakers Important New Choices

Thoughts about technology that is inclusive, trusted, and creates a more sustainable world

These posts represent my personal views on the future of the digital economy powered by the cloud and artificial intelligence. Unless otherwise indicated, they do not represent the official views of Microsoft.

I’ve been devoting this month’s posts to the subject of 5G, with emphasis on the opportunities these remarkable new networks offer to enterprises, national governments, and supranational entities like the European Union. I’ve written about how 5G will rewire civilization by bringing the power of the cloud to billions of everyday devices, how it will transform the auto industry and the way our cars work, and how it will be a crucial enabling platform for the data sovereignty strategies that governments are beginning to formulate all over the world. Today I want to consider how recent innovations in the way 5G networks are built will reshape the choices public policymakers face.

One of the biggest challenges for policymakers is that they must balance objectives that may conflict with one another. For example, 5G networks require radio spectrum to operate, and the network operators get that spectrum by buying it in government-run auctions. But when governments organize these auctions they must decide what their priorities are. Higher auction prices will raise more revenue for the state without the political challenge of raising taxes, and right now governments really need that extra revenue. But lower auction prices will reduce costs for 5G customers down the line and also speed up 5G deployments by reducing the amount of capital that operators need to raise.

Governments must also decide who can participate in the auctions and how much spectrum to make available. The more spectrum sold, the more participants allowed to buy it and build networks with it, the more choices 5G customers will have. But telecom operators argue that allowing fewer participants in the market will give them greater incentives to invest and innovate.

Who is right? Policymakers must carefully weigh these competing interests and choose the path that leads to the greatest overall gain in welfare for their nations. My personal view is that more and cheaper 5G services for enterprises and consumers will produce bigger and longer-lasting economic benefits for nations than the short term jolt of more money from spectrum auctions. But this is not an easy issue and I recognize that policymakers will have to decide based on the specific circumstances of their countries.

As I’ve written before, 5G technology is entering a generational transition from vertically integrated proprietary systems to multi-vendor systems built on standard platforms. This transition is going to have a big impact on policy, so let me dwell on it for a moment. There are three main enabling pieces here:

• Moving network functions from specialized hardware to software-defined virtual machines (known as Network Function Virtualization or NFV). This terminology may be unfamiliar to some readers, but NFV is the key technology enabler for all modern telecom networks. All it really means is that thanks to a special intermediate layer of virtualization code, the highly technical software applications that run these networks can now be stacked up cost-efficiently on easily updated standard servers instead of being permanently wedded to expensive specialized hardware that can’t evolve. This is exactly the same shift that occurred in enterprise computing over a decade ago at the dawn of the cloud era, and it’s hugely consequential. NFV doesn’t influence policy choices per se, but policymakers should recognize that it is a key driver behind the scenes in 5G.
• Cloud-native architectures for 5G networks. Once key network functions have been virtualized by NFV, the natural next step is to move the virtual machines performing these functions to the cloud. This allows the telecom operator to slash its capital costs while giving it the flexibility to evolve or scale up quickly the services offered by its 5G network. The shift from capital costs to operating expenditures is especially important for policymakers to consider when devising incentives or subsidies to encourage 5G deployment. Policies that inadvertently favor capital over operating expenses could have the effect of blocking cloud-native architectures and thus delay exciting new 5G services that only the cloud makes feasible.
• Open radio access networks for 5G (known as ORAN). This means creating standardized open interfaces between the radio equipment at the network periphery (the base stations your phones and myriad other 5G devices will connect to) and the network core. With ORAN it becomes possible for telecom operators to mix and match their equipment suppliers, for example choosing different suppliers for the radio access and core portions of the network. Diversifying suppliers can reduce costs, make it easier for operators to introduce new services, and allow governments to exercise sovereign control over 5G supply chains. Policymakers may want to consider regulations that foster the use of open standards in 5G networks.

I’ve pointed in the preceding paragraphs to some of the issues these new technologies raise for policymakers devising their nations’ 5G policies. But there is one other big new trend coming down the road that is enabled by these technologies and that has the potential to transform the telecom policy landscape: the rise of so-called greenfield 5G networks. A greenfield network is one that is built from the ground up with entirely new infrastructure rather than being an upgrade layered on top of older network infrastructure. Greenfield networks are usually built by new market entrants, and they are only just now becoming feasible thanks to the capital efficiencies and supplier diversity of cloud-native architectures and open radio access networks.

Greenfield networks offer telecom regulators a powerful new policy tool to accelerate the deployment of innovative and cost-competitive 5G services in their markets. Regulators in Japan, the United States, and India have already authorized greenfield 5G networks. The best known such effort, and the one closest to deployment, is that of Japanese e-commerce giant Rakuten. In the US, the FCC has authorized Dish to build a greenfield 5G network as a condition for approving the merger of Sprint with T-Mobile (which was required to divest customer assets to Dish). In India new market entrant Jio is building a 5G network as an upgrade to its earlier greenfield LTE/4G network.

All three of these greenfield networks rely on cloud-native 5G and open radio access. These technologies offer a genuinely new “template for future 5G networks,” and their influence is likely to extend far beyond these examples. In fact, the world’s leading telecom operators are the main drivers behind the development of open RAN, and they have the most to gain from cloud-native 5G. As Microsoft CEO Satya Nadella recently put it, cloud-native 5G based on open standards and diverse supply chains is “going to be the secular infrastructure architecture going forward.” Policymakers have an important stake in understanding these new technologies and ensuring that they are harnessed to serve the best interests of their nations.