Cisco’s former CEO John Chambers was one of a group of people who envisioned virtualizing the radio access network (RAN) early on. In 2009 Cisco paid $2.9 billion for Starent, a startup that decoupled the mobile packet core from the radio access network. And then in 2011 Cisco also helped to fund some of the members of the Starent team to enable them to create a new company — Altiostar Networks.
Altiostar’s vision was to virtualize the RAN so that commercial-off-the-shelf hardware could run Altiostar’s software.
“Cisco funded Altiostar because Chambers had trust in the team and believed at some point Cisco would have to look at the RAN,” said Thierry Maupile, Altiostar’s EVP of strategy and product.
In addition to Cisco, Altiostar’s primary investor has been Fidelity. Other investors include Qualcomm, Tech Mahindra, and most recently Rakuten. According to Crunchbase, Altiostar has raised more than $200 million to date.
It seems Chambers’ early bet may be paying off because now, both Altiostar and Cisco have been chosen by Rakuten to help the company build its greenfield mobile network in Japan, based on the most modern mobile network technology.
At a Cisco gathering at Mobile World Congress earlier this year, Rakuten CTO Tareq Amin said that rather than choosing a “traditional” network vendor for its radio access network, Rakuten chose Altiostar to drive RAN virtualization and to bring disruptive innovation to the mobile industry.
As far as its work with Cisco, Rakuten hired the vendor to build its network functions virtualization infrastructure (NFVi) with 4,000 edge nodes. In addition to software, Cisco is delivering routing and switching hardware. And Cisco is also the primary systems integrator for Rakuten’s virtualized telco cloud.
Rakuten plans to spend about $6 billion for its new mobile network.
Dearth of U.S. Mobile Vendors
Although American carriers such as Verizon and AT&T are early leaders in rolling out 5G, they are securing much of their 5G equipment from foreign telco vendors, including Ericsson, Nokia and Samsung. There is no U.S. vendor for RAN equipment comparable in size to these vendors.
Although it would seem intuitive that Cisco would have become a bigger player in the RAN, Maupile said the RAN business has not always been a profitable one, citing the “graveyard” full of companies such as Motorola and Nortel. But he said virtualization changes the economics.
“Once we had the tech breakthrough of disaggregating hardware from software, that was the major breakthrough,” he said. “With our tech we virtualize all the functions of the baseband: Layers 1, 2 and 3.” And the baseband unit can be split into virtualized distributed units (vDUs) and virtualized central units (vCUs). He said in Japan, in its work with Rakuten, Altiostar is deploying vDUs at the 4,000 edge compute sites and vCUs at two sites.
In addition to deploying cheaper hardware, Maupile said virtualization changes the economics of the RAN because so much more research and development money can go into software, and the “gross margin is attractive.”
For operators, virtualization not only frees them from vendor-lock-in, but resources can be dynamically allocated so that “operators don’t have to pay as if it were peak every day,” he said.
The changing economics will also affect traditional telecom vendors. For instance, Rakuten chose Nokia for the radios in its greenfield network. But as part of the deal, Nokia was obliged to open its radio interface. “Nokia in Japan wanted to participate in the network, and Rakuten told them ‘you have to work with Altiostar and open your interface to Altiostar,’” said Maupile.
For its part, Altiostar counts at least one other named customer besides Rakuten. It has a commercial deployment in Alaska with GCI. “We replaced Ericsson in some of the Alaska markets,” said Maupile.