The News: Ericsson Open Radio Access Networks (RAN) hardware and services totaling about $14 billion are part of a massive new strategic agreement with AT&T to design the mobile carrier’s next 5G network of the future across the US over the next 5 years. Under the agreement, Ericsson will help AT&T create an open programmable network that will enable AT&T to accelerate the commercial introduction of Open RAN equipment and network management that will ultimately lead to a cloud-native open network. Read the full press release on the Ericsson news webpage.
Ericsson Open RAN Gear to Power AT&T’s Coming US 5G Open RAN Network
Analyst Take: This strategic agreement bringing together Ericsson’s Open RAN hardware and services with AT&T’s unfolding next-generation 5G network is a groundbreaking deal, and it is not just because of its eye-watering $14 billion price tag over 5 years.
It is also groundbreaking because it will reimagine AT&T’s network and how the mobile carrier will build, maintain, and continue to expand its services and operations across the nation using open standards and modern cloud-native technologies in lieu of longtime network practices and procedures. It is a total redesign—a tectonic shift we could say—in AT&T’s cellular network thinking and direction, which we believe is very significant and gutsy.
The motivation for this huge shift is certainly what will be the giant price performance gains AT&T expects by moving the network to new technologies and capabilities that are designed to surpass the company’s existing implementation. AT&T clearly identified Ericsson as the strategic partner key to shifting 70% of its network traffic onto interoperable and open platforms.
AT&T indicated that it plans to have entirely integrated Open RAN sites operational starting next year, working with both Ericsson and Fujitsu. AT&T expects to start scaling in 2025 and by late 2026, it wants 70% of network traffic to be flowing over “open-capable” platforms.
For AT&T, this shift is also momentous because it scores the telecommunications company major sales and marketing points for building a much more modern and up-to-date next-gen network for its customers, scoring near-term mindshare gains. As a result, we expect T-Mobile and Verizon to put increased sales and marketing emphasis on their respective 5G network architecture plans, including particularly the Open RAN dimension in how they evolve their networks architectures.
Why Ericsson Won AT&T’s Open RAN Heart
To source and build this new Ericsson Open RAN, cloud-native, next-generation network of the future for AT&T, Ericsson will embark on quite a plan. The details call for the development of an open programmable network where AT&T will work with multiple vendors to provide purpose-built hardware and virtualized commercial off the shelf (COTS) hardware that will accelerate the commercial introduction of Open RAN equipment and open network management products to bring the network together.
Moreover, AT&T CEO John Stankey indicated that Ericsson provided highly competitive discounts to seal the deal. Under the deal, Ericsson will build a 5G network platform for AT&T that will take advantage of today’s cloud-native technologies built on O-RAN standardized interfaces to deliver critical industry scale, increased cost efficiencies, improved sustainability, and promised big performance gains for AT&T’s business and consumer customers.
Integral to the deal is that Ericsson will be replacing existing Nokia RAN gear as AT&T seeks more efficiency at the unit level to keep up with traffic. As Ericsson already supplied up to two-thirds of AT&T’s RAN gear, the move is warranted from AT&T’s perspective to operate more efficiently by using a single network infrastructure at the core, alongside using one set of systems for support.
The transaction, which at $14 billion is the largest in Ericsson’s history, is possible in part due to recent investments that Ericsson has made in its own facilities and capabilities. Ericsson had recently expanded its highly automated 5G Smart Factory in Lewisville, Texas, which produces 5G and Advanced Antenna System radios that are used to boost network capacity. The 5G Smart Factory also helps to secure Ericsson’s critical supply chain, which manufacturers learned the value of during the height of the COVID-19 pandemic. We believe that was a valuable lesson that all manufacturers should be baking into their supply chain strategies as well.
As noted in the deal’s announcement, the Ericsson Intelligent Automation Platform (EIAP) will provide multi-vendor, multi-technology service management and automation for the AT&T network. AT&T and Ericsson will jointly promote and use the open EIAP rApp Ecosystem with its marketplace and Software Development Toolkit (SDK) to accelerate rApp development and innovation for AT&T and third-party software providers globally.
Ericsson will seek to leverage Open RAN standardization to provide comprehensive support within the AT&T network for O-RAN Alliance SMO interfaces including: O1, O2, and A1 interfaces (in the non-real-time RIC) and encapsulates the R1 interface between the non-real-time RIC and the rApps.
AT&T’s Near-Term 5G Competitive Gains
For AT&T, these are huge benefits that will transform the company’s ongoing network development and strategy long into the future, while likely leading the way for competitors that will jump into the fray if it is successful and meets its project goals.
In following this roadmap, AT&T is taking a no-holds-barred approach to partnering with Ericsson to deploy a wide range of Ericsson 5G Open RAN products to meet the challenge of meeting and exceeding AT&T’s Open RAN ambitions across the nation. With this huge deal with Ericsson, AT&T is stepping up its 5G game and swiftly raises the competitive stakes with its two biggest rivals. We see the deal moving the needle across the North American 5G mobile operator market as well as the Open RAN landscape.
Key Takeaways: Ericsson’s Near-Term 5G Competitive Gains
We see Ericsson gaining rapid mindshare as the Open RAN stakes escalate across the North American region as well as globally. As lead integrator in AT&T’s Open RAN build, Ericsson gains strategically valuable sales reference and channel credentials to potentially win more mobile infrastructure business elsewhere.
Also, the deal confirms what we observed near the advent of Open RAN portfolio development and marketing. Conceptually, Open RAN envisioned enabling operators to combine multiple vendors across their network to diversify their supply sources, boost selection of best of breed components, and avoid over-reliance on a single vendor (i.e., vendor lock-in). However, we anticipated that the top-tier operators were more likely to lean on their known and trusted RAN suppliers to make the initial foray and transition into Open RAN. The AT&T-Ericsson deal confirms this trend in the rapidly evolving Open RAN market.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Ericsson’s ConsumerLab Report Points to 5G Monetization Opportunities
Ericsson: Network Platform Rising
5G Factor VRN: Ericsson and Vodafone Slice Mobile Gaming at Coventry
Image Credit: Ericsson
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
