Germany’s €300 Million Open RAN Push Sets Tone for European Debate

While the European Union's member states and the European institutions finalize key decisions over how they plan to spend the €750 billion Next Generation EU recovery fund, Germany is moving full speed ahead with its own €130 billion stimulus package. Berlin's plans call for substantial investment in the national telecoms sector, including over €300 million for the development of "Open RAN" - an emerging industry ecosystem with important implications for the whole of Europe.

The proposed Open Radio Access Network (RAN) principle not only promises to support the spread of faster Internet connections across the continent, but its implementation could also further critical EU-wide objectives in areas such as digital security and technological sovereignty. By transforming the current ecosystem of equipment used to build telecoms networks, which is dominated by a few major brands like Huawei, Nokia, and Ericsson, into a more flexible and open market, advocates of Open RAN hope it will also diversify the supply chain and create space for new European companies.

While Open RAN's potential to remake the European telecommunications space is considerable, pushing a highly complex and proprietary sector towards an open-architecture model will take considerable effort - and investment - by both private and public actors. Now that Germany is putting its shoulder to the wheel in the push for Open RAN, will the EU and other European governments implement Next Generation EU in a way that follows Berlin's lead?

Germany's stimulus plan prioritizes European technology

In June of last year, Angela Merkel unveiled Germany's €130 billion "economic stimulus and future technologies package," a set of national measures meant to alleviate the consequences of the Covid-19 pandemic. The German government will use some of the funds as direct support for families and local authorities hit by the economic downturn, but Berlin will also dedicate a substantial share towards reshaping the future of the country's economy.

As part of that investment focus, Merkel's government plans to dedicate a sizeable portion of the national recovery fund to technologies like electric cars, artificial intelligence, and advanced telecommunications technologies. The plan's €2 billion telecoms package includes €250 million for 5G network deployment and €237 million for 6G research, but one of the most consequential areas Germany intends to boost is Open RAN, the focus of a budget totaling over €300 million. Together with €550 million in investment for the European microchip industry, Open RAN represents one of the pillars of the German recovery package's push for increased European technological independence. 

Liberating 5G from pressures of geopolitics

Indeed, from the perspective of both the European telecoms industry and the governments responsible for regulating it, remaking the existing supply chains for 5G equipment would be a major step towards solving difficult sectoral issues that have preoccupied EU leaders for years. Given that open and interoperable interfaces would allow EU-based start-ups to participate on an equal footing alongside established players, Open RAN could reshape a market currently dominated by a small handful of firms and diminish the reliance of European businesses on legacy suppliers, encouraging a level of competition the sector currently lacks. 

Open RAN would also alleviate many of the geopolitical pressures surrounding 5G equipment, which have been a real and unwelcome burden on European efforts to roll out 5G networks. The uncertainty surrounding supply chains has weighed on investment across the continent and contributed to Europe's growing disadvantage in terms of 5G adoption compared to its American and Asian counterparts. 

By making a substantial show of financial support for this new field, Germany hopes to set a precedent for the European Union and other member states to follow as they finalize their own recovery plans. While both advocates and skeptics agree Open RAN is still in the developmental stages, policymakers on both sides of the Atlantic recognize its importance. Last November, the US House of Representatives passed a $750 million bill to develop Open RAN technology, with leading members of the US Senate proposing Washington invest even more. 

Industrywide commitments

Last month, Europe's four largest telcos - Deutsche Telekom, Telefónica, Vodafone and Orange - issued a joint MoU on Open RAN, calling directly on the European Commission and national governments to join in the research, development, and deployment effort. Telecom Italia joined the growing coalition this month, and a number of other European providers are also signaling interest. Concrete plans include Deutsche Telekom's announcement of a pilot "Open RAN Town" in Neubrandenburg, as well as Orange's commitment to exclusively purchase Open RAN-compliant equipment by 2025.

Even Nokia and Ericsson have joined the O-RAN Alliance, a group of over 200 "mobile network operators, vendors, and research & academic institutions" whose stated goal is to "re-shape the RAN industry towards more intelligent, open, virtualized and fully interoperable mobile networks." Alliance member Nokia, despite its status as a legacy supplier, publicly supports the concept and praises the fact Open RAN "enables mobile network operators to use equipment from multiple vendors and still ensure interoperability." Given the critical stakes for the EU of catching up with the latest generation of telecommunications technologies, especially as the pandemic forces European economies to digitalize more quickly than either the public or private sectors had previously planned, Open RAN appears to rapidly be gaining support in all corners of the market.

European leaders are also coming to understand that the bloc cannot allow itself to become a bit player in an international technology market dominated by China and the United States. Buoyed by the enthusiastic support for Open RAN among both vendors and carriers, as well as by Germany's decision to allocate investment funding, it is now up to the European Commission and other European governments to determine whether they too see Open RAN as a way to establish technological sovereignty, spur 5G deployment, and create space for new European companies - in short, hitting multiple birds with one stone.