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Rakuten still sailing smoothly on its disruptive mission

Japanese internet giant Rakuten is continuing to push into new ground with its disruptive mobile mission, promising the first 5G OpenRAN deployments next month.

Although the mission is several months behind the original timetable, it is still impressive progress. Few operators are brave enough to experiment with OpenRAN, electing for the fast follower approach, and an even smaller number have actually launched live trials. If Rakuten can launch a 5G OpenRAN network in 2020, that would be very admirable accomplishment.

So far, the Rakuten Mobile team have deployed 5,739 4G base stations, while there are 7,487 sites with contracts signed. There are still considerable holes in the service, but the team hope to have 70% population coverage in Japan by 2021.

“We’re about where we want to be,” said CEO Hiroshi Mikitani. “We’re using new technology, so needed additional time to check the quality.”

With the population coverage not at 100% it will be a while before Rakuten will be a direct challenger to the status quo in Japan, but let’s not forget this is not the only way the company will aim to make money. If the theory of ‘open’ network deployment can be proven in reality, it can be sold to interested parties around the world.

The Rakuten Communications Platform (RCP) is a very interesting idea; selling the components of the network and deployment know-how to governments and operators who want to introduce a new dynamic. Rakuten has opened two international offices over the last few weeks, and now claims to be in discussions with more than 70 governments and operators. If the numbers are to be believed, you can start to see why there are so many interested parties.

Network deployment CAPEX saving; traditional vs. Rakuten Communications Platform
Traditional RCP Cost saving
Total CAPEX 100 60 -40%
Software 30 30 0%
Hardware 45 17.5 -60%
Deployment 25 12.5 -50%

Rakuten believes CAPEX can be reduced by as much as 40% due to the reduced cost of sourcing RAN products, while there is also reduced equipment on these sites thanks to virtualisation and pooling of resources.

On the OPEX side, below, there are savings to be made though there are also additional expenses to account for. The data centre and transmission increased expenditure does allow for the delivery of low-latency products and services, but thanks to automation and reduced equipment in the field, staff cost can be reduced as well as becoming more operationally efficient.

Network deployment OPEX saving; traditional vs. Rakuten Communications Platform
Traditional RCP Cost saving
Total OPEX 100 70 -30%
Rent & bills 40 30 -25%
Data Centre 5 10 100%
Transmission 10 15 50%
Ops Centre 10 5 -50%
Field Maintenance 35 10 -70%

The deployment of this network is a very interesting story on its own, but when you tie that into the creation of a new business model it evolves into something new.

With the Rakuten Communications Platform, the company becomes a hybrid telco/vendor, selling connectivity services to Japanese customers but then also the underlying network design to other telecoms operators. However, it all depends on the delivery of this network in Japan.

Should Rakuten deploy the network and emerge as a sustainable telecoms operator in Japan, this company could become one of the most important in the telecoms industry.

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2 comments

  1. Avatar Anonymous 12/08/2020 @ 7:43 am

    TIME TO QUESTION THE TALL CLAIMS

    Rakuten’s Mobile business is becoming a huge drag on Group’s financials, as operating losses mount in Mobile segment, In Q2 2020 alone, this amounted to an operating loss of $475M. With aggressively low-priced data plans, 4G subscriber base has crossed 1M mark, but that also means roaming costs (paid to KDDI) are escalating. As per Opensignal report cited by Rakuten in their Q2 results, user’s experience a download speed which is half the average of other operators in Japan.

    RAN : Rakuten open and virtualized RAN is not so open and is a one-off thing and not easily repeatable. As per a senior O-RAN Alliance executive , Rakuten is not really using the open interoperable interfaces on the radio hardware side. These remarks appeared in several news articles in May 2020.

    Core : Rakuten’s 5G launch has been delayed by 3 months. In 5G, Rakuten decided to find new vendor partner for 5G Radio and Core. In one of the webinars in early June, a senior executive of Rakuten suggested that their current 4G Packet Core will be replaced by the new vendor’s 4G/5G Core in the next 14-16 months, which is very surprising. It doesn’t inspire much confidence that the investment done in 4G Core didn’t even serve for 2 years.

    RCP : Rakuten intends to provide to global operators “an app-store-like” interface via its RCP Marketplace. It is claiming a 40% Capex and 30% Opex reduction if operators adopt RCP ! Rakuten justifies 30% Opex reduction by providing a simplified table (page 26 of file 20Q2_Mobile_E on their website) that acknowledges increased spend on more Edge DC Locations and Transmission, The bulk of the savings are attributed to Automation of operations and Field Maintenance. Rakuten also shows a 25% reduction due to Simplified Site architecture. Operations automation and network simplification are definitely useful and most proactive operators are already implementing them, and they don’t need RCP or Rakuten to teach them this!

    With all the big hype and buzz around Rakuten in the last 2.5 years, it is not a surprise that it has attracted lot of attention. Perhaps it is time for some tough questions. How long will Rakuten Group afford a $500M/quarter hole in their financials.

  2. Avatar Professor Peter Curwen 12/08/2020 @ 5:30 pm

    The only real example of a successful disruptor is Reliance Jio in India – succeeding on the back of the deep pockets of its parent – although Iliad has done reasonably well in France, for example. Softback is in some trouble in Japan so you would not bet on Rakuten pulling this off.

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