Rakuten: ‘This is the most important industry and it shouldn't be left to chance’

INTERVIEW: We caught up with Geoff Hollingworth, CMO at Rakuten Symphony, who explained the dangers of ‘doing the new thing the old way’, his thoughts on OpenRAN, political pressure on telecoms, and more.

There are two parts to Rakuten. Rakuten Mobile is the new kid on the block operator in Japan which uses a software based approach to telecoms infrastructure, a business model which is more or less unique. Though Dish in the US and 1&1 in Germany are now making moves towards that method as well, Rakuten is very much the trailblazer.

Rakuten Symphony takes some of the learnings and products generated from the network and looks to work with operators around the world to usher in what it sees as the ‘new way’ of telecoms. We sat down with Geoff Hollingworth, CMO at Rakuten Symphony, to talk about the company’s plans for the future, how telecoms infrastructure is changing, political interest, OpenRAN, and the danger of ‘doing the new thing the old way.’

Could you give us a quick update on Rakuten Mobile, what’s the last year been like?

For the Rakuten Group we’ve validated that the network, which has been built the modern cloud native software defined way, has equivalent or better quality than traditional build, so there is no reason now to believe that this technology doesn’t work at scale. And with high density deployments, Tokyo is one of the densest cities in the world, in terms of requirements.

We have 270,000 different cells in the network, and we have nine radio vendors on that. There’s only 250 operational people, these are people that touch the network to reconfigure it or to solve problems, and we are going to hold that at 250. So Tareq (Tareq Amin, CEO of Rakuten Mobile) has got a hiring freeze on just to force the fact that we aren’t going to end up in a place where humans just add without knowing.

The core business of Rakuten is actually rewards, loyalty and points. That’s what connects at the heart. That’s a data science discipline. And the fact that now we have a data driven operation of the connectivity layer can become useful and available to inform and instruct value inside the broader ecosystem of properties. So beyond our 67% revenue growth, 35% of people shopped at Rakuten shopping, or Ichiba as it’s known, 20% of people applied for credit card for the first time and 10% of people applied to Rakuten Bank for the first time, and 12% started using Rakuten pay the first time.

So we want to show this highly efficient programmable network can start to play an enabling role inside the broader online ecosystem. And we can start to show the economics and the traffic management and value flow above the connectivity. Now for operators outside of Japan that don’t have an ecosystem, we are still speaking according to those findings. Because we can share the rewards and loyalty point systems, which is the core business that’s transposable anywhere.

The important message to all other operators is that there is opportunity to contribute to an ecosystem of connectivity. But you need to have a modern, responsive programmable network and be able to safely and from a privacy way use that data to participate in the ecosystem. So that’s the next year’s journey, to actually build and prove that story.

In terms of Symphony, you announced quite a few partnership deals MWC, can you talk a bit about the strategy for the next year?

We get the feeling everyone understands that there’s a need to change how we build supply and operate these networks. We have more conversations than we can deliver to for the moment. We want to work with people who are focused on commercial outcomes, where they understand what they want to achieve from a business point of view. We don’t feel we need to do any more trials for the sake of technology trials – there’s nothing else we need to prove. We proved that it works. At least with parity if not better than traditional with a completely different cost structure and completely different price points and speed.

I have a concern that there is a danger, because of the way the we have structured our organisations in the traditional world, that we will try and do the new way, the old way. And what I mean by that is the new thing the old way. This isn’t about buying technology that fits into an existing operation. This is about changing how you build, operate and manage your network. So there is a danger that if you follow a traditional RFP process that just focuses on technology, then you will be forced into a selection process that maintains trying to do the same thing as you were before. By just using more suppliers I think you won’t get the business savings that we’ve achieved.

So all the telcos, traditional telcos if you like, that’s the old way, and what you’re doing is the new way. is that right?

Yeah. And the way that we are doing this, the big number one difference, is that we’re an internet software company that’s building telecom networks. So we start from there. And if you start from that perspective, the best way to start is not by doing technology, RFPs and comparisons. It’s about ‘what are we trying to build with what business outcomes do we want to achieve?’ And then you start to build a software supply chain that supports that kind of model, the operating structure and the delivery. Then what we do once we understand that scope, obviously the first thing you want to do, like any software company, is test your assumptions as quickly as possible.

So it’s like being a data scientist, you test your hypothesis. Does this work the way we think it should work? And then once you have that you can start scaling it and replicating and duplicating. That’s what gives us that decoupling of 250 people to 270,000 separate cells.

Who do you consider are your main rivals? Do you have any?

I don’t think we see a market that has defined rivalry yet. I think what we see is a question of who is joining, genuinely joining, the new open way of collaborating. And when there are more companies that join that, the more that we can actually orchestrate and automate those companies to achieve their goals. We would love nothing more than to be working with Ericsson and Nokia at scale to do that. Because Ericsson and Nokia are foundation companies in this industry. They have the scale, they have the deployments. They’re really good at what they do. The sooner that they truly open up their interface, then we can actually scale what we’re doing with them. We think that telecoms needs to move from a market of attrition to a market of abundance.

If we can start taking part on an actual participatory level in the broader ecosystem, the way that we are now starting in Japan, then there’s more value creation. And there’s more money to share. So we’re not here to take money away. We’re here to grow the bigger ecosystem available.

When we when we met in MWC, one of the things we spoke about was an innovation problem in the telco market. Specifically what is it do you think the telcos are doing wrong, and what should they be doing that they’re not doing?

I don’t want to call them old or last generation. If you look at existing telecom organisations, the same as any other existing organisation in any industry, the challenge is organisation structure. Because organisation defines the process and the governance, and the process and the governance is designed to stop new things, because new things are inefficient. New things are dangerous. So this is the root cause of the challenge for these companies actually doing something completely new.

Can telcos be more than the providers of connectivity?

They can absolutely be more than that. There’s some great people in telecoms, it’s not a people problem in telecoms. It’s the people are kind of restricted by the facts around them. I think there’s two factors that lead to the opportunity for change: Somebody is put into a position of ownership, where they are commercially responsible for starting something new. That empowerment normally has to be at a very senior level to be able go away and do that. We as a company are here to help them to scale it the way an internet software company will do it. And that involves not just technology, it’s skill set transfers, It’s ways of doing commercials differently.

If you try and segment down into a traditional procurement, then you end up in the challenge that you’re building yesterday’s architecture with tomorrow’s approach. And there’s no internet company that’s ever done that. You know, the internet companies don’t try and reinvent what exists. Internet companies try and change how to do something in a better way tomorrow.

What do you think about telcos diversifying into areas such as content?

I think the only way that telcos can diversify is by becoming a very fit core business themselves. So when we started in 2018 in Rakuten Mobile, Tariq stood up and said it was going to be cloud based, it was going to be software defined, everything virtualized and cloud native. The industry turned around said you can’t do that. Yet at the same time, the industry was telling other industries that they could help them do that with telecoms support.

So the first customer of transformation is telecoms itself. And once you start to understand how to do that, then you start to understand how you can optimise, become efficient, move faster, become competitive, then you can take part in a digital ecosystem, because the digital ecosystem doesn’t want to work with people and paper. The digital ecosystem wants to work with software, people and interface and that’s how you start to get the speed. So you have to put the hard work in to become good at what you do first, because it’s your own transformation. That’s lesson number one.

After that, you can then start to take part, exactly the same way as we started in Rakuten Mobile, in participating in terms of value, not buying content companies and discounting it, but driving growth for content companies that you don’t own that you could choose to partner with or choose to actually acquire.

And in terms of OpenRAN, there’s obviously two camps – the advocates and the critics of it. How would you see the state of the current state of the debate and do you think there’s a consensus emerging in any in either direction?

I think first off OpenRAN isn’t an answer. It’s an enabler that you can do something with. And I think both arguments are correct. So always with an enabler there are open interfaces. You can take those open interfaces, and you can do them really badly. If you get a car repaired and try and put it back together, but you don’t automate that, industrialise that, then you might make one work, but you’re not ever going to get any repeatability or scale or quality. So, open interfaces and OpenRAN is not the answer.

It’s not the magic bullet…

It’s not the magic bullet. It allows you to make magic bullets because suddenly you can look inside and say ‘well actually, we can take this bit out completely because we don’t need it.’ And by being able to get inside and horizontally automate everything, that’s how we’ve saved operational costs. Facebook had the same challenge with the server industry, and they started the Open Compute project so that they could horizontalize the supply chain, open it up and make new solutions.

So Facebook doing Open Compute project is identical to why Rakutan did OpenRAN, and enabled the results that we see in Rakutan Mobile. But if you hadn’t made Symworld, the software operational model above it, then it would have been the opposite result. So it’s really important the industry doesn’t think that they’re fighting a religious war over this technology where if you win, you still lose. You’ve just fought the wrong war.

Why do you think telecoms is more politicised than other areas of tech or other industries entirely? And do you think that’s going to become more of a factor in the future?

I think what fundamentally we’ve proven is connectivity and communication start to affect the actual competitive nature of a country, and the Gross Domestic Product of a country. I think everyone is aware of that, as we move forward. The only direction is it becoming even more critical to the future. If we look now, the top five most valuable companies are all tech companies. they used to be industrial and oil companies only ten years ago. So building an infrastructure, a connectivity network, a communications network, that actually not only enables a country to be competitive today, but allows a platform for all of the people living inside that country to develop new business, starts to define the growth of a country as its core infrastructure.

I think it’s becoming more and more critically important to have, first, a highly competitive level of service to the people living in the country, but also to make sure that you can control the supply of that in a very changing uncertain world. I think we’re moving away from perhaps the naivety of the internet in the 90s where globalisation solved everything, to where we have a regionalization and we need to make sure that whatever happened, we can still maintain our own supply chains, our own quality of life, and have diversification.

And so I think it starts to define the future of countries. And I think there’s an opportunity for countries who didn’t take part in the last rise to reposition themselves in the next rise. Every single kid on the planet needs to be understanding how to live in a digital universe and take part. Otherwise you’re not literate, you’re going to be an illiterate participant in a digital world that’s not good.

Is there a danger that governments can make things worse by getting involved in what the market would otherwise be doing, which is increasing general connectivity in the way you describe?

Whenever people are involved there’s always the danger of making something worse or something better. I think the more education we can have around what truly is important, and the more collaboration between countries that have common perspectives, is hugely valuable. I think Japan is a bit of a role models for this. The reason Rakuten Mobile exists is because the Japanese government decided that they wanted more competition inside their connectivity providers. They encouraged that and Rakutan Mobile has come in and that’s exactly what is happening.

Now there’s a whole different landscape of activity in Japan across all of the communication providers that improves Japan’s position in the world from a tech point of view, and also for the people who live there. So suddenly Japan is appearing as a leader in a world where they weren’t leading before. I think every country has that opportunity. Being clear on some of the fundamentals that we’ve discussed here, about what is important, what isn’t important and what is an answer and what is an enabler, is really critical for people in governments.

And obviously from our side, we would absolutely contribute to that understanding, we just need to be invited. And we are doing that, obviously. But I think this is too important. This is the most important industry and it shouldn’t be left to chance.

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