Is It Possible for Viettel to Deploy a 5G Network with In-House Equipment?

While Mobile Network Operators (MNOs) across the world are deploying their initial 5G solutions in full swing in collaboration with Tier 1 network infrastructure vendors, Vietnam’s largest telecommunication MNO, Viettel, announced its ability to develop 5G network with in-house hardware and software. The commercial 5G service launch of Viettel for both civil and military targets has been announced for July 2020, and the developed technology is claimed to meet the 3rd Generation Partnership Project (3GPP) standard. If that proves to be the case, after Ericsson, Huawei, Nokia, ZTE, and Samsung, Viettel will be the sixth infrastructure vendor in the world to produce 5G equipment, and the only MNO that is capable of deploying 5G network with its own products.

As a state-owned MNO, Viettel keeps near 40% market share in the Vietnamese telecom service market, and its international footprint also covers many other counties, including neighbouring Laos and Cambodia and also Haiti, Mozambique, East Timor, Cameroon, Peru, Burundi, Tanzania, and Myanmar. Since mid-2019, Viettel has conducted its 5G trial projects in some of main cities from its own country, and the evaluation of network coverage and data performances will be used to prepare for its nationwide 5G rollout. However, skepticism from industry experts illustrated that the high demands of research cost and the lack of ownership of essential patents would make Viettel’s full in-house 5G portfolio development difficult to achieve. Apart from these arguments, they also highlighted that the deployment of 5G is not a short-term process. Under this circumstance, one possible solution if for Viettel to use its manufactured/designed components in combination with equipment from other infrastructure vendors to integrate a 5G network.

It is well known that the development and deployment of a reliable and high performed wireless network is not an easy task for infrastructure vendors and MNOs. From infrastructure vendors’ perspective, they need to rely on upstream suppliers to provide cost-effective components to meet network functionality requirements. In addition, the infrastructure vendors, in collaboration with MNOs and other industrial/enterprise partners, also need to carry out intensive test and field trials periodically for a long time to validate network performance before commercial deployment of the network is carried out.

From MNOs’ perspective, the pressure of a rapid 5G rollout has urged many of them to use the solutions from incumbent vendors, like Ericsson, Huawei, and Nokia, to guarantee the quality of network performances. However, the problem with these incumbent vendors’ solutions is the proprietary features in their radio products, meaning that they couldn’t interact with other vendors’ radios. This has placed the MNOs in an "embarrassing and critical" situation, in which they have to use the same vendor’s equipment without much space to negotiate the price or add customized features to drive innovations. Alternatively, MNOs can deploy their 5G networks by promoting a more flexible and interoperable multi-vendor environment. Nevertheless, building a multi-vendor network is a complicated project. This will create division of responsibilities problems for both the construction and maintenance of the network. In this case, if there is no smooth interoperability between different vendors’ equipment or proper trained engineers/technicians for system integration and operation, the system construction progress can be easily delayed, and the network performance will not be guaranteed.

Intellectual Property Rights (IPR) are another concern when someone is planning to use full/partial in-house equipment to build a 5G network. It is crucial for each software/hardware vendor or MNO to be in compliance with IP agreement before the products can be commercialized. Although most profitable IPRs come from a device due to its volume of shipment, and the incumbent vendors, who hold a large number of active patents, could turn a blind eye to the small ones in terms of infrastructure development, such situations will change when the market share of the former is eclipsed. If that happens, the incumbent vendors could seek royalties against smaller ones, and the latter need to use the same mechanism to protect their own expertise.

Having considered all the above challenges, if a MNO want to deploy a 5G network with its own equipment, it must have enough funds to form its Research and Development (R&D) and be able to set up intensive collaboration and field trial opportunities to accumulate experience and master essential skills. In addition, it should also be aware that this is not a short-term investment, and the pressure of rapid 5G rollout and competitive threat always exist, especially in the markets outside its own country. On the other hand, to build a qualified multi-vendor interoperable 5G network with off-the-shelf products plus some in-house hardware and/or software is also not an easy task. Firstly, the MNO needs to pay efforts to develop its own equipment. After that, it also needs to have proper training programs for employees to understand and be able to manage the integration and operation complexities that a multi-vendor network will bring in. Apart from those, the MNO should also be prepared to cope with patent disputes if other vendors make attempts to seek royalties against it.

As a consequence, ABI Research expects that Viettel has not developed its own equipment to build an End-to-End (E2E) 5G network, but has only made white labeling agreements with certain vendors to develop a customized system for itself. With this operational strategy, the MNO can save the time and resources to enter the market and build its own brand awareness. However, white labeling a product may not always be cost-effective, and it can also affect the MNO’s brand reputation if the product has problems. Unlike previous generations of network technology, 5G will be at the heart of the digital transformation of many industries, especially enterprise markets, and mastering 5G technology is of strategic significance for a country. Although Viettel is setting a good example for pursuing this, it also needs to understand the main obstacles and be able to find the right strategies to seize the market.