A risky new way to build a mobile broadband network, explained by Tarek Amin, CEO of Rakuten Mobile
Tareq Amin is the CEO of Rakuten Mobile and the CEO of Rakuten Symphony. Welcome to Decoder.
In 2019, the Trump administration brokered a deal allowing T-Mobile to buy Sprint as long as it helped Dish Network stand up a new 5G network to keep the number of national wireless carriers at four and preserve competition in the mobile market. You can say a lot about that deal, but it happened. And now, in 2022, Dish’s network — which is called Project Genesis, that’s a real name — is slowly getting off the ground. And it’s built on a new kind of wireless technology called Open Radio Access Network, or ORAN. Dish’s network is only the third ORAN network in the entire world, and if ORAN works, it will radically change how the entire wireless industry operates.
I have wanted to know more about ORAN for a long time. So today, I’m talking to Tareq Amin, CEO of Rakuten Mobile. Rakuten Mobile is a new wireless carrier in Japan. It just launched in 2020. It’s also the world’s first ORAN network, and Tareq basically pushed this whole concept into existence.
Tareq’s big idea, an Open Radio Access Network, is to break apart the hardware and software and make it so that many more vendors can build radio access hardware that Rakuten Mobile can run its own software on. Think about it like a Mac versus a PC: a Mac is Apple hardware running Apple’s software, while a PC can come from anyone and run Windows just fine or run another operating system if you want.
That’s the promise of ORAN: that it will increase competition and lower costs for cellular base station hardware, allow for more software innovation, and generally make networks faster and more reliable because operators like Rakuten Mobile will be in tighter control of the software that runs the networks and move all that software from the hardware itself to cloud services like Amazon AWS.
Since Rakuten Mobile is making all this software that can run on open hardware, they can sell it to other people. So Tareq is also the CEO of Rakuten Symphony, which — you guessed it — is helping Dish run its network here along with another network called 1&1 in Germany.
I really wanted to know if ORAN is going to work, and how Tareq managed to make it happen in such a traditional industry. So we got into it — like, really into it.
Okay, Tareq Amin, CEO of Rakuten Mobile. Here we go.
Tareq Amin is the CEO of Rakuten Mobile and the CEO of Rakuten Symphony. Welcome to Decoder.
Thank you, Nilay. Pleasure being with you.
I am excited to talk to you. Rakuten Mobile is one of the leaders in this next generation of wireless networks being built and I am very curious about it. It is in Japan, but we have a largely US-based audience, so can you explain what Rakuten is? What kind of company is it, and what is its presence like in Japan?
The Rakuten Group as a whole is not a telecom company, but mostly an internet services company. It started as one of the earliest e-commerce technology companies in Japan. Today, it is one of the largest in e-commerce, fintech, banking, travel, et cetera. These significant internet services were primarily built around a massive ecosystem in Japan, and the only missing piece for Rakuten as a group was the mobile connectivity business. That is why I came to Japan, to help build and launch a disruptive architecture for its mobile 4G/5G network.
Let me make a really bad comparison here. This company has been a huge internet services provider for a while. This is kind of like if Yahoo was massively successful and started a wireless network.
Correct. I mean, think of Amazon. What would happen if Amazon launched a mobile network in the US? This is the best analogy I could give, because Rakuten operates at that scale in Japan. This company with a disruptive mindset, disruptive skill set, disruptive culture, and disruptive organization endorsed my super crazy idea of how we should build this next-generation mobile infrastructure. I think that is where I attribute most of the success. The company’s DNA and culture is just remarkably different.
So it’s huge. How is it structured overall? How is Rakuten Mobile a part of that structure?
Of all the entities today, I think the founder and chairman of the company, Mickey [Hiroshi “Mickey” Mikitani], is probably one of the most innovative leaders I have ever had the opportunity to work with. I cannot tell you how much I enjoy the interactions we have with him. He is down to earth and his leadership style is definitely hands-on; he doesn’t really operate at a high level.
The fundamental belief of Rakuten is around synergistic impact for its ecosystem. The company has 71 internet-facing services in Japan — we also operate globally, by the way — and you as a consumer have one membership ID that you benefit from. The points/membership/loyalty is the foundation of what this company works on. Regardless of which services you consume, they are all tied through this unique ID across all 71.
The companies and the organizations internally have subsidiaries and legal structures that would separate all of them, but synergistically, they are all connected through this membership/points/loyalty system. We think it is really critical to grow the synergistic impact of not just one service, but the collective services, to the end consumer.
Today, Rakuten Mobile is a subsidiary of the group, and Rakuten Symphony is more focused on our platform business. It focuses on the globalization of the technology and architecture we have done in Japan, by selling and promoting to global customers.
When you say Symphony, do you mean the wireless network technology or the technology of the whole company?
Symphony itself is much more than just wireless. Of course, it has Edge Cloud connectivity architecture, the wireless technology stack for 4G/5G, and life cycle management for automation operations. In August of last year we launched Rakuten Symphony as a formal entity to take all the technology we have now and promote it to a global customer base.
I think one of the reasons you and I are having this conversation is because Dish Network in the United States is a Symphony customer. They are launching a next-generation 5G network and I have been very curious about how that is going. It sounds like Symphony is a big piece of the puzzle there.
To give you a bit of background, maybe we should start with the mobile business in Japan, because it is the foundation this idea initially started from. So, I would tell you, I have had a super crazy life. I am really blessed that I had the opportunity to work with amazing leaders and across three continents so far. My previous experiences before coming to Japan, which involved building another large greenfield network in India called Reliance Jio, have taught me quite a bit.
To be very frank with you, it taught me the value of the US dollar. When you go into a country where the economy of units — how much you could charge a consumer — is one to two US dollars, the idea of supply chain procurement and cost has to change. You have to find a way to build cost-efficient networks.
The launch of Reliance Jio was very successful and became a really good Cinderella story for the industry. I am extremely thankful for what Jio has taught me personally, and I have always wondered what I would do differently if I had a second opportunity to build a greenfield.
To give everybody listening to this podcast some perspective, the mobile technology industry has been about nothing but hardware changes since the inception of the first 1G in 1981. You just take the old hardware and replace it with new hardware. Nothing has changed in the way we deploy networks when the Gs change, even now in 2022. It is still complex and expensive, and I don’t think the essence of AI and autonomy exist in the DNA of these networks. That is why when you look at the cost expenditures to build new technology like 5G, it is so cost-prohibitive.
It was by coincidence that I met the chairman and CEO of Rakuten group, Mickey Mikitani, and I loved everything that Rakuten is all about. Like most people, I didn’t necessarily know who Rakuten was at the time. I only knew of them because I love football (soccer) and they were a big sponsor of FC Barcelona.
When Mickey started explaining the company fabric to me, about its DNA and internet services, I thought about what a significant opportunity he would have if he adopted a different architecture in how these networks are deployed — one that moves away from proprietary hardware. What would happen if we remove the hardware completely and build the world’s first, and only, cloud-native software telco?
Let me be really honest with you, this was just in PPT at the time. I conceived the idea thinking about what I would do differently if I were granted another opportunity like Reliance Jio. One of the first key elements I wanted to change is adopting this unique cloud architecture, because nobody had really deployed an end-to-end horizontal cloud across any telco yet.
The second element — which you have probably heard of because the industry has been talking about it excitedly — is this thing called Open RAN, which is the idea of disaggregating hardware and software. The third element, my ultimate dream, is the enablement of a full autonomous network that is able to run itself, fix itself, and heal itself without human beings.
This is the journey of mobile, and I think this is what differentiates us so much. I can’t say I had a recipe that defined what success would look like, but I was obsessed. Obsessed with creating a world-class organization with a larger ecosystem, and getting everybody motivated about this concept that did not exist four years ago.
Now here we are, post commercial launch. The world is celebrating what we have done. They like and enjoy the ideas around this disaggregated network, and they love the concept of cloud-native architecture. What I love the most is that we opened up a healthy debate across the globe. We really encourage and support what Dish is doing in the United States by deploying Open RAN as an architecture. I think this is absolutely the right platform to build resilient, scalable, cost-effective mobile networks for the future.
That is the high-level story of how this journey started with a super crazy, ambitious idea that nobody thought would succeed. If you go back four years to some of the press releases that were published, I cannot tell you how many times I was told I’m crazy or that I’m going to fail. As I said, we became fanatic about this idea, and that is what drove us all to emotionally connect to the mission, the objective. I am very, very happy to see the results that the team has achieved.
I want to take that in stages. I definitely want to talk about Jio, because it is a really interesting foundational element of this whole story. I want to talk about what you have built with O-RAN, and how that works in the industry. I also want to talk about where it could go as a platform for the network providers. But I have to ask you the Decoder question first. You have described your ideas as super crazy like five times now. You are the CEO of a big wireless provider in Japan, and you are selling that stuff to other CEOs. I have to ask you the Decoder question. How do you make decisions?
I know this might sound a little controversial, but I have to tell you. In any project I have taken, even from my early days, we have always been taught that you have to have a Plan A and a Plan B. This has never worked for me. I have a concept I call, “No Plan B for me.”
I don’t go in thinking, “This project will fail, therefore I need to look at alternatives and options,” so I am absolutely not worried about making big, bold decisions. I live by a basic philosophy that it is okay to fail sometimes, but let’s fail fast so we can pick ourselves up and progress. I am not saying people shouldn’t have Option A and Option B. I just feel that, for me personally, Option B might give my mind the opportunity to entertain that there is an escape clause. That may not necessarily be a good thing when working on ambitious projects. I think you need to be committed to your beliefs and ideas.
I have made some tough calls during my career, but for whatever reason, I have never really been worried about the consequences of failure. Sometimes we learn more from the mistakes we make and from having difficult experiences, whether they are personal or professional. I think my decision-making capability is one that is very bold, trying to make the team believe in the objectives that we are trying to accomplish and not worrying about failure. Sometimes you just need to be focused on the idea and the mission. Yes, the results are important, but that is not the only thing I am married to.
This is how I have operated all my life, and so far, I am really happy with some of the thinking I have adopted. I am not saying people should not have options in their lives, but this idea of “no Plan B” has its merits in certain projects. How can you adapt your leadership style when approaching projects, rather than thinking, “What is the other option?”
I think with deploying millions upon millions of dollars of mobile broadband equipment, it often feels like you have got to be committed. Let’s talk about that, starting with Jio. If the listeners don’t know, Reliance Jio is now the biggest carrier in India. It is extremely popular, but it launched as a pretty disruptive challenger against other carriers of 4G like Airtel. You just gave it away for free for like the first six months, and it has been lower-cost ever since. This is not the new idea though, right? It is not the open hardware-software disaggregated network that you are talking about now. How did you make Jio so cheap at the beginning?
I will tell you a one-minute prelude. I was sitting very comfortably in Newport Beach when I got a call from my friend. He asked me if I would be interested in going to India and being part of a leadership team to build this ambitious, audacious idea for a massive network at scale, in a country that has north of 1.3 billion people. My first reaction was, “What do I know about India? I have colleagues, but I have never really been there.”
It seemed like an interesting opportunity, and he encouraged me to go meet the executive leadership team of Reliance Jio. I remember flying to Dallas to have a conversation with three leaders that I didn’t really know at the time. One of them in particular, I have to tell you, the more he talked, the more I just wanted to listen. I was amazed by his ambition for what he wanted to achieve in the country.
What was his name?
Mukesh Ambani. I have learned quite a bit from him. India was ranked 154th in the world in mobile broadband penetration before Reliance Jio. The idea was, “Can we assemble an organization that brings ubiquitous connectivity anywhere and everywhere you go across the country? Can 1.3 billion people benefit from this massive transformation that offers cutting-edge services?”
At the time, LTE was the service that Jio launched with. I was really amazed by this ambition and how big it was. I said, “This is an opportunity I just cannot pass up.” It was much bigger than the financial reward; it was an opportunity of learning and understanding. I truly enjoy meeting different cultures. The more I interact with people from different parts of the world, the more it fuels the energy inside me.
So I picked myself up and I moved to India. I landed in the old Mumbai airport, and when I powered on my device, I saw a symbol I hadn’t seen in the US for a decade — 2G. I knew the opportunity Jio had if we did this right. I mean, think about it. 2G. What is really the definition of broadband? 256 kilobits per second? That’s not internet services. The foundation of Jio started with this.
I will tell you the big things that I have learned. Most people think the way you achieve the best pricing is through a process called request for proposals and reverse auctions, to bring vendors and partners to compete against each other. Sometimes there is a better way to do this. You find larger companies where the CEOs have emotion and connection to the idea that you are building, and are willing to work with you as a true partner.
One of the key, fundamental pillars I learned from Jio is that not everything is about status quo. How you run supplier selection, vendor selection, or requests for proposal, everything starts from the top leadership of partners you select. They need the ability to connect with the emotional journey — because it is an emotional journey after all — to do something at the scale of what Jio wanted to do. One of the biggest lessons I learned is the process of selecting suppliers who are uniquely different.
In terms of building a network at a relatively low cost, I will explain how this Open RAN idea came in. During my tenure at Jio, I really started thinking that in order to build a network at scale, regardless of how cheap your labor is, you need to fundamentally change your operating platforms for digitization. Jio would have north of 100,000 people a day working in the field, deploying sites. How do you manage them — give them tasks, check on the quality of installation they do, and audit the work before you turn up any of the bay stations, sites, or radio units?
I have driven this entire digitization and the digital workflows associated with it to connect everybody in India, whether it is Jio employees, contractors, or distributed organizations. Up to 400,000 people at any instant of time would come to the systems that my team has built. That changed everything. It changed the mentality of how we drive cost efficiency and how we run the operations.
This is where I would tell you that big building blocks started formulating in my mind around automation and its impact to operational efficiency if you approach it with a completely fundamental point of view from the current legacy systems you find in other telcos. Because of the constraint of financial pressure on what we call the average revenue per user, the RPU, which is the measurement of how much you charge a mobile customer, I wanted to find a different way to deploy the network.
When you build a network like Jio that has to support 1.3 billion, it’s not just about these big, massive radio sites you deploy. We need things called small cells, which are products that look like Wi-Fi access points, but you deploy lots of them to achieve what we call a heterogeneous design, a design that has big and small sites to meet capacity and coverage requirements.
I prepared an amazing presentation about small cells to the leadership team of Jio and I thought I kicked it out of the park. But then I was asked a question I have never heard in my life. Imagine! I am a veteran in this industry and have been doing this for a very long time. Someone said, “Tareq, I love your strategy. Can you tell me who the chipset supplier is for the small cell product?” I’m like, “What are you talking about?” I have never been asked such a question by any operator that I have ever worked for outside of India.
I was told, “Look, Tareq, money doesn’t grow on trees in India. You need to know the cost. To know the cost, you must understand the component cost.” That was the first building block. I said, “Okay, next time I come to this meeting, I am not going to be uneducated anymore.”
I took on a small project which, at the time, did not seem audacious to me. I said, “Look, if I go to an electronics shop in the US, like a Best Buy, I could buy a Wi-Fi access point for $100. If I buy an enterprise access point from a large supplier, it costs $1,000.” I wanted to know what the difference is, so I hired five of the best university graduates one could ask for, and I asked them a trivial question. “Open both boxes, write the part numbers.” I had a really great friend at Qualcomm, and I remember this gentleman saying, “Tareq, you are becoming too dangerous.”
Right. You are the network operator. You’re their margin.
That is where everything started clicking for me. The chairman of Jio was not afraid to think the way I wanted to think, so I told him, “Look, I want to build our own Wi-Fi access point. If we buy an access point at $1,000, I am now convinced I could get you an access point at sub-$100.” A year later, the total cost of the Wi-Fi access point we built in Jio was $35.
This delta between $1,000 and $35 translates to a substantial amount of money saved, and it started by disaggregating everything. Jio enabled its cost structure, and it was able to offer it for free because it had an amazing partnership with suppliers that secured great business terms. Simplification of technology, LTE only, and an amazing process for network rollout all played huge factors in lowering the cost and economics for Jio.
Let me ask you more about that. Jio is a transformative network, and is now obviously the most popular in India. You were able to offer a much lower-cost product than the traditional cell providers with what sounds like very clever business moves. You went and negotiated new kinds of supplier agreements and you said, “We have to actually integrate our products, find lower chips at cost, and make our own products. We have to build a new, efficient way to deploy the network with our technicians.”
To your credit, those are excellent management moves. At their core though, they are not technology moves. Now that you are onto Rakuten and saying you are going to build O-RAN, that is a technology play. Broadly, it sounds like you are going to take the management playbook that made Jio work, and now you are lowering costs even further with the technology of O-RAN — or you are proving out a technology that will one day enable further lower costs.
There were two things I could not do in Jio, and it’s not really anybody’s fault, the timing just wasn’t right. If you look at building a mobile network, I think everybody now more or less understands that you need antennas, bay stations, radio access, and core network infrastructure. But unless you are in this industry, you don’t realize the complexity of the operation tools that one needs in order to run and manage this distributed massive infrastructure.
The first thing I wanted to change in Jio is the traditional architecture. This management layer is called OSS [operation subsystems], and it is archaic, to put it politely. If you work in an adjacent vertical industry such as hyperscalers, an internet-facing company, you will be scratching your head saying, “I cannot believe this is how networks are managed today.”
Despite the elegance of the Gs and changing from one to five, the process of managing a network is as archaic as you could ever imagine. The idea of a true customer experience management is aloof; it is still a dream that nobody has enabled. The first thing I wanted to do is to change the paradigm of having thousands of disaggregated toolsets to manage a network into a consolidated platform. It was an idea that I couldn’t drive in Jio. I will tell you why that is even more important than Open RAN. These building blocks are for new architecture, the next generation of OSS.
If we build these operation platforms on a new modern architecture that supports real-time telemetry, the idea is to get real-time information about every element and node that you have into your network. Being able to correlate them and apply AI machine learning on top of them requires modern-age platforms. It is so critical to my dream.
Our success will not be celebrated because of Open RAN, but the grander vision of having Rakuten talked about as a company that does what Tesla has done for the electric industry in terms of autonomy. Autonomy in mobile networks is an absolutely amazing opportunity to build a resilient and reliable network that has better security architecture and does not need the complexity of the way we run and manage networks today. That was the first building block.
The impact of these big building blocks is massive. Here is the second thing I couldn’t do in Reliance Jio at the time. If you look at a pie chart on the cost structure for mobile networks, you may say, “Where do we spend money?” Regardless of geography, regardless of country, 70 to 80 percent of your spending always goes into this thing called radio access. Radio access today has been a private club that is really meant for about four or five companies, and that’s it. There is no diversification of the supply chain. You have no option but to buy from Ericsson, Nokia, Huawei, or ZTE. Nobody else could sell you the products of radio access.
The radio access products are the base stations?
Correct. Those are the base stations.
Which are the components of the cell tower?
Yes, and they contribute to about 70 percent of the capex [capital expenditure]. They are the one area that no startup has ever embraced and said, “You know what? Why don’t we try to disaggregate this? Why don’t we start to move away from the traditional architecture for how these space stations are deployed? Instead of running on custom hardware, custom ASICs, let’s use true software that runs on commodity appliances equivalent to what you would find inside data centers.”
This concept has been talked about, but nobody was willing to take the risk in any startup. Maybe I was wrong that your job is secure if you pick a traditional vendor. That is what I was thinking through, four years ago.
This is like “Nobody ever got fired for buying IBM.”
Something like that.
Let me ask you this. Is it because the initial investment is so high? There are not many startup wireless networks in the world. When they do start, they need an enormous amount of capital just to buy the spectrum. Are the stakes too high to take that kind of risk?
I think as an industry, we make the mistake of not rewarding and supporting startups the way we should. Our ability to incubate and build a thriving ecosystem that is built on new innovations, ideas, and startups is still a dream. I do not think anyone in telecom would argue with that. The reality is that everybody wants to see it happening, but we are just not there yet.
It was complex to do what we did in Japan. It was not simple, nor was it easy. When you have a running network carrying massive amounts of traffic, of course there are risks that you are going to have to take. The risk in that case is ensuring that you don’t disrupt your running base with poor quality services. Maybe the fear in people’s minds is that this technology is not ready, or integrating it into their networks is too complex, or they don’t have the right skillset to go into a software-defined world where they will need to upscale or hire new organization.
You said that right now the four vendors are Ericsson, Nokia, Huawei, and ZTE. You have moved to Open RAN, open radio access, in Japan. Do you have more vendors than those four? Are you actually using the commodity hardware with the software to find network? Or is it still those four vendors but now you can run your code on them?
The foundation of success for Rakuten Mobile today started by Rakuten itself enabling and acquiring one of the most disruptive companies in this Open RAN space. We bought a company in Boston called Altiostar, and I thought they had everything one could dream about, except nobody was willing to give them a chance. I diversified my hardware supply chain and purchased hardware through 11 suppliers. I mandated where manufacturing can happen, in terms of product, security, and chipsets. Also, the era that we entered focused on heightened security, especially around 5G. I felt really good about our ability to control manufacturing and supply chain.
The software Altiostar provided was the radio software for this entire open access network in Japan. Altiostar software is now running over 290,000 radiating elements. I mean, this is massive; 98 percent of the population coverage of Japan is served there.
I give huge credit to the large vendors. Nokia had a very big internal debate when I told them, “I want to buy your hardware, but not your software.” I know their board had to approve it, but this is the beauty of software disaggregation. Now, I buy one hardware aspect of the Nokia and Altiostar is running the radio software for that platform. We now have a diversified supply chain and we are no longer just counting on four hardware suppliers. We have a common software stack. The big building block, which is this OSS, has enabled our own platforms and tools.
Rakuten has purchased Altiostar from Boston. We have purchased an innovative cloud company in Silicon Valley called Robin.io for our Edge Cloud. We have purchased the OSS company called InnoEye and formulated this integrated technology stack that is now part of Rakuten Symphony.
You have described Rakuten’s network as being in the cloud several times. Very simply, what does it mean for a wireless network to be cloud-based?
To give you an image, four years ago I was asked to do a keynote in Japan on my first day there. Thanks to my translator, I think people understood the concepts I was explaining to them. I said, “Here is an image of what we don’t want to build.”
If I show you how to deliver voice and video messaging, most of the telecom networks across the world, even today, are still running into boxes of hardware. Having a cloud network means that your workloads are now moved away from proprietary implementation, to a complete network function software components. These software components run with the beauty of what is called microservices for software, and run with the elegance of things that cloud inherently supports, like capacity management, auto-elasticity, scale in, and scale out.
This is basic terminology. I’m not telling you about things that have been invented by Rakuten Mobile. It is thanks to Google, Microsoft, and Amazon, who have innovated like crazy on the cloud. I have just benefited from the innovation that they have done to deliver on scalability, resiliency, reliability, and a cost efficiency that one could never have imagined.
When it comes to the cost, this is a hyper-operation structure. There are 279,000 radiating elements, and the operational headcount in Rakuten Mobile is still sitting below 250 people.
As the number increases, there is no direct proportionality between the number of units in the network versus the number of employees in the network. There is absolutely no direct correlation whatsoever anymore. To me, that is what cloud is all about. All the things on top of it are modules that you need to derive to the operational efficiency that we did in Japan.
From an end user perspective, you have now architected this network differently. You have created a small revolution in the wireless industry from the provider level, where you can buy any hardware from 11 suppliers and run your software on it. Does the end user see an appreciable difference in quality? Or does it just lower the cost?
There is a huge difference from the end user point of view. One of the key reasons that Rakuten was encouraged and supported was because we were determined to enter the mobile segment in Japan. We felt that competition was stagnant, and the cost per user is one of the most expensive in the world.
To benefit the end consumer, we took a chapter from Jio’s strategy on lowering the cost burden economically. We did something that was so simple. At the time, the average plan rate in Japan was sitting about $100 US per user. We dropped that cost to $27 US, unlimited, no caps. When you go inside our stores, we change everything. We said, “Look, you don’t need to think about the plans. There is only one plan. That’s it.”
From a choices point of view, we made life super simple. We bundled local, we bundled international, we bundled everything under one local plan, and we tied it synergistically to the larger ecosystem of Rakuten. You acquire points as you buy things on e-commerce, as you buy things on our travel website, as you buy things from Rakuten Energy, or as you subscribe to Rakuten Bank. You could then use these points to pay off your cellular bill. The $27 could effectively be zero, because of the synergistic impact of other services you consume in Rakuten and the points you acquire from all of them.
Would Rakuten Mobile be profitable at $27 a customer? Is it being subsidized by the larger Rakuten?
We have to be profitable. Spectrum here is not auctioned in Japan; we are allocated spectrum, but there are conditions to it. You cannot just run a business that is not profitable standalone. So we will break even in Rakuten Mobile and make it standalone.
The way I think about it, it is not subsidized by the ecosystem. If I acquire you as a mobile customer, because of the impact I could bring to that larger sales contribution of you potentially buying from e-commerce or travel, I am using connectivity to empower the purchases of these 70-plus internet services, so we are actually contributing to the larger group. As long as the total top line revenue is increased because of mobile contribution, the group as a whole is going to be in good shape.
Even with standalone mobile, we are committed to our break-even point. We need to make it a profitable standalone business. The group as a whole has remarkable synergistic impact in our business. That is the benefit in value.
Now there is another benefit on the network architecture. Today we talk about the essence of marketing with Edge. The definition is so simple. It is all about bringing content as close to your device as humanly possible, to bring content close to you. I would always argue, if you have nothing but virtual machines or network functions that are software, the ability for you to move these software components from large data centers and all the way to the Edge is trivial. Hardware reallocation becomes more complex.
When the Edge use cases in Rakuten Mobile get delivered, you are hopefully going to hear some very amazing news about the lowest latency in the world delivered over the 5G network. This is the beginning of what is possible for new use cases for the consumer.
Think of cloud gaming. It has never been successful, at least in wireless, because networks could not sustain the latency that it would require. Speed, in my opinion, is a stupid metric to talk about. We should talk about latency, latency, latency! How do you deliver sub-4-millisecond latency on a wireless network?
It hasn’t happened yet on licensed spectrum, but I think you are going to see it very soon. There is an advantage to this software architecture and the creation of new age applications for cloud gaming. Even as we talk, people are getting excited about the metaverse, which will need these use cases to come alive in the mobile fabric.
So you have talked about Open RAN, how you have built it, how you have architected the network for Rakuten Mobile, how you have new software layers, and how you have new hardware relationships. You are also the CEO of Rakuten Symphony, which is the company inside Rakuten that would then license all these components to other vendors. Dish Network in this country is one of those providers, and they are at the beginning stages of trying to build a brand new greenfield Open RAN 5G network. If you were going to build an Open RAN network in the United States, how would you do it?
My focus would probably be a lot different than many people would think. It is not about technology. I have never in my life approached a problem where I think technology is the issue. We do not give ourselves enough credit for how creative we are as human beings and our ability to solve complex problems.
The first thing I would start with is structure, organization, and culture. What is the culture you need to have to do amazing, disruptive things? When I moved to Japan, I didn’t know anything about it. I always knew that I wanted to visit, but I didn’t know about the complexities and challenges I would have to face. I mean, imagine being in the heart of Tokyo, being largely driven and supported by an amazing leadership team that says, “The world is your canvas, hire from anywhere.”
I have brought in 17 nationalities — relocated, not as expats, as full-time employees in our office in Japan. Being this diversified, multicultural organization was the key. I did my own recruiting and handpicked my team. My focus was initially to find people with the spirits of warriors, that were willing to take on tough challenges and the bruises that came along with them, that would not get discouraged by people telling them something would not work.
Long story short, I would not build a network that has looked the same for 30 years. I would not build a network just because Rakuten has done it this way. I think networks of the future must have this essence of software and must have autonomy built into its DNA. This is not just about Open RAN, this is a holistic approach for fundamental transformation in the network architecture.
I ask this question a lot and the answers always surprise me. Most companies that I think of as hardware companies, once they make the investment in software, they end up with more software engineers than hardware engineers. Is that the case for you?
I have no hardware engineers at all. None. I think from the beginning, this was done by design. I knew that I could create an ecosystem in hardware, and I don’t want to be in the hardware business. From a fundamental business model, I had enough credible relationships in this industry to cultivate and create an ecosystem for people that just enjoy being in hardware design. But that is not us; it is not our fabric, not our DNA.
The more I look at the world, the more I see the success of companies that have invested heavily into the right skill sets, whether it is from data science, AI, ML, or the various software organizations that they have built. This is what I thought we needed.
If you go to Rakuten Symphony’s largest R&D center in India, we now have over 3,500 people that only do software. To me, that is an asset that is unprecedented in terms of the extent of capability, what we could build, what we could deliver, and the scale that we could deliver at. I don’t want to invest in hardware. I just think that it is not my business.
Our investment is all about platform. I really enjoy seeing the advancements that we have enabled, though we are still early in this journey. I have a lot of other things I want to accomplish before I say that Symphony has succeeded.
Symphony is a first-of-its-kind company, since it is going to sell a new kind of operating platform to other carriers. Do you have competitors? Do you see this being the next turn of the wireless industry? Are we going to see other platform integrators like Symphony show up and say to carriers, “Hey, we can do this part for you. You can focus on customer service or fighting with the FCC or whatever it is that carriers do”?
To be very honest with you, I love the idea of having more competitors in this space. It challenges my own team to stay on top of their toes, which is really good. At the same time, having more entrants come into the space would help me cultivate the hardware ecosystem today.
Symphony is uniquely positioned; there are not a whole lot of people that could provide the integrated stack that Symphony has. Symphony’s biggest advantage is that it has a running, live lab carrying a large commercial customer base called Rakuten Mobile. Nobody tells me, “Don’t do this or that on Rakuten Mobile.” I could do disruptive ideas or disruptive innovation, and test and validate new products and technologies before giving them to anybody else.
It’s good to be the CEO of both.
I know. This is one of the reasons I accepted and volunteered. I thought for the short term, it would be important to be able to control these two ecosystems, because Japan is a quality-sensitive market. If I build a high-quality network, nobody will doubt whether Symphony’s technology stack is credible, scalable, reliable, or secure. We are uniquely positioned because of our ability to deliver on a robust automation platform, Open RAN software technology architecture, and innovative Edge Cloud software.
I don’t see many in the industry that have the technology capabilities today that Symphony offers. People have bits and pieces of what we have, but when I look at the integrated stack, I’m really happy to see that we have some unique intellectual properties and IPs that are remarkably differentiated from the market today.
So Dish is obviously a client. We will see how their network goes. Are you talking to Telefónica, Verizon, and British Telecom? Are they thinking about O-RAN in this way?
Since it’s public in the US, I can talk about it. As I mentioned before, it is not just about the O-RAN discussion for me, it is about the whole story. We announced in the last Mobile World Congress that AT&T is working with Rakuten Symphony on a few disruptive applications around the digital workflow on the operation for wireless and wireline, the same as Telefónica in the UK and Telefónica in Germany. Our first big breakthrough was an integrated stack.
In the heart of Europe, in Germany, we are the supplier for a new greenfield operator called 1&1. I told the CEO of 1&1 that my dream is to build Rakuten 2.0 in Germany, so we are building the entire fabric of this network. It has been an amazing journey to take all the lessons learned from Japan and be able now to bring them to Germany. We are in the early stages, but I am really optimistic to see what the future will hold for Open RAN as a whole for Symphony.
Rakuten Mobile and Rakuten Symphony have opened a well-needed, healthy debate in the industry about radio access supplier alternatives and diversification that we need in order to move away into a software-driven network. We feel that is a big accomplishment for us.
As you build out the O-RAN networks, one thing that we know very well in the United States is that our handset vendors — Apple, Samsung, Google, Motorola — are very picky about qualifying their devices for networks.
Is there a difference in the conversation between a traditional network and an O-RAN network, when you go and talk to the Apples and Samsungs of the world?
Yes. Before we were approved as a mobile company to be able to sell their devices, I have to tell you about the pleasure of working with the likes of Apple. I’m being really honest about this; I really liked it. Their burden to quality was really high, as was their ability to accept and certify a quality of network. I thought if we got the certification that we needed from them, that’s another third-party audit; I would have cleared a big quality hurdle.
The Apple engineering team is really strong. They really understood the technology, which was great. There are a lot of facets to do with it that are fascinating. No matter how great it is, I had to pass a set of KPIs and metrics for device certification. This was not trivial. I went through the same journey with Jio, so I kind of have some ideas about the burdens to acceptance from large device manufacturing companies. I also knew that this is a process of identifying issues, solving them, coming back to the device vendors, and continuing to reiterate in improving the quality.
I went through the same journey in mobile, but just slightly after our commercial launch, when we got our commercial certification on being able to sell Apple devices, that was a big relief for all of us. A big relief, because it means that we have reached a quality level that they deem is minimally acceptable to carry the device.
Of course we monitor the quality every day, so I’m really happy that we have done this. We have proven that the Open RAN network, especially the software that we have built in Japan, is running with amazing reliability. Rather than celebrating our courageous attempt to do something good for everybody, the early days of our journey were all about skepticism. Like, “This will not work. This will not work.”
Was Apple more skeptical of your network going into tests than others since the technology is different?
The device vendors were very supportive. The skepticism came from the fear, uncertainty, and doubt from traditional OEMs and vendors who wanted to tell everybody that this technology is horrible. It was to such an extent I ignored everything. I still do today. I say you cannot argue the benefit of cloud brought to IT and enterprise. There is an indisputable benefit to this. When it comes to telco, why would you argue the advantage and benefit of moving all your workloads to the cloud?
I think this debate is ending, and it is ending much quicker and in a better place for everybody. I have huge admiration for what Apple has done. It’s a really impressive company. The more that we continue to engage with them, the more we can tell that this company is obsessed with quality. I thought if we cleared the hurdle of getting their acceptance, then it shows another validation for us that we are running a high-quality network. They are a strategic, critical part of our supplier ecosystem today in Japan.
Let me flip this question around real quick. One of my favorite things about the Indian smartphone market is how wide open it is on the device side. This is something that happened after Jio rolled out, but I was friends with a former editor of Gadgets 360 in India, Kunal Dua, and he told me, “My team covers 12 to 15 Android phone launches a week.”
The device market is wide open, you can connect anything, there are dual SIMs, and the actual consumer experience of picking a phone is of unlimited choice. That is not the case in the United States or in other countries. What do you think the benefits of that are? I am quite honestly jealous that there is that much choice in that market.
I think a couple of things in India really benefit the country quite a bit. When you have massive volume, people are intrigued to enter these economies that exist. Certain things have changed in Japan as well. The government policies are mandating the support for open device ecosystems.
In our case, we even told them that 100 percent of our device portfolio will support eSIM, which gives you the ability and flexibility to switch carriers within one second. You can just say, “Oh, I don’t like this. I like this.” The freedom of choices is just unparalleled. We, as Rakuten Mobile, changed the business model. We said, “Look, we will enable eSIM. There are no fees for termination of contracts. There are no fees for anything. If you don’t like us, you can leave. If you do like us, you are part of our family.”
We made it really simple, because it is a dream for us to build an open ecosystem. We are trying to see if it is relatively successful to open up a storefront for open device markets, since we own a very large e-commerce website. Come in, purchase, and acquire.
The difference between India and the US is that India does not subsidize the device. As a consumer in the US, you have been trained that you can buy an iPhone by signing a contract, and the iPhone will be subsidized by the carrier. A consumer could benefit from this open device ecosystem, but there would have to be a mentality change. Will a consumer accept the idea that they have to buy a device? From a carrier point of view, I still argue that if they don’t subsidize, maybe they could lower the cost of their tariffs.
It is still an evolution. For us in mobile, we have pretty much adopted what India has done. We said, “bring your own device,” and we promoted all these devices that you are talking about in India. We brought them into our e-commerce site. In Japanese, it is called Ichiba. So we brought them to the Ichiba website, gave them a storefront, let them advertise, and let them market. Our website has a massive amount of daily active users that come to it, and we do not necessarily benefit from selling their devices, but we don’t want to subsidize any device. That is subjective.
What is the biggest challenge of O-RAN? You have a long history in this industry. I’m sure many challenges are familiar to you in building a traditional network. What is the biggest, most surprising challenge of building it in this way?
Let me tell you the part that I was surprised about. Some parts were easier, some more difficult. If I take you to a traditional base station and we examine what is really there at this radio site, we will find that almost 95 percent of every deployment is the same. Basically, there is a big refrigerator cabinet, and inside this cabinet there is something called the base band. This is the brain of the base station. This base band was built on custom ASICs that large companies needed to constantly invest into this hardware development for.
The first thing that we did was remove the software and make it more like an off-the-shelf appliance, like a traditional data center server. I recognize that the software only gets better; there are no issues with software. The difficult part was that the hardware components you need for the base station are really complex.
At every site, there is an antenna that has a transmitting unit, called either a remote radiohead, or massive MIMO in 5G. These products need to support a huge diversity of spectrum bands, because in every country there are different spectrum bands and different bandwidth. If you are a traditional supplier — say Nokia, Ericsson, Huawei, ZTE — these companies have invested in a large organization, with tens of thousands of people, whose entire job is to create this massive hardware that could support all these diversified spectrum bands.
My number-one challenge with Rakuten Mobile is to find these hardware suppliers, because there are not a whole lot of them for Open RAN. The hardware suppliers that could support diversified spectrum requirements — because country to country it will be different — turned out to be a really big challenge. The approach that we have taken in Japan is to go to middle-size companies and startups. I funded them and encourage them to build the hardware that we need.
My biggest challenge and my biggest headache is spending time trying to find a company that has capability and scale to become the hardware supplier for Open RAN at the right cost structure. The hardware you need for both 4G and 5G is not to be underestimated. I think it is easier to solve the issues around some of the RF units that one would need for these base stations. This is my personal challenge, and I know the industry as a whole needs to solve for this.
I know these are complicated products, but are these companies worried that it is a race to the bottom? Most PC vendors ship the same Intel processor, the same basic parts, and they have to differentiate around the edges or do services for recurring revenue. We talk about this on Decoder all the time. The big four that you mentioned sell you the whole stack and then charge for service and support. That is a very high-margin business. If you commoditize the hardware and say, “I am going to run my own software,” do those companies worry it is just a race to the bottom?
Let’s differentiate between large companies and new entrants. I think new entrants in hardware are comfortable and content, understanding the value they provide by being commodity suppliers. Let me give you an analogy. Let’s say Apple uses Foxconn to manufacture its devices. I am sure Foxconn will not tell you they are unhappy about this business model. It has built their entire strategy around high-value engineering, high-yield, and high-capacity manufacturing, because that is how they make revenue. They do not bundle support services.
I found that the new age manufacturing companies I was looking for were companies like Foxconn. Companies that understand the new business model that I want to create.
The most amazing thing that the US, and some companies are probably not aware of, is the elegance that we have in the United States around silicon companies. It is amazing how they genuinely are one of the most innovative in the world in terms of capability. It still exists in the US; we still control this. Today, Qualcomm, Intel, Nvidia, Broadcom, and many other companies, provide a lot of technology in a way that is needed for these products. We go and build reference designs directly with the silicon companies, and then I take that reference design, go to a contract manufacturer, and say, “Build this reference design.”
This new way of working seems like the future. Hopefully one day, for the hardware supply chain ecosystem, many companies like Foxconn will start to exist and will appreciate the value they need to build hardware for all suppliers. Maybe Ericsson or Nokia will one day have to look and evaluate a pivoting opportunity to go into a software world that may have a much better valuation.
Look at the stock price of traditional telecom companies today. Look at the stock price of ServiceNow, a digital workflow tool. Look at the difference between them. One is a complete SaaS model; one lives on a traditional business model. I don’t think the market appreciates and recognizes that this may be the right thing to do.
It seems like it is inevitable. It is just a matter of time for traditional vendors to start pivoting. I want this hardware to be commoditized. It is very important. The value you compete on has to be software, it cannot be hardware.
Rakuten Mobile is only a couple years old. It is the fourth carrier in Japan, and you have 5 million subscribers. Japan is a big country. KDDI has 10X the subscribers. Is the ambition to be the number one carrier, like Jio became the number one carrier in India? How would you get there?
I am really proud about what we have done in Japan. I think for many people that have been through this journey of building networks, they will know it is not a trivial process. We had two pragmatic challenges.
First, we had to prove to the world that a new technology actually works and delivers on cost, resiliency, and reliability. That’s a check mark; done. That is not just me telling you today, but audited by a third party. Look at the performance, quality and reliability we do. Second, if you are in the mobile business, I think you have one area that new technology cannot easily solve for you. You need to have ubiquitous coverage everywhere and anywhere you go.
I am not sure if you have ever visited Tokyo, Japan, but you should know this is a concrete jungle. It’s amazing. The density that exists in an area like Tokyo, the subways and the coverage you have to provide for them, and the amount of capacity you have to cater for, is not trivial. In two years, we have been able to build a network to cater for 96 percent of Japan coverage. I have never seen the speed that a network could be built at, at this scale.
So our ambition is not to be a fourth mobile operator in Japan. It is by far to be a highly disruptive ecosystem provider in which we want to take the number-one position in this country. The approach we take here is very simple. We need to ensure that ubiquitous, high-quality coverage is delivered anywhere you go in Japan. We are almost there.
I’m not just talking about the outdoors. High-rises, indoor, deep indoor, basements, subways. Anything and everywhere you go, an amazing network must be delivered. And second is the point/membership/loyalty that I talked to you about earlier. We think that’s a huge differentiator from the competitors, just to bring a much bigger value, and being obsessed about the customer experience and the services that we have offered.
From being an infant, to where we are today, I am really happy about what the team has accomplished, but we have a lot of work that we need to focus on to finish the last remaining 3 percent of our build. That percent is extremely important to achieve the quality of coverage that we need to really be at par and better.
I know my cost today is 40 percent cheaper in running my network than any competitor in Japan. I have an advantage that is virtually impossible for anybody in Japan to compete against today around network cost structure. So that gives me a leg up on what we could do, what business models we could experiment with, and the actions that we will take. You will see us very decisive in our approach, because we don’t want just to be another carrier in Japan. We want to be leading mobile operators in this country.
All right, Tareq. That was amazing. I feel like I could talk to you for another full hour about this. Thank you so much for being on Decoder.