'NEC backs open platforms as a new possibility over the three traditional vendors'

One of the world’s leading telecoms integrators, Japan’s NEC has its eyes firmly on open RAN, a phenomenon that promises to diversify the market for software and hardware vendors to telecoms via an open, disaggregated ecosystem. 

Strong in networks, the group sees open platforms as a window to an area where Ericsson, Huawei and Nokia still dominate.

NEC already has in Telefónica one of its flagship customers for the integration of open RAN applications – including in Latin America, most notably in Brazil, according to Roberto Murakami, CTO of NEC in the region.

Open RAN aside, NEC’s main clients in the region also include the other leading multinational telcos: América Móvil, Millicom and Liberty Latin America.

The integrator is also betting on other 5G-driven network architectures, including with the enterprise segment, without losing sight of the demand to upgrade 4G LTE networks, along with terrestrial and submarine data transportation systems, and more.

BNamericas: What are NEC's prospects for the integration business in Latin America, now with the growth of private networks, network slicing and 5G?

Murakami: We integrate equipment from different manufacturers. Cisco, Juniper, etc. In some countries we’re stronger with some partners than in others.

About a year and a half ago we regionalized our [Latin American] operation. Prior to that, each country was very focused on its own operation, through its own engineering team. 

What we did was centralize that. I have employees in Mexico, Colombia, Chile and Argentina who work with the same type of network solution, with the same partner, together.

This gave us a scale gain in operations with end-customers that operate regionally, such as Telefônica [Telefónica in Brazil], América Móvil, Millicom, VTR, GTD. 

These customers operate in more than one country and we used to handle that very individually. Today we have a single team working in an integrated way with these customers. This was one of the last structural changes we made.

BNamericas: What was the focus?

Murakami: Basically, in networks, where we are strong.

There are many technology trends powering on. Today there is a lot of talk about network slicing, which is segmenting the network and placing different service level agreements for each service on the network.

And that requires automation, which is another major trend, to manage the network almost automatically. All clients are working on it. It's not widespread, it's not an intense, uniform movement, but we're on that path with them.

Another trend that we're working on is network disaggregation, that is, having different servers and software. That's what open RAN is, it's part of this trend. NEC backs the open platforms as a new possibility over the three traditional vendors [Ericsson, Huawei and Nokia].

We’re also working with software in a virtualized architecture. You standardize the blocks of the network to work it in the cloud, in a private datacenter, or both, and in a well-structured and private way. If it’s necessary to update, to change the [system] version, this is done in a very smooth way on the network. 

All operators are working with this. And we’re going with different partners, with different focuses, on that.

Overall, all customers want to reduce operating costs and to improve the quality of their end-user experience. The industry is increasingly looking for a self-managing, self-sustaining network.

BNamericas: What about 5G?

Murakami: Companies are betting big on the potential of 5G for this kind of more advanced architecture. But we must hold our horses a bit.

There is a lot related to IoT, for example, which, depending on the application, does not necessarily require 5G. It’s possible to make use of IoT connectivity in 4G LTE, even in a simpler network, LoRa.

5G, as an early-stage technology, is more expensive than 4G. If before a company did not bet on 4G for cost reasons, will it bet on 5G? These things are yet to be decided. But things are moving forward.

BNamericas: You mentioned the unbundling of networks, open RAN, and how different telecom groups that NEC works with are at different stages in this journey. Can you detail this adoption?

Murakami: It's all about who you talk to. The operators' operational teams are more reticent to install new equipment, with which they might not be so familiar. 

Engineering will want to test, compare, etc.

The technological and administrative team will want to know about cost reduction, what the total cost of ownership will be. It all ends up depending on which area gets a stronger grip in this discussion.

That's why there are customers at various stages. There are customers who like to be first movers, there are customers who prefer to wait and see the results of implementations in the competition. 

But everyone is looking for it, assessing and evaluating, and some are already going into contracts and implementation.

BNamericas: Which ones, for example?

Murakami: We have a contract with Telefônica, which has a lot of influence from the headquarters in Spain, whose tech team we have a close relationship with.

They [in Spain] end up paving the way. Obviously, initially there is some resistance from the local operation to put in new equipment.

BNamericas: And the other operators you usually work with, like América Móvil, Millicom, etc?

Murakami: They're in the testing phase, field trials. 

In this respect [open RAN], Telefónica is one of the leading companies. We already have other contracts referring to disaggregated equipment with them, optical equipment.

BNamericas: Does this also apply to Telefónica's other LatAm operations?

Murakami: We are in talks. Today we can already see more interest and greater contact on the part of Telefónica's engineering and planning [at the HispAm unit] with the head office in Spain.

BNamericas: What about other operators with smaller international footprints, such as GTD?

Murakami: Overall, everyone is now working on how to implement 4G+, through carrier aggregation, and how to migrate that to 5G. 

The pace depends on the availability of the 5G network by country. But everyone is interested in open RAN. We see a lot of interest in getting to know the architecture.

These operators are betting on the model mainly for B2B. 5G applications for personal use, so far, are not much in demand. People [end-users] generally don't see a need for 5G, for more bandwidth, if it’s to send WhatsApp, videos, photos. That’s not the case.

The operator, which is investing heavily in 5G to expand the network and meet coverage goals, sees the end-user not demanding the technology. As a result, they see it as taking more time to pay for 5G investments, without even having finished paying for 4G.

So they’re seeking to change the business model. Hence the bet on industrial automation, industry 4.0, IoT, agriculture, mines, etc. The operator is thinking: “I have to enter the B2B market, I'm going to have to enter this vertical market.”

This is where the integrator, the ecosystem, comes in. Because it's not possible [for the carrier] to address all [business] verticals, end to end. You need to understand the vertical business. Have experts dedicated to it. 

BNamericas: How is the business of private networks?

Murakami: There are different models. I divide the formats into public network, private network and local network. The public network is the commercial, public network itself. 

The private network is where the operator goes there, sets up a network for the company, but it’s connected to the public network, you roam and handover signal also through the public network.

Then there's the local network, which I understand as its own private network, the one without an operator, set up by the company itself.

The chief focus at this moment for NEC Corporation, in the world, is to work with operators – public networks. To set up mobile networks, with tendered bands, for operators.

We have cases with enterprise customers who are asking us for solutions, and we’re setting up [the networks]. And there are cases in which the operator uses an integrator for these projects.

BNamericas: How many private [local] network projects in the region is NEC participating in?

Murakami: I'd say about a dozen, more or less.

There are several elements at play. Because when we go to a medium-sized enterprise, there is usually already quite good Wi-Fi coverage running in the area. Then there's the [possibility of using] WiFi-6, security issues, roaming in those areas.

In general, there’s an assessment of advantages and disadvantages of having a local network, a 4G or 5G network, versus Wi-Fi coverage and the benefits of Wi-Fi in relation to the applications that need to be supported by the network. Because if it's connectivity for people in general, Wi-Fi can do it.

But we have some interesting projects [in private, local networks]. What we're doing right now, dedicating ourselves to, is the Hospital das Clínicas project [in São Paulo]. It's 5G, it's open RAN. It's a small project, it covers two rooms in the hospital, to connect X-ray and ultrasound machines.

BNamericas: How is it? The hospital has already mentioned plans for robotic surgery, for more advanced stuff.

Murakami: It's already in operation. Now they are considering, given that there is already the network and the platform there, other applications. Telemedicine, remote diagnosis, training. They will depend on the success of the initial applications.

The first results are promising, even though the project was complex. It is a constant learning process with the different players involved.

BNamericas: In open RAN, which partners are you working primarily with?

Murakami: We work with the big ones. Altiostar, Mavenir. Altiostar was acquired by Rakuten, and we worked with Rakuten on some projects. 

That's in the software part.

In the frequency part, we work with several. In addition to NEC itself, which also provides this type of equipment, we work with Comba, with KMW (who we worked with at Telefônica Brasil), with Airspan. It will depend on the type of project and application.

BNamericas: NEC recently announced a project with Infinera for Neutral Networks' data system running from Mexico to the US. How is this project?

Murakami: In Mexico, our main customer is Telmex and Telcel [América Móvil]. 

This [Neutral Networks] contract was important for us to expand our market share in the country, bringing connectivity to the US and vice versa.

Infinera is our main partner in Mexico. We are strong integrators of Infinera, for DWDM and for IP networks.

BNamericas: What is the current size of NEC’s LatAm operations? How many customers does the company report?

Murakami: Speaking of operators, we have the main ones, mentioned above. All the big ones. V.tal, in Brazil, is now also a major client of ours. 

Considering the enterprise segment as well, in addition to operators, well, we have more than 1,000 customers in Brazil alone.

There are big projects, smaller projects. We are also operating in biometrics, POS for retailers, unified communications.

As for revenues, NEC makes around US$26bn-27bn worldwide. 

Our operation in Latin America would be around US$500mn, depending on the FX rates. If we count the businesses that NEC Corporation does directly in the region, such as submarine cables, that number is greater.