A Vision Unraveling More Than Just a Corporate Restructuring
The recent announcement that Japanese technology giant NEC is scaling back its 5G network equipment business is far more than a simple line item in a corporate earnings report. While framed as a strategic “streamlining” to improve profitability, this decision represents a significant and damaging setback for the Open Radio Access Network (Open RAN) initiative. NEC was not merely a peripheral player but a cornerstone of the movement’s promise to diversify a market long dominated by a handful of incumbents. This article explores the cascading implications of NEC’s retreat, placing it within a troubling pattern of recent failures and examining the harsh economic realities that threaten to derail the Open RAN vision entirely.
The Promise of a New Order Understanding the Open RAN Dream
For nearly a decade, Open RAN has been championed as the solution to the telecommunications industry’s vendor lock-in problem. Historically, network operators have been forced to buy entire, proprietary systems from a single supplier like Ericsson, Nokia, or Huawei. This created monolithic networks where innovation was dictated by a select few, and costs were kept artificially high due to a lack of competition. Open RAN promised to dismantle these “closed” ecosystems by standardizing the interfaces between different network components, allowing operators to mix and match hardware and software from various vendors. This vision of an open, interoperable, and competitive marketplace was designed to foster innovation, reduce costs, and provide a critical foothold for smaller, specialized suppliers.
The theoretical benefits were compelling: an operator could select the best-in-class radio unit from one company, a superior baseband unit from another, and cutting-edge software from a third, integrating them all into a single, cohesive network. This modular approach was expected to break the stranglehold of the traditional giants and create a dynamic ecosystem teeming with new entrants. In this context, companies like NEC were vital, serving as credible alternatives that proved the multi-vendor model could work. Their technical expertise and manufacturing scale provided the proof-of-concept that the movement desperately needed to gain traction with risk-averse network operators. Their departure, therefore, strikes at the very heart of the Open RAN proposition.
A Cascade of Failures Shakes an Already Fragile Ecosystem
The Domino Falls NEC’s Strategic Pivot and Its Immediate Impact
NEC’s decision to classify its 5G base station business as “non-core” is the culmination of immense financial pressure and a market that failed to materialize as quickly as hoped. The company was forced to slash its fiscal year 2026 revenue target for 5G equipment outside Japan from a hopeful $540 million down to just $200 million, citing a severe delay in the international Open RAN market’s takeoff. This dramatic revision reflects a sobering realization that profitability in the space was not achievable in the near term. Despite being the world’s sixth-largest RAN vendor, its global market share stood at a meager 0.9%, a position that proved untenable against entrenched rivals with deep pockets and decades-long customer relationships.
The withdrawal directly impacts pioneering Open RAN adopters who had placed their faith in the new model. Operators like Rakuten in Japan and 1&1 in Germany relied heavily on NEC’s hardware to build out their ambitious greenfield networks. Now, they are left with fewer choices for future expansion and maintenance, validating the perceived risks of betting on challenger vendors. This situation creates a chilling effect across the industry, as other operators considering a shift to Open RAN will undoubtedly view NEC’s retreat as a cautionary tale, potentially delaying their own plans or defaulting to the perceived safety of a single, incumbent supplier.
A Troubling Trend The Growing List of Open RAN Casualties
NEC’s move is not an isolated incident but the latest in a series of blows that suggest a systemic weakness within the Open RAN ecosystem. The optimism of just a few years ago has been eroded by a consistent pattern of challenger companies struggling to survive. Just last year, the movement was rocked by two other significant setbacks that highlighted the immense barriers to entry. Mavenir, once touted as America’s best hope for a domestic RAN champion, exited the highly competitive market for radio units, choosing to focus on software instead. This pivot was a tacit admission that competing in the capital-intensive hardware segment was unsustainable.
Simultaneously, EchoStar, which had embarked on an ambitious plan to build a nationwide US network based on Open RAN principles, was forced to sell off critical spectrum licenses, signaling deep financial distress. The company’s struggles demonstrated that even a well-funded project with a clear vision could falter under the weight of deployment costs and competitive pressure. Together, these events, now capped by NEC’s withdrawal, paint a grim picture. They suggest that the structural and economic hurdles facing Open RAN challengers are not just significant but are proving to be insurmountable for all but the most well-capitalized players.
The Unwinnable Arms Race Economic Headwinds and R&D Gaps
The underlying cause for these failures is a brutal combination of a market downturn and an unsustainable research and development arms race. The global RAN market has contracted from approximately $45 billion just a few years ago to just $35 billion, a “long 5G winter” that has squeezed even the industry giants. During such downturns, operators become intensely risk-averse, tending to stick with their incumbent suppliers for network upgrades rather than risk complex and expensive multi-vendor integrations that could introduce instability. This creates a vicious cycle where challengers are starved of the revenue they need to grow and innovate.
Compounding this is the colossal R&D spending required to compete at the highest level. The technological complexity of 5G and future 6G networks demands continuous, massive investment. An industry leader like Ericsson, for example, invested roughly $5.8 billion in R&D in 2025 alone, an amount that dwarfs the entire revenue of most challenger vendors. For a company like NEC, with less than 1% of the market, matching this level of investment is a fiscal impossibility. This creates a technological gap that widens with each passing year, making it increasingly difficult for smaller players to offer products that are competitive on both price and performance.
An Industry Consolidating Not Opening
Far from fostering diversity, the current market dynamics are pushing the industry toward greater consolidation. In 2025, the top three vendors—Huawei, Ericsson, and Nokia—strengthened their collective grip on the RAN market, growing their combined share to 77.4% from 75.1% the year prior. This trend is a stark refutation of Open RAN’s core objective and demonstrates that nearly a decade after the movement’s inception, the incumbents are more powerful than ever. The skepticism among network operators is palpable, as the promised benefits of openness have yet to outweigh the real-world complexities of system integration, which remains an arduous and costly task.
Consequently, a concerning trend has emerged where many so-called “Open RAN” deployments are, in reality, single-vendor solutions that simply adhere to O-RAN specifications. In these scenarios, an operator buys all the key components from one of the major incumbents, defeating the purpose of a truly open, multi-vendor ecosystem. NEC’s retreat is also part of a broader trend among Japanese vendors, with Kyocera reportedly abandoning its 5G base station plans and Fujitsu spinning off its network business amid declining sales. This regional consolidation further shrinks the already shallow pool of credible alternative suppliers.
Recalibrating Expectations in a Harsher Reality
The major takeaway from NEC’s decision is that the idealistic goals of Open RAN are colliding with unforgiving market forces. The dream of a vibrant, plug-and-play ecosystem of dozens of suppliers is being replaced by the reality of a punishing economic climate and an R&D chasm that only giants can cross. This sobering development forces a necessary recalibration of expectations for the entire industry. The path to a disaggregated network is proving to be far steeper and more fraught with peril than early proponents had envisioned.
For network operators, this serves as a crucial warning to reassess the timelines and risks associated with multi-vendor deployments. The promise of lower costs and greater flexibility must be weighed against the very real danger of supplier instability and the complexities of acting as a system integrator. For remaining challenger vendors, the strategic imperative is clear: specialize in a defensible niche, secure deep-pocketed partners, or face a similar fate to NEC and Mavenir. The industry as a whole must now confront the difficult question of whether the current Open RAN model is fundamentally viable without a more concerted effort, perhaps including government or consortium support, to sustain the smaller players it was meant to empower.
The Future of Telecom Diversity Hangs in the Balance
NEC’s withdrawal from the mainstream 5G hardware market was a powerful symbol of a movement in crisis. It eroded the credibility of Open RAN and left its proponents with one less success story to point to. While the company stated it would continue to focus on software, virtualization, and 6G research, its exit from the front lines of the 5G radio battle was a significant loss for market diversity. The core promise of a truly competitive and diverse supplier market consequently appeared more distant than ever. As the dust settled, the telecommunications industry was left to wonder whether the future of network innovation was destined to remain in the hands of a few, or if the vision of an open and collaborative ecosystem could somehow be salvaged from the growing wreckage.
