TOKYO -- As Rakuten prepares to debut in Japan as a fourth major mobile carrier, it is tapping a new technology to reduce its network investment to just a fraction of conventional levels and offer competitive pricing.
The Japanese internet service company on Wednesday unveiled equipment to be used for its mobile service launching in October. The hardware, from American startup Altiostar Networks, comprises just servers stacked up on refrigerator-size racks in a Tokyo office building. It includes no switchboards, often seen in mobile service base stations.
Rakuten is the first mobile carrier to employ software for radio base stations, said Rakuten Mobile Network Chief Technology Officer Tareq Amin.
Mobile carriers typically spend nearly 80% of their capital investment on base stations. Top carriers NTT Docomo and KDDI have invested 3 trillion to 4 trillion yen ($27 billion to $36 billion) in their 4G networks currently in use. Rakuten plans to spend only about 600 billion yen.
Rakuten also aims to beat the competition in next-generation 5G service. The software-based system will work with 5G by simply switching the antenna, says Amin. This will help Rakuten avoid a hefty investment in the shift to 5G, which is expected to cost carriers around 1 trillion yen.
For a newcomer to the market, the ability to offer competitive pricing will be vital to winning subscribers. Rakuten Chairman and CEO Hiroshi Mikitani made no mention of pricing at the unveiling event, but the partnership with the U.S. startup is a step toward offering competitive pricing.
Amin worked at T-Mobile US, the third-largest carrier in the country, as well as Huawei Technologies before he joined India's Reliance Jio Infocomm in September 2016, when the company made a foray into the mobile market. Under his leadership, Reliance Jio employed a cloud wireless access network (C-RAN) that uses simplified equipment and thereby saves costs. It has become the No. 3 carrier in India in just a year and a half, with a market share of 15%.
Mikitani took notice of Altiostar owing to its use of the C-RAN technology. "With capital investment lighter, there is a great chance that Rakuten's mobile service rates will be cheaper," said Taro Daimon of Tokyo-based research company MCA.
With Rakuten and Altiostar both being newcomers, however, their partnership has potential risks. Altiostar has worked with investors like Cisco Systems, Intel and Nokia to resolve system issues. And Rakuten is building its own network for large cities like Tokyo, but in smaller localities it will use KDDI's network. Connection disruption between the two networks could be a problem.
As much as adopting the latest technology is a newcomer's advantage, frequent service interruptions or slow data speeds would quickly drive customers away.