By Douglas Busvine
BARCELONA (Reuters) - Japanese e-commerce firm Rakuten plans to become Japan's fourth mobile operator this year with what its says is the world's first fully cloud-based mobile network, creating a potential template for international expansion.
Rakuten, which started out as a two-man outfit in 1997 and has grown to post annual revenues of $10 billion, is already trialing the network with early users as it looks to run mobile services in a scalable, low-cost way.
"We can disrupt the telecoms industry and bring huge value to customers," Rakuten's founder Hiroshi 'Mickey' Mikitani told a packed presentation at the company's stall during the Mobile World Congress on Wednesday.
The project is being led by chief technology officer Tareq Amin, whose last job was at Indian telecoms startup Reliance Jio that rapidly won a mass following with its free voice and cut-price data plans, forcing rivals to exit the market or merge.
"The advantage of cloud, if you look at Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL) or Facebook (NASDAQ:FB), is that they have achieved a level of efficiency that telecommunications companies can only dream of," Amin said.
"We are there today in terms of our efficiency," he told Reuters in an interview in Barcelona.
VIRTUAL NETWORKS
Rakuten's end-to-end cloud model 'virtualizes' not only the network core but its radio network also runs on software, making it easy to upgrade or reconfigure without having to go to vendors for bespoke solutions.
"The network has to become highly scalable and rapidly adaptable," said Ashraf Dahod, president and CEO of Altiostar, a U.S. startup that conceived the software-defined radio part of the Rakuten project.
Dahod, a serial entrepreneur, sold his last business to U.S. networks giant Cisco Systems (NASDAQ:CSCO) which also worked with Rakuten on the private cloud setup it will run in Japan.
"This is a bespoke thing for Rakuten, however we see this architecture as very applicable to others," Jonathan Davidson, head of Cisco's service provider business, told Reuters.
Also partnering with Rakuten are network specialist Nokia (HE:NOKIA), chipmaker Intel (NASDAQ:INTC), Taiwan's Quanta Cloud Technology, and Netcracker Technology, a unit of NEC.
Netcracker is involved in customer billing and digital services for Rakuten, which runs a membership model across a range of services that includes chat app Viber.
"This is not just about a lower cost network," said Ed Finegold, director of content strategy at Netcracker.
"That is part of the overall business case, but the core of their vision is a cloud-native network, which means the ability to roll out services that you would not normally see from mobile operators."
WORKING GROUP
In a similar project, Cisco last year backed a spinoff from Norway's Telenor, called Working Group Two, which is developing a public cloud model enabling virtual mobile network operators, or MVNOs, to start small and grow fast.
Working Group Two said this week that it was introducing a platform to host networks on Amazon Web Services, the leading cloud computing platform.
Cisco and Telenor also said on Wednesday they would explore open radio solutions as part of the Nordic operator's plans to launch next-generation 5G mobile services.
Rakuten, which until now has run its own MVNO in Japan, says it has already done most of the work to make its new network 5G-ready. Once the project is up and running, Rakuten would consider expanding its platform model.
"We intend to go global," said Amin. "Japan is just the beginning."