Tuesday, December 5, 2023

AT&T's Shift in Supplier Strategy

AT&T made a major shift from a single primary supplier of proprietary network infrastructure provided by Nokia to an open radio access network (Open RAN) to handle most of its US network traffic by late 2026.

Open RAN is expected to bring several advantages, including reduced costs, increased vendor diversity, and enhanced network agility.

Open RAN is a way to have many different vendors compete for business in the future. What precipitated this dramatic change in strategy? Two possibilities include:

  • A long-term contract with single supplier is often a mechanism to overcome holdup opportunities. Perhaps newer technology has made the upstream market develop so that relationship specific investments are less important.
  • A clever two-part pricing supplier contract in could have mitigated the effects of double-marginalization. Perhaps this form of contract became unworkable. Or perhaps enough competition developed that the margins are not big enough for double-marginalization to lead to large inefficiencies.

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