Telco Edge Strategies Start to Mature

As 2021 begins, 5G networks have appeared in most developed markets; several deployments are already well underway on a large scale. Many of these operators have realized that 5G may not introduce the revenue uplift that previous generations did, and the investment to enable enterprise use cases and applications is far too risky at the current point in time. As such, most 5G deployments are limited to the consumer space, and although there are a few pilots, proof of concepts, and partnerships for enterprise cellular, these are limited to niche use cases and are nowhere near the US$1 trillion annual service revenue target that operators make in the consumer market.

The network edge is where the new battle is taking place. Mobile operators have already deployed edge data centers in their central offices and mobile gateway aggregation points but have not yet found a way to monetize them. Central offices are typically found in every city while mobile gateway aggregation points are a step closer to the core network compared with central offices. These locations have traditionally been “passive” networking elements, but with edge computing, they may become prime real estate for enabling applications.

On the other hand, several hyperscalers are already pushing toward the network edge (e.g., Amazon Wavelength being deployed in telco edge locations) and even on-premises (e.g., Microsoft Azure Private Edge Zones). The enterprise space is certainly not the exclusive domain of telecom operators, and hyperscalers are now executing what telcos are still discussing. For example, the telco edge federation initiative, MobileEdgeX, has yet to create a commercial impact, and telco edge data centers are not generating any significant revenue. Every single operator has a different strategy: some partner with hyperscalers and some are guarding their telco edge capabilities; Telefonica is the first to start leasing its edge data centers in an Infrastructure-as-a-Service (IaaS) business model.

Telefonica is now offering what it calls “Virtual Data Center” (VDC) that offer processing and storage functionality in edge nodes in Seville and Andalucia. The new edge node service is referred to as VDC-Edge. The operator claims that clients will be able to host applications in its edge cloud that can act as if these applications are hosted on-premises with minimal latency and added data security.

ABI Research expects that Telefonica may have realized that implementing advanced application enablement for its 5G network and its telco edge may be a longer-term expectation and has thus decided to implement simpler business models, such as the VDC-Edge initiative—essentially an IaaS model. Telco edge revenues will likely come from many different business models, possibly including hyperscaler partnerships, IaaS business models, operator-own services (e.g., network slicing), and other types that are not yet actualized. Telefonica’s decision is showing signs of maturity as it has suggested that telco edge locations should be immediately monetized and mobile operators should start with basic functionality and move up the IaaS → Platform-as-a-Service (PaaS) → software-as-a-service stack gradually. Telecom operators have tried shooting for the stars with initiatives such as 5G network slicing, but they will first need to know what it takes to make a far more simple strategy successful.

All operators need to understand this very well: telco network edge deployments are an excellent asset and one that can be immediately monetized. Hyperscalers are excellent tacticians and strategists regarding centralized public cloud deployments, but they have neither the expertise nor the willingness to deploy dense cellular national networks, for example, as the strong edge locations and many central offices mobile operators already have done so. On the other hand, telcos can immediately monetize these assets through IaaS (like Telefonica) or PaaS business models. This will provide them with some form of much needed monetary compensation for these assets while they prepare for the next level of their network edge strategy.

Expertise in the telco edge IaaS and PaaS domains will allow telcos to understand what it takes to deploy and operate a distributed computing infrastructure. End-to-end orchestration, monetization, integration with third-party application programming interfaces, application development, and co-creation programs are all items that need to be developed, but it is now clear that simple strategies should be the starting point.