This guest post from analyst Patrick Lopez, of Core Analysis, looks at the need for and role of the edge platform player.
It’s a topic TMN addressed in this article a year ago, looking at the role of the aggregator model.
In this guest article, Lopez moves things on. He outlines the role off the edge platform, and why he feels they will be essential to operator success at the edge. Lopez is a member of TIP and ETSI and was global VP Networks Innovation at Telefonica where he supervised the launch of the world’s first Open Ran and Multi Access Edge Computing projects. As such he has a good sense of where the friction points and synergies lie between the telco space and the internet and cloud players.
Why telcos need a platform
Edge computing needs a platform. The object of this platform is to provide a web interface and series of APIs to abstract network topology and complexity and offer developers a series of cloud services and products to package within their offering. The platform is where developers and third parties reserve and consume operators’ computing, storage and networking capacity. Beyond hyperscalers that have developed these platforms natively, a few vendors have emerged in the telco space – such as MobiledgeX and ORI Industries.
Why the enterprise is key for 5G business models
Network operators worldwide are confronted with the inexorable growth of their data traffic due to the consumers’ voracious appetite for video streaming and gaming. As this happens, data charging models have departed from per Megabyte metered billing to bundles and unlimited data, which encourages traffic growth, while reducing the operators’ capacity to monetize this growth. Consumers are not willing to pay much more for a HD video versus Standard Definition. For them, it is essentially the same service and the operator is to blame if the quality is not sufficient. Unfortunately, the problem is likely to accelerate with emerging media hungry video services relying on 4K, 8K and Augmented Reality. As a consequence, the average revenue per user stagnates in most mature markets, while costs continue to rise to increase networks capacity.
While 5G promises extraordinary data speeds, enough to complement or equal fibre fixed capacity, there is no real evidence that the retail consumer market will be willing to pay a premium for improved connectivity. If 5G goes the way of 4G, the social media, video streaming, gaming services and internet giants will be the ones profiting from the growth in digital services. The costs for deploying 5G networks will range in the low to double digit billions, depending on the market, so… who will foot the bill?
If properly executed, the 5G roll out will become in many markets the main broadband access at scale. As this transition occurs, new opportunities arise to bundle mobile connectivity with higher level services, but because the consumer market is unlikely to drastically change its connectivity needs in the short term, the enterprise market is the most likely growth opportunity for 5G in the short to medium term.
To get the the enterprise, you need a cloudy edge
Enterprise themselves are undergoing a transformation, with the commoditisation of cloud offerings.
Cloud is one of the fastest growing ICT businesses worldwide, with IaaS the fastest growing segment. Most technology companies are running their business on cloud technology, be it private or public and many traditional verticals are now considering the transition.
The real opportunity is for network operators to rejoin the cloud value chain by providing a hyper local, secure, high performance, low latency edge cloud that will complement the public and private clouds deployed today.
The platform is where developers and third parties reserve and consume operators’ computing, storage and networking capacity.
Telecom operators have mostly lost the cloud battle – AWS, Microsoft, Google, Alibaba have been able to convert their global network of data centers into an elastic, on-demand as-a-service economy.
Edge computing – the deployment of mini data centers in telco networks – promises to deliver a range of exciting new digital services. It may power remote surgery, self driving cars, autonomous industrial robots, drone swarms and countless futuristic applications.
In the short term, though, the real opportunity is for network operators to rejoin the cloud value chain by providing a hyper local, secure, high performance, low latency edge cloud that will complement the public and private clouds deployed today.
Most private and public clouds ultimately stumble upon the “last mile” issue. Not managing the connectivity between the CPE, the on-premise data center and the remote data center means more latency, less control and more possibility for hacking or privacy issues.
Operators have a chance to partner with the developer community and provide them with a cloud flavour that extends and improves current public and private cloud capabilities.
But a cloudy edge needs a platform
The edge computing market is still emerging, with many different options in terms of location, distribution, infrastructure and management, but what is certain is that it will need to be more of a cloud network than a telco network if it succeeds in attracting developers.
The key for network operators to capture the enterprise opportunity is to offer a set of APIs that are as simple as those from the public clouds
Beyond the technical details that are being clarified by deployments and standards, the most important gap that network operators need to bridge with a true cloud experience is the platform. Operators traditionally have deployed private cloud for their own purpose – to manage their network. These clouds do not have all the traditional features we can expect from commercial public cloud (life-cycle management, third party authentication, reservation, fulfillment…). The key for network operators to capture the enterprise opportunity is to offer a set of APIs that are as simple as those from the public clouds, so that developers and enterprise may reserve, consume and pay for edge computing and connectivity workloads and pipelines.
If operators do not open their private cloud to enterprises, hyperscalers may expand their clouds to operators’ networks and provide these services to their developer and client community. This would mean that operators would be confined to a strict connectivity utility model, where traffic prices would inexorably decline due to competitive pressure and high margin services would be captured by the public cloud.
Edge computing can allow operators to offer IaaS and PaaS services to enterprises and developers with unparalleled performance compared to traditional clouds:
– Ultra-low and guaranteed latency (typically between 3 -25ms between the CPE and the first virtual machine in the local cloud)
– Guaranteed performance (up to 1Gps in fibre and 300Mbps in cellular)
– Access to mobile edge computing (precise user location, authentication, payment, postpaid / prepaid, demographics… depending on operators’ available APIs)
– Better than cloud, better than WIFI services and connectivity (storage, video production, remote desktop, collaboration, autonomous robots,…)
– Flexible deployment and operating models (dedicated, multi-tenant…)
– Local guaranteed data residency (legal, regulatory, privacy compliant)
– Reduce cloud costs (data thinning and preprocessing before transfer to the cloud)
– High performance ML and AI inferring
– Real time guiding and configuration of autonomous systems
It is likely that many enterprise segments will want to benefit from this high-performance cloud. It is also unlikely that operators alone will be able to design products and services for every vertical and segment. Operators will probably focus on a few specific accounts and verticals, and cloud integration providers will rush in to enable specific market edge cloud and connectivity services:
– Banking and insurances
Each of these already have connectivity value chain, where network operators are merely a utility provider for higher value services and products. Hybrid local cloud computing offer the operators the opportunity to go up the value chain by providing new and enhanced connectivity and computing products directly to consumers (B2C), enterprises (B2B) and developers (B2B2x).
Fixed and mobile networks have not been designed to expose their capabilities to third party for reservation, consumption and payment of discrete computing and connectivity services. Edge computing, as a new greenfield environment is a great place to start if an operator would like to offer these types of services. Because it is new, there is no legacy deployed and the underlying technology is closer to cloud native. This is necessary to create a developer and enterprise platform. Nonetheless, an abstraction layer is necessary to federate and orchestrate the edge compute infrastructure and provide a web-based authentication, management, reservation, fulfillment, consumption and payment model for enterprises and developers to contract these new telco services.
This is what a platform provides. An abstraction layer that hides telco networks’ complexity, federates all edge computing capacity across various networks and operators and presents a coherent marketplace for enterprise and developers to build and consume new services offered by the operator community as IaaS, PaaS and SaaS.
By deploying a platform, operators can reintegrate the cloud supply chain, but they will have to decide whether they want to own the developer relationship (and build their own platform) or benefit from existing ecosystems (and deploy an existing third party platform). In the first case, it is a great effort, but the revenues flow directly to the operator, the platform is just another technology layer. In the second, revenues go to the platform provider and are shared with the operator. It provides faster time to market, but less control and margin. This model, in my mind is inevitable, it remains to be seen whether operators will be able to develop and deploy it in time and at scale.