Hyperscalers such as Google or Amazon are going to enter carriers´ territories in order to host compute power in edge locations. Georg Kopf, Managing Consultant of Detecon, asked Detecon’s Subject Matter Expert Szymon Lis how telco’s should act in this competitive environment – and why ecosystems are becoming so important here.
Georg Kopf: What is the motivation of public cloud providers, the so-called hyperscalers such as Google or Amazon, to enter carriers´ territories in order to host compute power in edge locations?
Szymon Lis: The current Internet setup is "isolated" to a certain extent. Telecommunications companies have built their cloud infrastructure as a kind of internal ecosystem. Public cloud providers have also implemented their ecosystems in a kind of internal way, far away from the end customer, e.g. in terms of latency.
A new wave of applications and services requires an edge ecosystem that is close to the end customer. This is especially important for video-related offerings such as VR/AR, gaming, or for lightweight devices where hosting of compute power is difficult due to small form factors. In addition to B2C service offerings, there are new business opportunities in building 5G campus networks for enterprises with computing power hosted on campus premises.
Therefore, to take advantage of low latency and high bandwidth of next-generation cloud computing, hyperscalers need to bring their cloud ecosystems at the edge of the Internet closer to end customers.
What are the benefits and challenges of having computing power closer to the end customer?
Customer experience and customer satisfaction are the focus. A large number of new applications and services, especially if 5G-driven, will require very low latency and high bandwidth. The growth of expectations towards real-time experiences is another factor that can only be met by hosting applications at the edge. In terms of security, data protection will also play an important role within an ecosystem for new generation applications. Keeping this data local without having to transport it over the Internet will definitely provide an advantage.
Another advantage is purely network-centric. Today's centralized cloud computing architecture and sending large amounts of data is cost and time intensive (latency). By fully processing or even pre-processing the data locally, close to the end customers, telcos relieve their backbone networks, resulting in optimized performance and costs.
How can telco's improve their standing at the edge and what decisions do they need to make?
Partnering – it is as simple as that. Telcos need to partner with hyperscalers, but also with developer communities. The Edge ecosystem certainly offers new opportunities, but telcos also need to retain their control points such as connectivity, quality of service, and direct relationships with consumers and enterprises.
Telcos should open their network assets to hyperscalers, at the same time hyperscalers can facilitate partnerships with application developers. Network as a Service to start monetizing telco assets should be the next step.
What are the latest developments in the Edge ecosystem?
The past year has been full of new developments emanating from hyperscalers, enterprises and telcos. To name just a few of them:
Hyperscalers continue to deploy their own Edge zones, which are small distributed data centers primarily in the US. AWS has just announced further miniaturization of its Outpost product line, launching two fully managed types of pizza boxes with the same APIs and infrastructure as AWS Public Cloud. This product would be a good fit for SoHo or even telco’s 5G towers.
In the enterprise space, we are also seeing a lot of hype with giants like Ericsson, Volkswagen, FedEx either running proof of concepts based on their own distributed small data centers or partnering with hyperscalers.
Another example is Edge computing as a Service initiative which combines Edge computing, network as a services along with automation. This initiative is led by both telco´s (BT, Orange, Verizon), Hyperscalers (AWS) and Microsoft.
And last but not least, Deutsche Telecom group has its own developments for example with MobiledgeX, a daughter company based in the Valley, who just announced a partnership with Google in order to aggregate access to telco infrastructure for Anthos. I would also like to mention Deutsche Telekom's 5G campus network solutions, which incorporates local computing.
How should all parties involved behave from Detecon's point of view in order to profit from these new market opportunities?
The reality is that an Edge ecosystem is still immature and all players have just started to position themselves. We have all already seen announcements of initial partnerships, e.g., AWS - Verizon, MicroSoft - AT&T, and so on. However, the entire ICT industry needs to identify and prove business cases, technology models, and who the end customer is. Then the Edge ecosystem can take off on a large scale and with reasonable arguments.
From a telco perspective, being part of the Edge ecosystem from day one is of utmost importance. And to avoid repeating a losing battle from 10/15 years ago in the OTT space. Telcos need to retain their rights in areas such as physical access sites, IaaS and connectivity and go into co-competitive mode with hyperscalers.
On the one hand, it's good to accelerate adoption, but on the other hand, there's a risk that the energy will dissipate and the market will become too fragmented. At some point, this may lead to a need for consolidation.
Certainly, there is no "one size fits all," but a win-win solution should be sought for all market participants.
