Final Push on the Last Mile – The Future of Telcos in the Edge

Edge computing is beyond any doubt the next truly disruptive step in the evolution of telecommunications networks. Telcos could be at the forefront of development if they leverage their traditional core business strengths to their advantage. Yet the quest for holistic networking must find a new focus: the last few meters to the customer.

Telecommunications companies rarely attract attention by being at the forefront of new technology trends. That changes with the rollout of 5G mobile communications and the wide range of low-latency applications it enables: edge computing gives telcos a chance to swim on the crest of the wave of innovation and new business creation in the 2020s.

It is no secret that the demands of the ongoing digitalization of companies raises the level of requirements for data flow and data analysis both in terms of latency and throughput. Applications that require calculations in (virtually) real time such as interconnected manufacturing robots or autonomous driving transport systems are often too far away from the cloud. Workloads and the demand for computing power are moving ever closer to the customer because response times need to be reduced as much as possible while at the same time the sheer amount of data to be transferred grows exponentially. System engineering requires a scalable, reliable, and trusted solution and edge computing is the answer to satisfy these heightened service requirements. Data can be processed directly where they are generated – in “small data centers” on the site, right at the “edge,” the outer limits of a company’s infrastructure. Edge computing stands for clear and quantifiable customer benefits but confronts telcos with new challenges both in technical and business terms, including putting at risk their up-to-now privileged access to the customer. The pace in this field is accelerated and cloud providers and hyperscalers are already ahead in this race for the “last mile.” AWS Outpost, for example, may not yet have achieved the goal of absolute customer proximity in fact and in name, but it is already getting dangerously close. Nevertheless, the game is far from over for telcos if they play their cards right and adapt to the new market conditions according to their strengths. Modern network concepts will enable telcos to increase their value-add share in the end-to-end chain and develop unique selling points in this respect.

Specifically, this means that carriers must set themselves apart as important enablers for the distribution of workloads and as providers of smart services with far-reaching quality of service (QoS) guarantees in terms of latency, availability, security, and throughput. Along the way, the following steps are indispensable:

  1. Cloudification
    Conversion of existing networks to cloudified, distributed, and open architectures.
  2. Automation
    Automated operation of the network infrastructure using field-proven software practices and leveraging artificial intelligence and machine learning.
  3. Network differentiation
    Network production using cloud and software technologies that natively support end-to-end network slicing.

The edge service that is most attractive to customers is created where the strengths of the telcos and hyperscalers come together. Creating new partnerships will be the first rule of the playbook  – with hyperscalers, to be sure, but with developer communities as well. Edge is all about location and proximity to the customer, true, but it’s also about APIs and the ability to handle the new workloads. Telcos have an advantage in the former sector, hyperscalers and the software community in the latter

One plausible scenario: telcos open their network assets to hyperscalers while hyperscalers facilitate partnerships with application developers and integrators. Or telcos handle the network and the associated local breakout (LBO) and hyperscalers manage everything from the edge platform to API. Of course, it would also be conceivable for telcos to blaze their own path to the edge, creating their own platform and application landscape. But this would also mean assuming end-to-end responsibility for service quality “from network to API”– and that, as things stand today, would still confront them with major challenges in some areas. In any case, doing nothing is no longer an option.

Network services currently represent an attractive market for telcos because partnerships enable them to expand their cloud and AI capabilities, for example. Take the joint venture between Vodafone and IBM, who are combining their core competencies to tap into the cloud market in Europe. Or Amazon’s deal with Verizon to integrate AWS cloud technology into the latter’s 5G MEC infrastructure. This is an impressive demonstration of how communications service providers and hyperscalers can work together to gain greater proximity to the end customer and extend their respective capabilities into new areas.

Owing to the substantial dependence of edge applications on network technology, the position of telcos in the trend toward edge computing may seem stronger than it was during the technical upheavals of the past. Still, the question is whether they can define a role for themselves in the edge market from this position alone that puts them on peer level with the hyperscalers, as equal partners. The contrary blueprint sees them reduced to providing basic connectivity functions. And that is not a desirable scenario when one considers revenue growth or EBIT.

Telcos must develop a shared strategy that redefines their positioning within a changed competitive landscape and secures their prospects of gaining access to value streams beyond connectivity. This requires a deep understanding of industry requirements, one the one hand, and matching the edge services demanded by the market to the telcos’ strong assets (QoS, site proximity, slicing, LBO), on the other.

Their core business of connectivity will assure telcos of a slice of the edge pie, whatever form it might take. It would be fatalistic, however, to withdraw to this position as it will result in lower revenue. On the contrary, this reassuring fact should not be viewed as the ultimate certainty; instead, it is the most important reason why telcos in particular are in a privileged position to play a major role in determining the edge playing field and securing an EBIT-growing position on it.

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