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A Tug of War at the Edge

By January 13, 2020July 21st, 2020Postcards from the Edge

By Joseph Noronha

Director and COO, Detecon Inc.

Operators around the world are falling over themselves to claim to be first in the 5G race with a string of announcements and rollouts across Asia, Europe and North America. For many players, a parallel track is the “cloudification” of their own networks, catalyzed by deploying compute in their central offices (CO) as a start to running their own virtualized network functions. With an eye to the developments around newer latency-critical applications, some of them (e.g. Verizon, Deutsche Telekom) have begun to roll out infrastructure dedicated to serve third-party applications. Fully cognizant of the fact that the operators themselves have a non-existent track record of working with developers, some of them have even founded secondary companies (e.g. envrmnt, MobiledgeX) to attract this hitherto elusive community.

While this go-it-alone strategy may seem sound at first (“We build infra and work with another firm that offers services”), certain elements merit a rethink of this approach:

  • Developers: The companies that build applications want to reach as large an audience as possible, which means being able to deploy the same applications globally, across many operators. They also want to use the tools and platforms they are already familiar with. This requires not only a developer-friendly interface, but also standardized APIs and infrastructures. Operators, by their very nature are regional at best – both in geographical coverage and mindset, and in their urge to stand out, commonality and similarity of infrastructure are not high on their priority list. The potential result is that infrastructure standards when developed, are reduced to the least common denominator (suffering the fate of a Joyn) or become non-standardized across the world.

  • Cost: The second and equally important element is cost, specifically the price at which a compute cycle can be made available to a developer. Having failed to compete with the cloud platforms of Amazon, Microsoft and Google, operators such as Verizon and AT&T have sold off their large-scale datacenter assets and exited the business. On the other hand, players like Amazon Web Service, have developed massive economies of scale, evidenced by their ability to lower prices over 70 times during the past decade—something hard to imagine an operator doing of its own volition. While operators are experts in managing telco assets, they have not been successful in building and operating a distributed cloud infrastructure at lowest-unit-cost economics. To do so would require them to compete with the purchasing power of a hyperscale provider, while also adapting to the maintenance and replacement of equipment that has a shorter lifecycle (about 3 years for cloud servers compared to the typical 5-7 years for telco equipment). The operators would also have to build a highly-efficient cloud operation model. On their own, an operator-created cloud will likely have high costs and if costs remain high, developer interests will remain scarce except for the most demanding of applications which cannot function without edge, which in turn would dramatically reduce the overall available market.

  • Mindset: The third element is mindset, specifically that of sharing infrastructure, especially with third parties. While operators have computing infrastructure in their networks, they have traditionally only utilized it for their own internal operations, as part of their overall virtualization strategy. Deploying servers to run virtualized network functions has been driven by cost-optimization, not by a desire to enable new third-party services. While there are valid arguments against sharing—cybersecurity and network reliability being two of the most salient—the tradeoff is often underutilized idle resources. However, if there was a way to safely and securely access untapped capacity—if it were possible to operate a multi-tenant environment with the operator as an anchor tenant—it would turn a hitherto cost element into a revenue-generating engine.

Cloud providers have already confronted and dealt with  many of these very same issues operators face. For example, the cloud providers: 

  • Have fostered a rich developer ecosystem. They have access to and work with a large population of developers. They offer standardized infrastructure that’s accessible to developers around the globe, bridging national and regional constraints. While an operator could offer access to a country, a cloud provider could provide access to the world, across operators.
  • Benefit from massive economies of scale and are familiar with managing a large-distributed infrastructure in a highly automated manner. This ensures not only high availability, but also excellent unit-economics.
  • Are able to maximize asset utilization (an important consideration in a relatively constrained environment such as the infrastructure edge), enabling resource reservation down to a second.

While operators and cloud providers have contended with each other in the past, combining the strengths of these “frenemies” offers up an interesting proposition. It would incentivize the cloud players to invest towards making a uniform global edge infrastructure accessible to a legion of developers at an attractive price point. 

We are seeing glimpses of this happening. Recently, for example, AT&T has announced partnerships with both Microsoft and IBM that could easily extend to include collaboration on an edge cloud. Another example is TIM teaming up with Google. This would open up the “beachfront property,” accelerating the development of new applications that depend and can benefit from the new “edge” in the computing continuum.  

Detecon Inc. is a knowledge and consulting center that focuses on digital innovation trends originating from Silicon Valley. As part of the German-based Detecon Group, Detecon USA has a dual mission – serving as Detecon’s innovation spearhead and managing its Americas operations.