How Might a Tier-One Telco Gain Edge Computing Scale?

Given past experience, it is possible to doubt the success cloud efforts by telcos will achieve, despite some cloud asset advantages. To be sure, edge computing again brings hope. Still, the value of connectivity was negligible for telco involvement in cloud computing, and even ownership of edge assets (real estate and connections) might not bring success for infrastructure edge, either.

source: RightScale

But history also teaches something else that is vital to understanding how tier-one telcos actually grow revenues: they acquire capabilities and revenue sources by acquisition. That will eventually play out for infrastructure edge computing as well. As Comcast and AT&T bought their  way into the content ownership game, as all the four U.S. tier-one mobile providers acquired their way to scale in mobile services, as the former SBC became AT&T, acquisition was the way scale was built.

If past is prologue, and I believe it will be, then eventually, any U.S. tier-one connectivity provider that expects to generate revenue at scale in infrastructure edge computing will have to do it by acquisition, or possibly through some sort of major joint venture, if in fact no targets with scale can be found.

And though it is hard to see why the larger cloud kings (AWS, Microsoft, Google, IBM) would want to tie themselves exclusively to a single connectivity provider, in principle a major edge computing joint venture, where the actual cloud operations are run by the partner, and the connectivity provider supplies the local real estate and access, would allow the scale necessary in what is sure to be a fragmented business.

We can almost certainly be safe in predicting that no tier-one telco will acquire all of AWS, Google, Microsoft, IBM, simply because the capital is not available, and because any such move, even if feasible financially, would face lock in issues.

That might be the case even if full multi-cloud capability was ensured from the start.

What also has to be addressed is whether a retail or neutral host model makes more sense. In the former case, the telco sells services direct to end users; in the latter model the telco supplies the neutral-host facilities and connections to cloud kings. Telcos might prefer the former, but the economics, early on, might favor the latter approach.