How Much Could Edge Computing Contribute to Telco Recurring Revenue or Asset Monetization?

It remains to be seen whether connectivity providers will have more success in the edge computing colocation business than they seem to have had in the data center business. One might also argue that as telcos have not emerged as leaders in computing as a service, they have little chance to emerge as leaders of the edge computing as a service market, either. 

With a few notable exceptions, such as NTT’s continuing support of its data center operations, data center units have proven irresistible assets to shed when cash can be wrung out of them to support other mission-critical telco business objectives. 

At least in principle, edge computing colocation could be a logical line extension for many tier-one connectivity providers. The investments might be incremental, and the business might not be as easy or tempting to sell, when edge computing colo sites are inside telco facilities, for example. 

The more-difficult asset monetization path might lead executives to commit more fully to the edge data facilities business, as it will not be so easy to sell those assets to raise cash. Cell towers and stand-alone data center facilities were easy to separate from the rest of the connectivity business. 

That is not so easy when edge computing racks and infrastructure are inside telco buildings and real estate, unless those facilities have been nearly entirely replaced as elements of the communications infrastructure. 

On the other hand, network virtualization could be a way for telcos to position much of their former central office infrastructure as non-core assets, though they might still need to become tenants, if most local central offices were sold. Much as they sell owned towers and then become tenants, the same could, in principle, be done with most central offices once virtualization is possible. 

At least for fixed network operations, those former CO locations would still be needed as aggregation points for the local access network. 

If an entire local access business cannot or should not be sold, the question might then be asked: how much of those physical “access” assets could be positioned for sale? Generally speaking, COs and access networks have been considered mission critical assets, with connectivity providers benefiting from ownership of those facilities. 

So there are some possible new questions. 

To what extent does edge computing infrastructure, like the data center business, create recurring revenue, and to what extent might such assets become mission critical for connectivity providers? 

Even if mission critical, could such assets be packaged for possible eventual sale, using the same sale and lease-back mechanisms previously used for cell towers? 

To the extent that edge computing is integral for connectivity service operations, to what extent could those functions be supplied as a “buy rather than build” input? 

Those could become more interesting discussions at some point, as most service providers seek to become a bit more asset light, if only to reduce the sunk costs of their businesses.