Can Mobile Operators Create a Platform for Edge Computing?

It already seems clear that mobile operator 5G strategies for edge computing, for the most part, avoid direct competition with the hyperscale cloud computing giants, operating instead as edge real estate partners (space, racks, security, cooling, power), 5G networking for system integrators or providing low-latency routing, though other roles supporting vertical industry applications are being pursued. 

The search for new edge computing roles is driven in large part by the search for big new revenue streams, as the “dumb pipes” business model of a transport network is “broken.” 

Most mobile service providers executives--having learned from experience--seem to be avoiding any notion of competing directly against the hyperscalers for the actual “computing as a service” function. Instead, 5G and fixed network access providers are looking for complementary roles, typically including the supply of rack space, colocation, security, power and air conditioning, in addition to connectivity or customized routing. 

Beyond the throwaway platitudes, one possible model is to “become an edge computing platform.” The issues for connectivity service provider executives are many. 

“Can we accomplish this?  “What capabilities would we have to create?” “How do we convince the whole ecosystem to participate?” 

But there is much misunderstanding about what a platform is, and what it takes to function as a platform. To the extent that scale is required, a legitimate issue is whether, realistically, every connectivity provider can become a platform.

A platform business model essentially involves becoming an exchange or marketplace, more than remaining a direct supplier of some essential input in the value chain. It is, in short, to function as a matchmaker. 

The platform facilitates selling and buying and allows participants in the exchange to find each other. 

Platforms are built on resource orchestration; pipes are built on resource control. Value quite often comes from the contributions made by community members rather than ownership or control of scarce inputs vertically integrated by a supplier. 

A pipe business focuses more on efficiency in its value chain, where a platform focuses more on orchestrating interactions between members. 

A pipes business success metrics revolve around customer value. A platform emphasizes ecosystem value creation. 

So “lifetime customer value” is a reasonable metric for a pipes business. 

A platform often creates value because of the scale and scope of the interactions between members of the ecosystem, so the range and depth of interactions might be a better metric for a platform. In other words, the platform is easy to join, easy for participants to use and easy to federate. 

Effective application program interfaces are one aspect. But effective logistics, settlements, data exchange, payments and information on ecosystem participant behavior might be other important aspects for ecosystem transactions and interactions. 

Perhaps the best models are multi-product e-tail firms such as Amazon, Alibaba or eBay; ride hailing companies such as Uber or Lyft; content exchanges such as YouTube; payment services such as PayPal; lodging exchanges such as airBNB; food delivery services such as GrubHub;  messaging platforms such as WhatsApp or social networks such as Facebook. 

source: Innovation Tactics 

Platform revenue models also are known as multi-sided business models. In traditional usage, multi-sided business models also were those which earned revenue from buyers (users) and sellers. Newspapers which earned revenue from users (subscriptions) and sellers (advertising). 

The newspaper was a platform--or multi-sided business model--that connected advertisers with audiences; buyers with sellers. Virtually all ad-supported media also used multi-sided business models. The point here is that the platform business model is technology independent. 

As a corollary, just because a business is based on use of technology--such as the internet--does not automatically mean that business is a platform or uses a multi-sided business model. 

Also, “digitizing” business processes does not necessarily make an organization a platform, or change its business model. Virtually all businesses use technology and software. That does not make them platforms.  

In the pre-internet era, operating systems were platforms. Important caveat: platforms can lose their value over time. Few now believe operating systems are key platforms, or have the power they once had as platforms. 

In the internet era, app stores might be considered platforms. What all these business models tend to feature are the ability to match buyers and sellers, rather than direct ownership of some function in the value chain. 

There are some analogies to the traditional telecom business, which though a supplier of direct connectivity services to paying customers, also serves as an intermediary to connect end users on the network. 

The difference is that the telecom service provider business model is not based on facilitating transactions between end users and then building a revenue model on those transactions. Instead, the traditional “fee for service” telecom model involved supplying the function of communications itself. 

“Rather than playing a direct role in the supply chain, companies build digital ecosystems or marketplaces connecting consumers with producers of goods and/or services,”  says the TMForum. 

Almost as a byproduct, internet-era marketplaces are based on electronic marketplaces.

source: Lumen Technologies

If not, the further issue is whether being part of somebody else’s platform, and continuing mainly to supply connectivity, is a viable growth model. 

The platform business model aggregates consumers and producers through an ecosystem. “The real strategic value of a digital platform is to harness the service offerings from a diverse supplier base, and then to use shared orchestration, monetization and administration tools to offer new service bundles,” says BearingPoint.

For PCCW Global, this evolution means creating a “platform” that connects many trading partners in an ecosystem, and not simply providing connectivity services to other service providers, enterprises, data centers, mobile operators and consumers. 

source: PCCW Global, MEF 

As envisioned by PCCW Global, all suppliers of services to end users would be connected to those users over the platform. So application providers could reach their users and customers using the platform; but also other trading partners. 

That would allow for all sorts of innovative solutions to be created, built, modified and supported with something approaching near-real-time provisioning, with automated systems allowing low-cost charging models that essentially allow all sorts of value-generating products to be created, delivered and supported at costs impossible or difficult to support in a manual processes environment.

It will not be especially easy to create such a platform, given the rivalries between hyperscale cloud giants and faster and alternative ways of creating proprietary platforms.

PCCW Global has Big Hopes for a New ICT Ecosystem that Includes the Former Telco Ecosystem

Bandwidth on demand has been the telco mantra for decades. These days, it might be more important to create global automated systems that also allow settlements on demand that support internet of things apps and services. That will require creation of an accepted global information model. It's a big vision. 

Business Issues are Greatest Telco Concern about IoT

Internet of things opportunities are most promising in the smart cities, e-health and manufacturing verticals, a survey largely of European mobile operators and others in the supply chain suggests. Business issues collectively seem to dominate the list of challenges.

source: Mobile Europe 

Respondents were about equally divided on the most-promising roles. About 43 percent said the connectivity opportunity was highest, while 40 percent saw the greatest role would be as an end-to-end solutions provider. 

Significantly, 48 percent of service provider respondents  thought they should provide end-to-end IoT solutions, while 38 percent thought connectivity provider was the logical role. 

source: Mobile Europe 

Conducted by Mobile Europe/European Communications, the survey featured 102 responses, 40 percent of which were from network operators.

Some 87 percent of respondents were from Europe; seven percent from Asia and six percent from the Americas. 

As you probably would expect, the business model is viewed as the biggest challenge, followed by security and lack of standards. 

source: Mobile Europe

How 5G, AI, Edge Computing and IoT are Related

In his talk at PTC’21, (register here) Jefferson Wang, Accenture managing director for network and connected solutions, will explain how 5G, artificial intelligence, edge computing and the internet of things are directly related. 

At a high level, Wang sees AI as a mediating capability between networks (public and private) and the IoT devices that use those networks. Basically, AI and edge computing orchestrate the interactions between networks, devices and analytics that provide the business value. 

Source: Jefferson Wang, Accenture

Verizon Teams with Deloitte for Smart Factories Using Edge Computing

Verizon Business is teaming with Deloitte to create 5G and mobile edge computing solutions for manufacturing and retail, ultimately expanding to other sectors. The collaboration presumably will build on Deloitte’s Smart Factory Fabric, a cloud-enabled smart manufacturing solution developed with Amazon Web Services (AWS).

Deloitte will act as a system integrator while Verizon’s supplies the mobile and private enterprise wireless networks, 5G Edge MEC platform, internet of things, Software Defined-Wide Area Network (SD-WAN), and VNS Application Edge capabilities.

The companies are co-developing a smart factory solution at Verizon’s Customer Technology Center in Richardson, TX that will use computer vision and sensor-based detection coupled with MEC to identify and predict quality defects on the assembly line and automatically alert plant engineering and management in near real-time.

Verizon says the companies will also introduce an edge compute environment for next generation applications.

 “By bringing together Verizon’s 5G and MEC prowess with Deloitte’s deep industry expertise and track record in system integration with large enterprises on smart factories, we plan to deliver cutting-edge solutions that will close the gap between digital business operations and legacy manufacturing environments and unlock the value of the end-to-end digital enterprise,” said Tami Erwin, CEO of Verizon Business. 

IoT: Same Story, Different Location

Revenue from internet of things connectivity will be important for connectivity providers, but, as always, is a percentage of ecosystem revenue. In that sense, connectivity providers face the same issue in the IoT business as they do in the edge computing, video entertainment, voice, messaging and enterprise services businesses: most of the money lies in apps, platforms and professional services, not connectivity. 

source: GSMA Intelligence

How Much Commercial MEC Revenue Can be Generated, Early On?

Network operator spend on multi-access edge computing will grow from $2.7 billion in 2020 to $8.3 billion in 2025, says Juniper Research.  By 2025, the number of deployed MEC nodes will reach two million globally in 2025, up from 230,000 in 2020. These devices, which take the form of access points, base stations, and routers, Juniper Research says.

What perhaps is not so clear is the expected value those MEC investments will produce. Since the 5G core network is itself virtualized, edge computing locations and devices will be necessary for distributed radio access network functions, at the very least. 

Beyond that, mobile operators hope their MEC investments will translate into retail revenues from commercial customers, including hyperscale app providers and cloud computing firms using connectivity network assets to support their own retail edge computing services. 

At the moment, mobile operator commercial revenues are probably in low single-digit millions, and much of that generated in the form of hosting services at the edge for hyperscale “computing as a service” providers. 

At least for a while, MEC might produce higher value for operators as a support for their core networks than as a commercial revenue source.

U.S. Crop Yields Benefit from Broadband, Probably IoT, Study Finds

Precision agriculture using internet of things sensors and analytics, as well as e-commerce enabled by broadband internet access might be responsible for higher U.S. farmer crop yields, researcher Katherine LoPiccalo finds. “Corn, cotton, hay, soybeans and wheat yields are all positively and significantly correlated with increased 25+/3+ broadband penetration rates,” LoPiccalo says. 

“A one-percent increase in the number of 10+/0.768+ connections per 1,000 households is associated with an approximately 6.5 percent decline in fertilizer expenses per operation and a 3.4 percent decrease in seed and plants expenses per operation,” she notes. 

An analysis of farm yields and broadband finds that a one-percent increase in the number of 25 Mbps/3 Mbps or better broadband connections per 1,000 households is associated with a 3.6 percent increase in corn yields, as measured in bushels per acre, the Federal Communications Commission’s Office of Economics and Analytics finds. 

It is not possible to conclusively prove whether e-commerce or IoT are responsible for the improvements. It seems logical enough that e-commerce leads to  loweri input or other supply costs, in part because farmers are able to comparison shop and therefore buy inputs at lower prices. 

As always, correlation is not necessarily causation, but LoPiccalo suggests some logical ways correlation might be causation, and “may influence farm outcomes.” In addition to e-commerce that might “impact farm profitability by directly lowering input or other supply costs,” 

An improved bargaining position might include the ability to negotiate with their traditional suppliers for better prices, as farmers are no longer locked into offered rates from the local farm store or co-operative,” she says. 

“A more salient mechanism derives from the use of Internet connectivity to extract real time, accurate data on crop yields, soil moisture levels, plant health, and equipment conditions,” a direct result of the use of internet of things sensors and analytics. 

Who Owns the Edge Computing Customer?

One obvious issue for hyperscale “cloud computing as a service” providers working with mobile operators to supply edge computing is the always-important issue of value and revenue shares. 

"I think the challenge around that might be who takes what piece of the value chain 

 and who owns the customer?” notes BT Chief Architect Neil McRae.  

At least so far, it appears that the hyperscalers will actually own the customer. 

Generally speaking, with the exception of Mobiledge, which hopes to create an edge platform controlled by service providers, the edge platform space is occupied by the same names you would expect to see leading cloud computing as a service. 

Real estate--facilities, racks, electricity, security, rackspace and access network colocation--was among the reasons for the interest in multi-access edge computing on the part of connectivity providers. 

Recent deals made by hyperscalers with mobile operators--including Google Cloud with AT&T or Verizon with Amazon Web Services confirm that trend, with telcos acting as providers of edge real estate. 

Device suppliers, also as one might expect, are supplying the edge hardware. 

How much of a platform role telcos might create, as opposed to providing real estate and dumb pipe colocation remains to be seen. Some observers estimate telco edge revenues at between $2 billion and $4 billion by 2025, for example.

source: STL Partners 

Though connectivity revenue will be significant for telcos, it might not be so large as some think. The analogy is the internet of things, also a big potential revenue opportunity for telcos and others in the ecosystem.  As now projected, connectivity provider direct revenues in the IoT ecosystem are a relatively small portion of the total revenue opportunity.  

Perhaps it is not too early to argue that, in IoT as well as edge computing, it is likely to be hyperscalers, enterprises or system integrators who wind up “owning the customer.”

Data Center Infrastructure Spending in 3Q 2020: Public Cloup Up 21%, Enterprise Down 8%

Worldwide spending on data center hardware and software nudged upwards by two percent from the third quarter of 2019, thanks entirely to a 21 percent jump in spending on public cloud infrastructure, which pushed it to an all-time high, says Synergy Research Group. 

Meanwhile enterprise spending on their own data center infrastructure dropped eight percent from last year, the third consecutive quarter to feature a substantial decline, the firm says. 

source: Synergy Research Group 

Enterprise spending on cloud services got a big boost in the third quarter, as COVID-19 drove changes in enterprise behavior and sped up the transition from on-premise operations to cloud-based services, Synergy Research says. 

source: Synergy Research Group

Telco MEC Role Shaping Up

In the early days of the edge computing ecosystem, and despite the hopes many participants have for revenue growth based on edge computing, roles in the ecosystem are starting to shape up. Since edge computing as a service remains a “computing service,” it is perhaps entirely logical that the hyperscalers who dominate cloud computing would be leading suppliers of edge computing that is an extension of their cloud offers. 

source: STL Partners 

Generally speaking, with the exception of Mobiledge, which hopes to create an edge platform controlled by service providers, the edge platform space is occupied by the same names you would expect to see leading cloud computing as a service. 

Real estate--facilities, racks, electricity, security, rackspace and access network colocation--was among the reasons for the interest in multi-access edge computing on the part of connectivity providers. 

 Recent deals made by hyperscalers with mobile operators--including Google Cloud with AT&T or Verizon with Amazon Web Services confirm that trend, with telcos acting as providers of edge real estate. 

Device suppliers, also as one might expect, are supplying the edge hardware. 

How much of a platform role telcos might create, as opposed to providing real estate and dumb pipe colocation remains to be seen. Some observers estimate telco edge revenues at between $2 billion and $4 billion by 2025, for example. 

The concern some might express is that the incremental new revenue and profit margin from real estate (hosting) at the edge--and any significant “platform” opportunity--might not be large enough to offset expected revenue losses from legacy services and average revenue per user diminution. 

Of course, one way of looking at edge computing is to view it as a necessary capability mobile operators will require in the 5G and coming eras simply to operate their virtualized networks. In other words, edge computing might be more important as a “cost of infrastructure” and “capabilities” spending item than a revenue source.

There will be some incremental revenue for telcos from edge computing, but importance might be derived from support of core network operations and the indirect effect of edge computing in getting and keeping business customers on the network. 

Cloud Computing Market Remains Unstable

"A stable competitive market never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest,” Bruce Henderson, founder of the Boston Consulting Group has argued.

Sometimes known as “the rule of three,”  he argued that stable and competitive industries will have no more than three significant competitors, with market share ratios around 4:2:1.

If you look at market share in the “cloud computing as a service” industry, one does not yet see that pattern, suggesting major market share shifts are likely. But most of the activity, all other things being equal, will happen at positions two to four. 

AWS now has 32 percent share. By some estimates Microsoft has 19 percent share. Google Cloud about seven percent share. The rule of three would predict either that AWS eventually would have more share, or that number two would have less share, or both. 

I believe the reported numbers overstate Microsoft’s share and understate Google’s share, however. 

source: Canalys 

If a “like to like” analysis of “computing as a service” revenues are made, Microsoft’s actual cloud revenues are far smaller than reported. 

The problem is that the way Microsoft reports revenue dramatically skews the results. 

Azure, which includes cloud computing revenue, also includes sales of the Windows operating system, productivity suites, Xbox, Surface and advertising. 

Also, keep in  mind that Azure cloud computing also includes server sales, not just “cloud computing as a service” revenues. 

The “intelligent cloud” segment of Azure represents only about 35 percent of total Azure revenue. Another third of Azure revenue comes from productivity suite revenues. Also, 32 percent of Azure revenue comes from operating systems, productivity suites, Xbox, Surface and advertising. 

I personally do not consider those revenue sources a “like to like” comparison with AWS cloud computing as a service revenues. Actual Azure cloud computing revenue. might be as low as $4 billion a quarter. The point is that any analysis of cloud computing market share based on Azure revenue is incorrect. 

Azure cloud computing might be only a bit larger than Google Cloud, which generated about $3.4 billion quarterly revenues recently. 

If so, AWS market share is understated and Microsoft’s share is vastly overstated. At $4 billion quarterly revenue, Microsoft likely has about 11 percent share. Google might have about nine percent share. 

If AWS generated about $11.6 billion in revenue in the third quarter of 2020, then AWS did have about 32 percent of global cloud computing market share. 

A corollary is that, all things being equal, it will be very hard to supplant Amazon Web Services as the market leader. It is unclear at this point which firm emerges as a stronger number-two provider. Many seem to be betting on Microsoft, based on its apparent or reported growth rate. 

In the absence of better data, it is hard to say.

EdgeX Retail Use Case

EdgeX Foundry Retail Use Case: HP

Cloud Market Grows 33% in 3Q 2020

The global cloud market grew 33 percent  to US$36.5 billion in the third quarter of 2020, up US$2.0 billion quarter over quarter and up US$9.0 billion year over year, according to Canalys. 

source: Canalys 

Edge Computing Driven by Cloud Hyperscalers, Telcos Will Reach $12 Billion in 2021, Deloitte Predicts

Deloitte predicts that edge computing will grow about 35 percent in 2021, driven by cloud hyperscalers and connectivity providers, generating about $12 billion. Deloitte does not specifically break out revenues by provider, so the portion earned by cloud providers and telcos providers of edge computing activity is not so clear. 

Some larger telcos will try to sell retail edge computing as a service. Others will earn revenues by partnering with edge computing providers in some way, providing real estate services, for example, integrating 5G access in some way or co-selling edge computing provided by telco partners.

Separately, cloud growth, says Deloitte, was slowing before the Covid-19 pandemic. 

source: Deloitte

Google Cloud Adds 200 ISV Partners to Edge Cloud

Google Cloud will support more than 200 independent software vendors on its edge  platform, starting with a launch of 30 apps supporting internet of things, media delivery, retail operations and other horizontal functions (commerce, analytics, network slicing, artificial intelligence, security and subscriber identification module management, for example). 

Those apps build on the Global Mobile Edge Cloud, enabling 5G solutions built jointly with telecommunications companies such as AT&T. 

Anthos for Telecom also is supported at the network edge, allowing telecommunications companies to run their applications wherever it makes the most sense within the network, an obvious use case and requirement for virtualized networks such as 5G.