Is IoT System Integrator a Viable Role for Telcos?

Is digital transformation based on use of the internet of things and edge computing the business need that telcos can supply to small and medium businesses? Some think so. 

This is the way Singtel segments its cloud computing offers for small and medium business customers. As you can see, Singtel offers the brand names in computing as a service, rather than trying to recreate such capabilities on its own. 

Singtel also adds a preconfigured solution for internet of things monitoring, the cloud gateway and bulk data transfer. But Singtel focuses on integrating and managing the on-premise devices and software used to collect data, not the actual edge computing function itself. 

source: Delta Partners Group 

You might argue that the value of digital operations is based on three capabilities: intra-company and inter-company communications, enabling better information tracking and extending business reach. All three of those objectives are classic “communications” requirements. 

The new value-add is support for the analytics function. While not supplying the analytical engines or the core processing to conduct analysis, telcos can package the “function” of sensor network management as a key added-value role. Neither computing as a service vendors nor analytics software firms want to manage the on-site networks of sensors. 

Most smaller businesses might not want to have their limited information technology staff doing so, either. In essence, the telco IoT role becomes that of system integrator and operations manager for the IoT sensor network. 

source: Delta Partners Group

Data Center Colocation Rates Have not Changed Much Because of Covid-19

The Covid-19 policies essentially shutting down education and in-office work have not caused data center colocation prices to drop, TeleGeography says. About 83 percent of survey respondents say prices have not changed. 

Source: TeleGeography

Does Edge Computing Support 5G, or is 5G an Input for Edge Computing?

Many remain skeptical of the financial upside of 5G mobility, and on reasonable grounds. Perhaps for that--and other legitimate reasons, Bell Labs Consulting forecasters now talk about 5G+ as the driver of value. 

But it might also be possible to argue that 5G and other new technologies are supports for the broader value of edge computing. In other words, edge computing does not make 5G more valuable: it is 5G that creates the new value of edge computing. 

Bell Labs Consulting uses 5G+ as an umbrella term for a broad ecosystem of technologies that will unlock the future economic potential of industry.

The emerging technologies include edge computing, private networks, augmented intelligence, automation, sensing and robotics, as well as platform and as-a-service business models that will have a collective impact. 

And one might argue that virtually all those developments play a specific role supporting edge computing. 5G networks will allow ultra-low latency, very high bandwidths, high device density and guaranteed performance, either locally or across wide area networks. That might be crucial for process control when edge computing is mandatory.

5G private networks might play roles once occupied by Ethernet cable networks or Wi-Fi, offering the performance advantages of Ethernet with the low cost and flexibility and mobility of Wi-Fi. Local area networks always have connected local area devices and computing resources, and would continue to do in an edge computing environment.

Artificial intelligence--called augmented intelligence by Bell Labs--might be viewed as the mediator between sensors, reported data and process control response. Though AI is far more than "automation," AI is inseparable from automated processes, which often are enabled by edge computing.

The sensing functions make robotics control as well as other process controls possible, at the edge. "As a service" business models also will support edge computing.

In other words, it might be possible to argue that big coming change is edge computing, which 5G enables. It is edge computing that changes capabilities in terms of immediate value for real-time processes.

As a corollary, assessment of the economic value of that complex of technologies produces big numbers, as would be the case if one tried to quantify the impact of value created by all uses of computing or electricity in a modern economy. 

But even infrastructure spending can reach lofty levels when looking at the full complex of 5G+ technologies. 

Bell Labs Consulting estimates spending of up to $4.5 trillion in 2030 for the 5G+ enablers and about $8 trillion in new economic value in 2030 from the 5G+ complex. 

source: Nokia Bell Labs Consulting 

Perhaps most significantly, Bell Labs Consulting notes that early 5G+ adopters report the number-one and number-two benefits as being “incremental revenue growth” and the “ability to enter new or adjacent markets.

For those who believe long-term connectivity provider strategy has to be based on movement into new roles in the internet ecosystem and value chain, those are suggestive findings. Indeed, though incremental revenue growth always is important, the enabling of moves into adjacent markets might be the most important. 

The caveat might be that it will remain hard to quantify the various contributions of 5G+ capabilities. It might also be argued that 5G is so new that it is likely other parts of the technology complex--such as computing as a service--have been the actual value drivers and enablers, not 5G connectivity as such.

Private 4G: How Much is Infrastructure; How Much is Service Revenue?

 The issue for all forecasts of the size of the “private 4G market” is the same issue we face when quantifying the size of the “Wi-Fi market.” Most of the market consists of sales of  infrastructure products purchased, owned and operated by firms and individuals. Very little is carrier services.

source: Global Market Insights

Router sales are not the same as service provider connectivity service sales, obviously. We still do not know what percentage of 4G or 5G private network total sales will consist of infrastructure deployed by firms themselves, and how much represents service revenue for mobile operators or others. 

Why Telcos Must Hope Edge Computing, IoT, Virtual Networks Take Off

To the extent that mobile voice, then mobile broadband have driven global industry revenues for most of the last 20 years, and to the extent those services reach saturation, the question of “what comes next?” must be asked. 

That is why edge computing, internet of things, virtual networks, autonomous vehicles and other new products get talked about and examined so much, or why a growing number of telcos are diversifying into additional and different lines of business. 

Some trends in the global telecommunications business are obvious, even if local patterns can vary substantially. On a global basis, the fixed network voice business peaked around the turn of the century, and has been declining since then, according to International Telecommunications Union data. 

Use of the fixed network has gradually shifted to support for broadband internet access as voice subscriptions have fallen. 

source: World Economic Forum, ITU 

Mobile service now is the primary way human beings use communications and mobile networks increasingly are the way humans access internet apps and services as well. 

But as mobile accounts have exceeded 100 percent (accounts, not persons), and as mobile broadband (internet access) has climbed above 80 percent, the limits to either mobile subscriptions or mobile broadband as the industry revenue driver seem inescapable.

That makes the question of how to discover or create big, scalable revenue sources beyond connectivity services crucially important. An argument can be made that strict reliance on connectivity revenues is a strategy that leads to firm decline and death.

Radar Imaging Through Fog for Autonomous Vehicles

Pipeline or Platform for MEC?

Can connectivity providers create an edge computing platform? And if so, what does such a platform entail?  It is a question with significant revenue implications. Early moves by mobile operators suggest they have not yet come up with a viable path forward, despite the use of the term “platform.”

Present 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. 

None of those roles and revenue models constitute a platform. Rather, in the framework of business models, they are “pipelines” rather than “platforms.” A pipeline is the most common business model for any firm in any industry. It involves creating a product and then selling that product to a customer. 

Even some products sold by “platforms” such as Amazon Web Services actually have “pipeline” business models. When AWS sells computing or storage or “platform” as a service, it actually acts as a traditional pipeline supplier. AWS creates a product and then sells it directly to customers. AWS Wavelengths, one form of AWS edge computing products, remains a “pipeline” business, no matter how much we might characterize AWS overall as a “platform.”

So what characteristics might an edge computing platform feature?

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. 

In a sense, a federated mobile operator edge computing platform would allow any edge computing supplier to connect with any edge computing services buyer, as well as allow any third party software supplier to connect with any edge computing supplier. 

The multi-service edge computing (MEC) platform would facilitate selling and buying and allow participants in the exchange to find each other. By definition, an edge computing platform offered by a mobile operator would not offer edge computing itself. It would allow all suppliers and partners to reach all potential customers in an ecosystem. 

The MEC would exist as an exchange; a marketplace; a transaction-enabling platform; necessarily in a full multi-cloud (every cloud) ecosystem. 

A MEC platform would be a resource orchestrator, not the “owner” of the computing services or application assets themselves. The value of the MEC would come largely from the contributions made by community members--not mobile service provider ownership or control of scarce inputs it vertically integrates.

By definition, a supplier of edge real estate or access does not become a platform by doing so. As a creator of an ecosystem of buyers and sellers, a MEC edge computing platform would create value by federating all relationships across the ecosystem. Ecosystem value creation is the key and distinguishing function. 

To ask and answer the question, can a “pipe” business model (connectivity or real estate) be a  platform? The simple answer is “no.” That is not a criticism of mobile operator skill. 

Few businesses, in any industry, can become a real platform. Most revenue models are built on creating a product and then selling that product to customers.

Though firms often are urged to become platforms, few actually can do so, and not for reasons of technology deployment, skill or type of product. Successful platforms are relatively rare because they require scale, and few businesses can afford to invest to scale.

Scale is necessary because profit margins for a platform typically are very low. The old adage about volume offsetting low marginal revenue does apply. 

Life as a platform would ultimately be based on very low per-unit prices. In fact, as many platforms feature zero marginal cost, they also tend towards near zero pricing. 

Virtually all platforms feature lower prices per unit than rival pipe businesses, for a number of reasons. Typically making extensive use of internet and computing resources to radically lower transaction and information discovery costs, etailing platforms inevitably push cost out of retail transactions. Platforms reduce friction. 

So most firms in the edge computing ecosystem--including mobile operators--will not be able to transform as platforms.

So are there other options? Sure. Firms might try to gain scale to lower unit costs, change the cost model in other ways to enhance profitability, exit the business or change the game being played. 

Moving “up the stack,” across the ecosystem or into new or adjacent roles within the value chain can “change the game.” That is the strategy behind Comcast and AT&T moving into the content ownership business, or moves by other tier-one service providers into new lines of business outside the connectivity core. 

In other words, being a more-robust pipeline, rather than trying to become a platform, is the path nearly all firms must take. It does not yet seem as though it will be any different for mobile operators in the edge computing ecosystem.