More enterprises are testing private networks, with 5G starting to get more traction, according to consultants at Deloitte, even if the market is developing more slowly than some had predicted.
There were 748 private network deployments in enterprises globally in January 2022, according to the Global mobile Suppliers Association (GSA).
Almost by definition, private networks are edge computing deployments as well. Though it is possible to deploy a private 4G or 5G network without doing computation locally, the business case might be harder to establish, beyond providing greater security.
In most cases, the value of the private network is directly tied to the ability to create and operate sensor-enhanced networks for operating efficiency and effectiveness. To the extent process control is the objective, edge computing makes sense.
Amazon Web Services announced the general availability of AWS Cloud WAN, a new managed wide area network service that connects on-premises data centers, colocation facilities, branch offices, and cloud resources.
The offer is another way of illustrating the dependencies between hyperscale cloud computing providers and connectivity providers; the areas where channel conflict arises; the blurring of lines between value chain roles in the computing and connectivity services businesses and a potential shift in the way enterprises build and manage their global networks.
AWS Cloud WAN arguably competes with “do it yourself” enterprise networks or managed services offered by system integrators, more than being a substitute for standalone WAN services offered by public network providers.
“AWS makes it easy for customers to connect cloud and on-premises environments using AWS networking services (Amazon Virtual Private Cloud, AWS Transit Gateway, and AWS Direct Connect),” the company says. “AWS Cloud WAN makes it faster and easier for customers to build, manage, and monitor a unified global network that seamlessly connects their cloud and on-premises environments.”
Lumen Technologies is extending its edge computing infrastructure to Europe. The company says its Lumen Edge Computing Solutions can meet approximately 70 percent of enterprise connectivity demand within 5 milliseconds of latency in the UK, France, Germany, Belgium, and the Netherlands. Additional locations are planned by end of year, Lumen says.
Lumen offers several edge infrastructure and services solutions, ranging from bare metal server hosting to edge gateway services.
Lumen Edge Bare Metal offers dedicated, pay-as-you-go server hardware hosted in distributed locations and connected to the Lumen global fiber network. Edge Bare Metal delivers enhanced security and connectivity with dedicated, single tenancy servers designed to isolate and protect data and deliver high-performance, Lumen notes.
Lumen Network Storage provides secure, scalable, and fast storage where and when they need it. The service allows enterprises and public sector organizations to ingest and update data at the edge using whatever file storage protocol meets their needs.
Lumen Edge Private Cloud provides pre-built infrastructure for high performance private cloud computing connected to the Lumen global fiber network. Lumen Edge Private Cloud is fully managed by Lumen and helps businesses go-to-market quickly with the capacity needed for interaction-intensive applications.
Lumen Edge Gateway is a scalable Multi-access Edge Compute (MEC) platform for the premises. The service offers a compute platform for the delivery of virtualized wide area networking (WAN), security, and IT applications from multiple vendors on the premises edge.
How much mobile edge computing revenue will 5G operators actually earn? Some estimates have total MEC revenues exceeding $25 billion by perhaps 2027 and close to $70 billion by 2032. Other estimates suggest annual revenue of close to $17 billion by 2027.
But those forecasts virtually always lump together revenues earned by hardware, software and services suppliers: infrastructure and platform plus computing as a service revenues. And computing as a service revenues will likely be dominated by hyperscalers, not mobile operators.
Connectivity providers will profit from real estate support and some increase in connectivity revenues, but relatively rarely from the actual “edge computing as a service” revenues.
For example, assume 2021 MEC revenues of $1.6 billion globally; a cumulative average growth rate of 33 percent per year; services share of 30 percent; telco share of service revenue at 10 percent.
The actual MEC revenue from MEC is quite small by 2028. In fact, too small to measure. Of course, all forecasts are about assumptions.
One can assume higher or lower growth rates; different amounts of connectivity provider participation in the services business; different telco shares of the actual “computing as a service” revenue stream; greater or lesser contributions from mobile connectivity revenue from MEC.
The point is that actual MEC revenues earned by mobile operators or other connectivity providers might actually be quite low. So value earned from all those infrastructure investments would have to come in other ways.
Higher subscription rates; higher profit margins; lower churn; higher average revenue per account are some of the ways MEC could provide a return on invested capital. Some service providers might actually provide the “computing as a service” function as well, in which case MEC revenues could be two to three times higher.
But many observers are likely to be disappointed by the actual direct revenue MEC creates for a connectivity provider.
“There is a strong consensus that 5G’s greatest commercial feature will shift away from acting purely as a connectivity pipe, says Telecoms.com. Such beliefs can be both reasonable and inconsequential at the time.
Ultra low latency performance might be both an important or key feature, and yet also have only slight impact on the ability of connectivity providers to escape their role.
A survey of executives found industry insider belief that low-latency, sensor communications, network slicing and edge computing capabilities with most commercial significance. Again, that can be simultaneously true and yet very impactful in terms of revenue generation or ability to enhance value and role in the ecosystem.
As with most other features and capabilities, 5G can be a source of competitive differentiation when other competitors cannot match a particular feature as well. At the same time, the amount of differentiation is inherently limited, as all competitors have access to the same platforms.
Spectrum assets, on the other hand, provide a clearer case of differentiation, where ownership of licenses for various types of spectrum is disparate. T-Mobile, for example, has so far been able to leverage its greater mid-band spectrum resources against rivals whose positions still are developing.
As always, much hinges on how customers and users behave. The values of ultra-low latency performance, for example, can be obtained in various ways, not always to the revenue benefit of mobile operators. Network slicing value can be replicated in some instances by enterprise edge computing. The same is true of ultra-low latency and predictability, which can be created by private networks as well as 5G public networks; edge computing or private 5G.
It is understandable that industry executives hope for revenue and role outcomes that help service providers augment their connectivity role. Those hopes are likely to be hard to fulfill.
Even if network slicing, edge computing, private networks and sensor network support generate some incremental revenues, the volume of incremental revenue will not be as large as many hope to gain.
It is conceivable that mobile operators globally will make more money providing home broadband using fixed wireless than they will earn from the flashier, trendy new revenue sources such as private networks, edge computing and internet of things.
Wells Fargo telecom and media analysts Eric Luebchow and Steven Cahall predict fixed wireless access will grow from 7.1 million total subscribers at the end of 2021 to 17.6 million in 2027, growth that largely will come at the expense of cable operators.
source: Polaris Market Research
If 5G fixed wireless accounts and revenue grow as fast as some envision, $14 billion to $24 billion in fixed wireless home broadband revenue would be created in 2025.
Consider the U.S. market. By some estimates, U.S. home broadband generates $60 billion to more than $130 billion in annual revenues.
If the market is valued at $60 billion in 2021 and grows at four percent annually, then home broadband revenue could reach $73 billion by 2026. $24 billion would represent about 33 percent of total home broadband revenues.
If we use the higher revenue base and the lower growth rate, then 5G fixed wireless might represent about 10 percent of the installed base, which will seem more reasonable to many observers.
Assuming $50 per month in revenue, with no price increases at all to 2026, 5G fixed wireless still would amount to about $10.6 billion in annual revenue by 2026 or so. That would have 5G fixed wireless representing about 14 percent of home broadband revenue, assuming a total 2026 market of $73 billion.
If the home broadband market were $134 billion in 2026, then 5G fixed wireless would represent about eight percent of home broadband revenue.
Do you believe U.S. mobile operators will make more than $14 billion to $24 billion in revenues from edge computing, IoT or private networks?
Nor might private networks or edge computing revenues be especially important as components of total revenue. It is almost certain that global service provider revenues from multi-access edge computing, for example, will be in the single-digit billions ($ billion) range over the next few years.
The same is true of forecasts of service provider internet of things revenue. The service provider 4G or 5G private networks revenue stream is likely to be small as well.
All that implies that 5G fixed wireless might be the most-material--and largest--source of new service revenues for mobile operators.
Multi Cloud computing now is fairly standard among enterprises, a survey conducted by Vertaina suggests. Nearly half of respondent organizations said they used three to five different public clouds.
That usage represents 46 percent of total organization workloads.
source: Virtana
In the computing market, network as a service is touted by some as an alternative form of procuring platform and functions, including hardware, software and security. Some argue connectivity providers can play a big role in the market, perhaps even leading it.
Some of us might argue that is extremely unlikely to happen, based on historical precedent. ABI Research expects that by 2030, just under 90 percent of enterprises will have migrated at least 25 percent of their global network infrastructure to be consumed within a NaaS model.
But is it so logical that connectivity providers will emerge as leaders? NaaS is about the computing architecture, and connectivity providers never have been able to grab leadership in enterprise computing.
Sure, many things could happen, but are unlikely. Telco leadership of NaaS seems in that category.
As big as the cloud computing services market is, and no matter how fast it grows, not all the growth is "net" expansion of the infomation technology industry. Some significant amount of cloud spending replaces former legacy investments in hardware, software, services and facilities.
And while everyone expects a continued shift to hybrid environments, the eventual pattern of cloud and dedicated or otherwise shared resources remains a bit unclear. The economics of infrastructure generally shift with scale. For many apps, at some point private cloud using "owned" resourdes costs less than public cloud spending.
Where the global cloud computing services revenue was about $409 billion in 2021, and computing hardware will generate about $300 billion in 2022, business software created about $430 billion in 2021.
If total software revenue in 2021 was about $968 billion, then consumer software generates up to $269 billion, subtracting all the business software revenue and then cutting the remainder by half to account for software as a service delivery.
Then there is the system integration business, which might represent another $328 billion in annual revenues.
The point is that cloud computing might represent about 24 percent of the $1.7 trillion global computing industry. But not all the spending represents net growth. By definition, cloud services replace hardware, software and services that otherwise would have been deployed some other way.
As use of cloud mechanisms grows, spending in other information technology categories will often decrease, obviously.
