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19 December 2019

Operator struggles to expand into edge lead to cloud capitulations

The key to the promise that 5G will be something very different from 4G lies in the convergence of cloud and networks – or of advanced data processing with advanced connectivity, to enable a host of new use cases and revenue streams. Some of these are focused on traditional consumers of mobile network services, including many focused on AR/VR, but the real socio-economic impact – and impact on operators’ balance sheets – will come in the enterprise.

Here, operators have battled with several barriers. They are not global, whereas many of the early investors in cloud/5G applications are likely to be multinational, and not want to sign different contracts with operators in each country. Additionally, they, generally speaking, have limited track records of providing strategic enterprise services, being mainly focused on selling bundles of minutes and data, or a few well-established services such as telematics.

Operators are also finding it very difficult to move into the cloud infrastructure and services spaces themselves. Many operators that initially decided to build telco clouds, and take on AWS and the others, have backed away. Verizon, for instance, sold its 29 data centers to Equinix for $3.6bn in 2016, and AT&T did the same with its 31 data centers, sold to Brookfield Infrastructure Partners for $1.1bn in 2018. Some operators are even leaning towards third-party clouds to host their own networks and applications (AT&T has a policy of ‘public cloud-first’ for IT operations, which may be extended to the network in future).

A few will invest so heavily in skills, platforms and vertical market partners that they will succeed in moving up the enterprise value chain and becoming major players. This is particularly likely in large markets where operators and other industries already have close ties and where the domestic business is attractively large, such as China.

And a few will come from other industries, buy licenses and build networks, and attack the converged opportunity from that side. Reliance Jio has stated this as an aim, harnessing its greenfield, virtualized networks and digital processes. AWS and Google themselves have experimented with connectivity and telco-like services, and may expand those activities, especially in shared spectrum, or where they cannot find amenable operator partners.

However, the indications are that the webscalers would rather work with the operators, saving themselves the investment and effort of moving into networks, and using their enterprise weight to skew the partnerships towards their own interests.

That was the overall picture that emerged from Amazon Web Services’ (AWS’) re:Invent 2019 conference. In 2018, it used developments like the USA’s CBRS shared spectrum scheme, and its Snowball on-premise edge computing platform, to intimate that it could bypass telcos in the industrial markets. This year, it was heralding several major operator alliances – with Verizon, Vodafone, SK Telecom, KDDI and others – as if to show off a template for how the two worlds can work profitably together, to accelerate the uptake of 5G-enabled edge cloud services (and avoid a destructive battle for sole control of the value chain).

The Verizon partnership was the headline in the conference’s telco-related news this year – indeed, at the end of AWS CEO Andy Jassy’s three-hour keynote speech, Verizon CEO Hans Vestberg came on stage to announce the partnership. This sees the US operator launching Verizon Edge, which combines its 5G network with AWS’s Wavelength edge computing service. This brings AWS storage and computing resource closer to the 5G network and to the end user by harnessing Verizon network hub locations and connectivity.

The technology embeds AWS compute and storage in Wavelength Zones — AWS deployments within the operator’s edge-based data centers. This allows developers to deploy parts of an application that require ultra-low latency within the 5G network, and connect that back to the rest of the app in the main AWS cloud, maintaining a consistent experience for developers and users. The former can use the same AWS programming interfaces and tools at the edge that they already use in the AWS cloud.

Bill Stone, Verizon’s VP of technology development and planning, said the announcement was the result of 18 months of “stealth cooperation” with AWS. He said the combined platform will provide a resource for developers to create new services for the enterprise, which can harness the advantages of an edge-centric system, notably low latency, as well as strong privacy control and other benefits.

“When a customer accesses an AWS cloud service today, the response time, or the latency, is relatively high because you have to traverse not only the 5G network but also the core network to ultimately get to the cloud,” he said in an interview. “Now when we bring the edge all the way down into the 5G network or right at the very edge of that, we get down to single-digit response times.”

Developers will be able to make their new applications available on the Verizon Edge platform, and as they will target a wide range of sectors and users, they will organically expand the reach of the telco’s ecosystem. This is the approach which is second nature to Google, Amazon and others in the cloud world, but operators have generally been weak at growing a broad developer and apps base through organic, viral means. They will be hoping that the edge environment, which relies heavily on their advanced connectivity, will be the catalyst for some of the cloud market’s developer stardust to fall, finally, into the telecoms world.

“The ecosystem of developers that AWS already have using their cloud platform can now access Verizon Edge via the AWS portal. We’re essentially opening up to the development community the ability to develop new transformative applications that can take advantage of the low latency and high throughput capabilities of 5G,” said Stone.

However, Verizon hasn’t quite turned itself into a fully open, web-style player. Its 5G connectivity remains its crown jewel, and one that needs defending from other, non-telco rivals which might deploy 5G in future (AWS included). So developers and enterprises using Verizon Edge will need to be Verizon customers, though the way they relate to Wavelength and Verizon Edge, respectively, will be flexible. “We have flexibility there to structure it in whatever is appropriate for the specific application or service capability that is being enabled through Verizon Edge and AWS Wavelength,” Stone told SDxCentral. Specific details about services, packages and pricing are still to be finalized.

Verizon Edge is due to be commercially available across the USA at an unspecified time next year, but that will require significant deployment effort and investment, including the installation of new edge cloud hardware at every hub location in the Verizon network.

It is not clear exactly how many hubs there will be, but the telco does not believe it will be necessary to build out to the “far edge”, which it defines as 5G cell sites and radio nodes. Instead, the hubs “are the logical places for the platform so a single platform gets access to many 5G nodes and provides a capability to different sized geographic areas,” Stone said in the interview. “The further down we deploy, the lower the latency”, but investing in a very dispersed edge would have, for now at least, uncertain return on investment. The latency gains from the currently envisaged locations will make a significant difference to enterprise application performance, while pushing the edge further could involve diminishing returns.

Verizon IoT executive Steve Szabo said that the platform will only use Verizon’s own in-network computing resources, not third-party micro-data centers like those run by Vapor IO or Packet (including in Chicago).

Verizon and AWS are currently piloting their combined technology with selected customers in Chicago, including video game publisher Bethesda Softworks and the National Football League. Chicago is a hotbed of telco-centric edge activity – the tower operators, Crown Castle and American Tower, are also piloting neutral host edge data center services in the city.

Stone expects the deployment of Verizon Edge to track the expansion of the operator’s 5G network “or be very close behind it”. He believes the roll-out will be significantly simplified, compared to an operator starting from scratch, because of the amount of virtualization that Verizon has already introduced to its new network. “We’ve already been going through a process of virtualizing our network functions on the Verizon cloud platform. The change that’s required is we have to move some of those network functions around,” he said. “Essentially we just reconfigure the network by instantiating network functions closer to the edge of the network, to enable us to break out the user plane data that’s then feeding directly into the Verizon Edge platform.”

Verizon will hope that the combination of its 5G network and AWS’s developer community will enable it to steal a march on rival AT&T’s own strategic partnership with Microsoft Azure (see separate item below). The AWS deal is, in many ways, an admission of defeat – an acknowledgement that even the largest telcos with a tradition of investing heavily in networks and infrastructure, can go it alone at the 5G edge. The best they can hope for is to build sufficient value into their 5G networks and services, that they – and not rival telcos or new 5G deployers – become indispensable to the webscale kingmakers, and that this helps them build the kind of developer base they have failed to achieve in the past.