Tag: edge computing

Is the consumer edge opportunity overlooked?

Consumer edge offers growth

There are many use cases for consumer edge. The majority of consumer digital services are delivered from the cloud, or more accurately from a combination of cloud and on-device processing. This is true for web, mobile, PC and smart device applications.

Generally edge computing is about moving compute close to where data is generated or consumed, although the actual edge location can vary according to scenarios, use case and perspective. It could imply deploying servers per country as opposed to servers per continent. Or it could mean deploying servers in a regional data centre, a telco/ISP network, a stadium or in a home.

Most telco industry focus on edge has been for enterprise use cases (manufacturing, robotics, predictive maintenance, video analytics, etc) with B2B and B2B2B models. This follows the attention given to private networks and enterprise accounts to find incremental revenues from 5G deployments. It is notionally easier to envisage migrating enterprise single-site on-premises workloads to telco edge in a single operator managed environment, than to contemplate consumer use cases with requirements which are inherently more distributed and multi operator. However, consumer use cases are where we expect to see most of the distributed edge (where processing occurs across multiple edge locations and providers) over the next five years.

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Defining the consumer edge

We define “consumer edge” to be where edge computing is used to enable or enhance a consumer service or consumer user experience. The edge resources may be located on-premises (e.g. at home or in a public venue), in their connectivity service provider’s network (ISP, fixed, mobile network) or in a regional location (data centre, interconnect or internet exchange) and represents a shift of compute resources either from an end device or out of the traditional cloud. This is not to say that all the functionality of a use case will “be edge” as in reality some or much of the compute will remain on device and in “the cloud”. Nevertheless, there will be specific rationale and benefit to process some of the experience at the edge (see later).

The consumer edge continuum

Source: STL Partners

Edge nodes are either purchased from an edge compute service provider or implemented by the service provider themselves. The edge resources may be paid for by consumers within a premium service offering (B2C) or paid for by the consumer service provider.

Moving to the consumer edge

There are two broad directions of travel to the edge related to consumer use cases and the underlying compute workloads required to support them – device offload and cloud offload.

Device offload

Consumer digital services are traditionally accessed via smartphones, tablets, PCs, and laptops. Increasingly a whole host of other connected devices need to be considered in the mix; smart TVs, media streaming devices, smart home sensors, wearables (AR glasses, VR headsets, watches), projectors, 360 cameras, etc. Smartphones and tablets alone vary significantly in terms of their compute, storage and display capabilities. Reaching more device types adds a wider range of connectivity and processing capabilities, memory and electrical power capacity. AR/VR and AI/ML place high demands on processing which consumes power and generates heat while adding higher capacity batteries increases form factor and weight. Edge computing can help consumer electronics devices by shifting compute intensive workloads away from the end device to be processed on a capable edge node and sending the results back to the end device.

Cloud offload

Consumer digital consumer services are traditionally served from the cloud and delivered over the internet. Their servers will be physically located at one or more central data centres around the world operated by the hyperscalers (AWS, MS and Google) or other internet hosting companies. Regular web content is routinely distributed from these central servers closer to consumers using content delivery networks (CDNs). This is fine for static content and reduces latency, server load and data transit, enabling the internet to efficiently deliver vast quantities of content worldwide. However, for interactive experiences with more complex user interactions requiring server processing, CDNs may not be technically capable and reducing end-end latency becomes even more critical. Additionally serving the user from far away for high bandwidth interactive experiences, can result in inefficient data transit, network congestion and poor user experience. Edge computing can help by offering cloud off-load where certain workloads are moved to an edge node closer to the consumer.

 

Table of Contents

  • Executive Summary
  • Recommendations for telcos
  • Introduction
    • Defining the consumer edge
    • Moving to the edge
  • Sizing the market
  • Consumer use cases
    • Content delivery
    • Real time interactive experiences
    • Cloud gaming
    • Smart homes
    • Smart places
    • Smart vehicles
    • Data residency
  • Telco opportunities in consumer edge
    • Content delivery
    • Build experience delivery networks
    • On demand networks
    • Enter the smart home
  • Conclusion

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What do enterprises want from telcos?

Enterprises are striving for success…

All enterprises want success. The language and specifics that define this may differ across sectors – but the underlying drivers are the same. They include financial, strategic, operational and market-facing factors, as described below.

Success drivers

enterprise

Source: STL Partners

…against a new, transformed backdrop

Demand and supply forces have changed: Customers expect more, but resources are increasingly constrained. Enterprises are pondering the range of new technologies and practices to help them meet the challenges of a Coordination Age:

  • Coordinating outcomes and experiences for customers
  • Collaborating to enable the delivery of more value
  • Bridging the digital and physical worlds

The Coordination Age

Enterprise

Source: STL Partners

Telcos’ national scope and assets mean they are well placed to participate in some of the new opportunity areas of the Coordination Age. Although technologies and applications running over the telcos’ connectivity are often developed at global scale, how they are implemented within local and national markets is likely to vary from one country to the next, owing to regulatory constraints and how these have shaped the structure and priorities of the market. Telcos can help enterprises navigate this path.

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Do enterprises believe telcos can help?

What enterprises think of telcos depends on their tech maturity, their knowledge and experience of telcos, the telcos’ technology capability and the sector that they are in, as shown below.

Factors influencing enterprise consideration

 

enterprisesSource: STL Partners

Telcos must work to understand enterprise needs in their specific markets and how they are best placed to serve those needs.

Table of contents

  • Executive summary
  • Introduction
  • Understanding telco enterprise strategies
  • Seven enterprise growth opportunities

Related research

STL Partners has a research solution focused on growing enterprise revenues. Reports that could be of interest include:

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MWC 2023: You are now in a new industry

The birth of a new sector: “Connected Technologies”

Mobile World Congress (MWC) is the world’s biggest showcase for the mobile telecoms industry. MWC 2023 marked the second year back to full scale after COVID disruptions. With 88k visitors, 2,400 exhibitors and 1,000 speakers it did not quite reach pre-COVID heights, but remained an enormous scale event. Notably, 56% of visitors came from industries adjacent to the core mobile ecosystem, reflecting STL’s view that we are now in a new industry with a diverse range of players delivering connected technologies.

With such scale It can be difficult to find the significant messages through the noise. STL’s research team attended the event in full force, and we each focused on a specific topic. In this report we distil what we saw at MWC 2023 and what we think it means for telecoms operators, technology companies and new players entering the industry.

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STL Partners research team at MWC 2023

STL-Partners-MWC23-research-team

The diversity of companies attending and of applications demonstrated at MWC23 illustrated that the business being conducted is no longer the delivery of mobile communications. It is addressing a broader goal that we’ve described as the Coordination Age. This is the use of connected technologies to help a wide range of customers make better use of their resources.

The centrality of the GSMA Open Gateway announcement in discussions was one harbinger of the new model. The point of the APIs is to enable other players to access and use telecoms resources more automatically and rapidly, rather than through lengthy and complex bespoke processes. It starts to open many new business model opportunities across the economy. To steal the words of John Antanaitis, VP Global Portfolio Marketing at Vonage, APIs are “a small key to a big door”.

Other examples from MWC 2023 underlining the transition of “telecommunications” to a sector with new boundaries and new functions include:

  • The centrality of ecosystems and partnerships, which fundamentally serve to connect different parts of the technology value chain.
  • The importance of sustainability to the industry’s agenda. This is about careful and efficient use of resources within the industry and enabling customers to connect their own technologies to optimise energy consumption and their uses of other scarce resources such as land, water and carbon.
  • An increasing interest and experimentation with the metaverse, which uses connected technologies (AR/VR, high speed data, sometimes edge resources) to deliver a newly visceral experience to its users, in turn delivering other benefits, such as more engaging entertainment (better use of leisure time and attention), and more compelling training experiences (e.g. delivering more realistic and lifelike emergency training scenarios).
  • A primary purpose of telco cloud is to break out the functions and technologies within the operators and network domains. It makes individual processes, assets and functions programmable – again, linking them with signals from other parts of the ecosystem – whether an external customer or partner or internal users.
  • The growing dialogues around edge computing and private networks –evolving ways for enterprise customers to take control of all or part of their connected technologies.
  • The importance of AI and automation, both within operators and across the market. The nature of automation is to connect one technology or data source to another. An action in one place is triggered by a signal from another.

Many of these connecting technologies are still relatively nascent and incomplete at this stage. They do not yet deliver the experiences or economics that will ultimately make them successful. However, what they collectively reveal is that the underlying drive to connect technologies to make better use of resources is like a form of economic gravity. In the same way that water will always run downhill, so will the market evolve towards optimising the use of resources through connecting technologies.

Table of contents

  • Executive Summary
    • The birth of a new sector: ‘Connected technologies’
    • Old gripes remain
    • So what if you are in a new industry?
    • You might like it
    • How to go from telco to connected techco
    • Next steps
  • Introduction
  • Strategy: Does the industry know where it’s going?
    • Where will the money come from?
    • Telcos still demanding their “fair share”, but what’s fair, or constructive?
    • Hope for the future
  • Transformation leadership: Ecosystem practices
    • Current drivers for ecosystem thinking
    • Barriers to wider and less linear ecosystem practices
    • Conclusion
  • Energy crisis sparks efficiency drive
    • Innovation is happening around energy
    • Orange looks to change consumer behaviour
    • Moves on measuring enablement effects
    • Key takeaways
  • Telco Cloud: Open RAN is important
    • Brownfield open RAN deployments at scale in 2024-25
    • Acceleration is key for vRAN workloads on COTS hardware
    • Energy efficiency is a key use case of open RAN and vRAN
    • Other business
    • Conclusion
  • Consumer: Where are telcos currently focused?
    • Staying relevant: Metaverse returns
    • Consumer revenue opportunities: Commerce and finance
    • Customer engagement: Utilising AI
  • Enterprise: Are telcos really ready for new business models?
    • Metaverse for enterprise: Pure hype?
    • Network APIs: The tech is progressing
    • …But commercial value is still unclear
    • Final takeaways:
  • Private networks: Coming over the hype curve
    • A fragmented but dynamic ecosystem
    • A push for mid-market adoption
    • Finding the right sector and the right business case
  • Edge computing: Entering the next phase
    • Telcos are looking for ways to monetise edge
    • Edge computing and private networks – a winning combination?
    • Network APIs take centre stage
    • Final thoughts
  • AI and automation: Opening up access to operational data
    • Gathering up of end-to-end data across multiple-domains
    • Support for network automations
    • Data for external use
    • Key takeaways

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Why is now the time to rethink edge orchestration?

More than hosting

Edge computing is not simply about hosting workloads at an edge node. Orchestration is key to ensure that applications are able to take full advantage of the benefits that come with edge, and to ensure that telcos can manage their infrastructure easily and cost-efficiently. Unfortunately, existing network orchestration systems lack the capabilities necessary to orchestrate edge effectively.

 

Shortcomings of the network orchestration platform

Source: STL Partners

Our research has shown that the total edge computing addressable market will grow from US$9 billion in 2020 to US$445 billion in 2030. The segment of the value chain with the largest share is application, which will capture 70% of the total edge computing addressable revenue in 2030, reaching US$313 billion.

Not only is edge an attractive opportunity in itself, but it is highly complementary to the private networks opportunity.

The benefits of edge with private networks

Source: STL Partners

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Taking edge solutions to market is not simple

It requires partnerships across the edge value chain, the components of which are:

  • Integration and systems: Services that provide support to customers employing and integrating edge at any stage of the value chain, including design and engineering services to create platforms for edge applications, or traditional integration into existing (enterprise) systems.
    ​
  • Application/Software: Applications that run on edge computing infrastructure, including network functions, and the application-specific tools that support these, for example analytics capabilities or APIs and platform-as-a-service products.
    ​
  • Edge Cloud Infrastructure: Virtual infrastructure supporting edge workloads and applications from the operating system, the virtualisation layer, and the platforms for developers to access and manage the storage and compute infrastructure. Edge orchestration is an integral part of edge cloud infrastructure.
    ​
  • Hardware: Dedicated hardware (different from the traditional hardware used in data centres) needed to run the edge applications (servers, processors and the maintenance and operators for these) as well as end-devices.
    ​
  • Network: Specialised connectivity infrastructure and services to enable edge applications, as well as traffic routing controls and types of networks to optimise content delivery (e.g. CDN). Note, this category does not include a long-list of network operators.
    ​
  • Facility: The physical site that may include a street cabinet without cooling/security requirements or the land/location for the edge data centre (e.g. area around mobile operator’s cell tower), the data centre itself, power and cooling to support it and additional services to maintain and operate the site. ​

Edge poses new challenges for enterprises and developers in terms of how they manage workloads, as application architectures move from centralised models to highly distributed models. This is because distributed environments at the edge are heterogenous.

Application architecture shift

 

Source: STL Partners

Additionally, edge use cases have strict performance requirements, which makes orchestration even more important to ensure the right level of performance.

Stringent use case requirements

Source: STL Partners

 

An edge use case pack accompanies this report to bring the need for edge orchestration to life.

Table of contents

  • Executive Summary
  • Telco edge computing: state of play
  • Why does edge need orchestration?
  • What is an edge orchestration platform?
  • Conclusions and next steps
  • Glossary

Further insights and explanations can be found in our videos

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Edge computing market sizing forecast: Second release

This is the second release of STL’s edge computing revenue forecast

In this release, we update the forecast and include regional edge

The edge computing market continues to invite different types of players including telcos, hyperscalers, data centre operators and enterprise connectivity providers. The varying requirements across verticals, business sizes and use cases create an opportunity that can accommodate all these different players. However, it is important for any edge provider to understand how to position its service in the space and what areas of the market to pursue vertically and horizontally.

Through quantitative analysis, this report aims to help telcos and others to identify where opportunities lie. This report presents the key findings of STL Partners’ demand forecast model for edge computing services. Its purpose is to:

  • Assess the demand from 20 use cases which currently rely on edge or will require edge to fully develop;
  • Identify the total revenue across the value chain: device, connectivity, application, edge infrastructure (regional, network and on-premise), and integration and support;
  • Output a full set of results for over 90 countries over the 2020–2030 period per use case and per vertical.

This report is accompanied by a dashboard which presents a summary of our model output and the associated graphics for the world’s regions and for 20 major markets. The dashboard also presents the full revenue output for the 97 countries.

Download the accompanying spreadsheet 

Edge computing addressable revenue will reach US$445 billion by 2030

High-level findings from the model indicate that:

  • The total edge computing addressable market will grow from US$9 billion in 2020 to US$445 billion in 2030 at a CAGR of 48% over the 10-year period.
  • We now forecast regional edge in addition to network and on-prem edge. Regional edge refers to local edge data centres that are outside the telecoms operators’ network. Examples of these include internet exchange data centres, small data centres in Tier 2/3 cities, AWS Local Zones, etc.
  • The vertical opportunities in on-prem and distributed edge are quite different. Telcos and other providers that are looking into the various types of infrastructure to offer edge services should evaluate these differences and assess their own capabilities and willingness to compete in these verticals.
  • The growth in the number of connected devices, as well as the need for higher levels of automation, operational efficiency and cost reduction, will drive the adoption of edge computing across many use cases and verticals over the next 10 years. This will result in increased spend across the value chain.

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Total edge computing addressable revenue 2020–2030

This forecast is part of our Edge Insights Service which also includes:

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Telecoms 2023: Meaningful growth in challenging times

The key pillars to change and growth 

Ten years from today, telcos could find themselves growing into national or regional champions of connected technologies, working with enterprises and governments to help the world run better. Or, they may find themselves becoming marginalised, with shrinking relationships with their customers, consigned to corners of the IT market specialising in low-cost connectivity. To establish a clear path to the more desirable option one, and sustainable growth, telcos need to commit to a long-term strategy that will require fundamental changes to their business. A long-term strategy that: 

  • Prioritises service innovation through strong investment in research and development 
  • Funds ongoing innovation by shifting away from the established capex heavy financial model 
  • Re-orientates company systems and culture to become an effective ecosystem player, adaptable and open to multiple ecosystem roles and business models. 

Commitment to this kind of strategy should happen now if it hasn’t already. But current macro-economic and societal challenges may make this focus difficult to achieve. Telcos need to find a way to deal with more immediate turmoil and challenges, and be ready to seize any opportunities they present, while also progressing towards their long-term goals. 

STL believes that the Coordination Age offers telcos a new context for growth. It is built upon demand for more flexible availability and more efficient use of all types of resources (energy, labour, time, etc), combined with multiple new technologies and capabilities (5G, fibre, AI, automation, virtualisation) approaching maturity. The resulting paradigm sees customers demanding coordinated outcomes and experiences, enabled through collaborative ecosystems, with business models spanning the digital and physical world. It is the context within which telcos can hope to become the champions of connected technologies helping the world run better mentioned earlier. 

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Figure 1: The Coordination Age thrives on innovation 

Source: STL Partners 

More immediate concerns – the energy crisis, high inflation, possible recession, the still lurking threat of new covid strains, war, climate change – demand immediate attention. Please see our Beating the crash: What’s coming? report for more details. For all that these can crowd out focus on a more long-term growth strategy and a drive to change the role and meaning of telecoms in society, these factors are actually accelerating changes and mean that a Coordination Age approach is needed more urgently. 

Figure 2: Accelerating changes means the Coordination is now a “must have” 

Source: STL Partners 

Telcos’ national scope and assets mean that they are well placed to take advantage of some of the new opportunities, boosting growth. But they are large and complex businesses with many departments and initiatives to co-ordinate, and broad organisational strategy has to be applied in different areas with a variety of specific goals and capabilities. In this report, STL addresses seven key strategic areas: transformation; consumer; enterprise; edge computing; networks; telco cloud; and sustainability. In each, we present our detailed assessment of how telcos can and should address current challenges and seize new growth opportunities, while building towards long term success in the Coordination Age, and how current and ongoing STL research can provide support and guidance. 

Table of Contents

  • Executive Summary 
  • The key pillars to change and growth
  • Transformation: How to adapt faster and better, collectively
    • Why does transformation matter?
    • Why is transformation difficult for telcos?
    • How telcos can operationalise adaptability
    • What must telcos do to capitalise on the adaptive opportunity?
  • Consumer: (Re)engaging through new needs
    • Why does the consumer business matter?
    • What challenges are telcos facing in the consumer market?
    • A three-pronged approach to winning with consumers
  • Enterprise: Becoming a transformative partner
    • Why does enterprise matter?
    • What challenges is the industry facing in enterprise?
    • What are the potential opportunities?
    • What must telcos do to capture the opportunities?
  • Edge computing: Getting compute to where the customer needs it
    • Why does edge computing matter?
    • The key challenges and opportunities the in edge market
    • So where to invest?
    • What must telcos (and others) do to capture the opportunities?
  • Networks: Developing and delivering the best tool for the job
    • The key challenge: Moving to a world of “network diversity”
    • It’s not about 5G, but the best tool for the job
    • What are the potential opportunities?
  • Telco cloud: Making the fabric customer-adaptable
    • Why does telco cloud matter?
    • What challenges is the industry facing in telco cloud?
    • What must telcos (and others) do to capture the opportunities?
  • Sustainability: Making it relevant for everyone
    • Why does sustainability matter?
    • What challenges is the industry facing in sustainability?
    • What are the potential opportunities?
    • How to move the industry forward on sustainability
  • Conclusion

Related research

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Network edge capacity forecast: The role of hyperscalers

Developers need to see sufficient edge capacity

Edge computing comprises a spectrum of potential locations and technologies designed to bring processing power closer to the end-device and source of data, outside of a central data centre or cloud. This report focuses on forecasting capacity at the network edge – i.e. edge computing at edge data centres owned (and usually operated) by telecoms operators. ​

This forecast models capacity at these sites for non-RAN workloads. In other words, processing for enterprise or consumer applications and the distributed core network functions required to support them. We cover forecasts on RAN as part of our Telco Cloud research services portfolio.

Forecast scope in terms of edge locations and workload types

Source: STL Partners

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The output of the forecast focuses on capacity: number of edge data centres and servers

STL Partners has always argued that for network edge to take off, developers and enterprises need to see sufficient edge capacity to transform their applications to leverage its benefits at scale. The forecast seeks to provide an indication for how this will grow over the next five years, by predicting the number of edge data centres owned by telecoms operators and how many servers they plan to fill these up with.​

Hardware vendors have been evolving their server portfolios for a number of years to fit the needs of the telecoms industry. This started with core network virtualisation, as the industry moved away from an appliance-based model to using common-off-the-shelf hardware to support the virtualised LTE core.​

As infrastructure moves “deeper” into the edge, the requirements for servers will change. Servers at RAN base stations will not have full data centre structures, but need to be self-contained and ruggedised. ​

However, at this stage of the market’s maturity, most servers at the network edge will be in data centre-like facilities. ​

There are three key factors determining a telco’s approach and timing for its edge computing data centres

Telecoms operators want to build their network edge capacity where there is demand. In general, the approach has been to create a deployment strategy for network edge data centres that guarantees a level of (low) latency for a certain level of population coverage. In interviews with operators, this has often ranged from 90-99% of the population experiencing sub-10 to 20 millisecond roundtrip latency for applications hosted at their network edge.​

The resultant distribution of edge capacity will therefore be impacted by the spread of the population, the size of the country and the telecoms operator’s network topology. For example, in well connected, small countries, such as the Netherlands, low latencies are already achievable with the current networks and location of centralised data centres.

Key factors determining network edge build​

Source: STL Partners

The actual number of sites and speed at which a telecoms operator deploys these sites is driven by three main factors: ​

Factor 1: edge computing strategy;​

Factor 2: the speed at which it has or will deploy 5G (if it is a mobile operator);​

Factor 3: the country’s geographic profile.​

Details on the evidence for the individual factors can be found in the inaugural report, Forecasting capacity of network edge computing.

Table of contents

  • Executive summary
  • Introduction to the forecast
  • Key findings this year
  • Regional deep-dives
  • Role of hyperscalers
  • Conclusions
  • Appendix: Methodology

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Pursuing hyperscale economics

The promise of hyperscale economics

Managing demands and disruption

As telecoms operators move to more advanced, data intensive services enabled by 5G, fibre to the X (FTTX) and other value-added services, they are looking to build the capabilities to support the growing demands on the network. However, in most cases, telco operators are expanding their own capabilities in such a way that results in their costs increasing in line with their capabilities.

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This is becoming an increasingly pressing issue given the commoditisation of traditional connectivity services and changing competitive dynamics from within and outside the telecoms industry. Telcos are facing stagnating or declining ARPUs within the telecoms sector as price becomes the competitive weapon and service differentiation of connectivity services diminishes.A

The competitive landscape within the telecoms industry is also becoming much more dynamic, with differences in progress made by telecoms operators adopting cloud-native technologies from a new ecosystem of vendors. At the same time, the rate of innovation is accelerating and revenue shares are being eroded due to the changes in the competitive landscape and the emergence of new competitors, including:

  • Greenfield operators like DISH and Rakuten;
  • More software-centric digital enterprise service providers that provide advanced innovative applications and services;
  • Content and SaaS players and the hyperscale cloud providers, such as AWS, Microsoft and Google, as well as the likes of Netflix and Disney.

We are in another transition period in the telco space. We’ve made a lot of mess in the past, but now everyone is talking about cloud-native and containers which gives us an opportunity to start over based on the lessons we‘ve learned.

VP Cloudified Production, European converged operator 1

Even for incumbents or established challengers in more closed and stable markets where connectivity revenues are still growing, there is still a risk of complacency for these telcos. Markets with limited historic competition and high barriers to entry can be prone to major systemic shocks or sudden unexpected changes to the market environment such as government policy, new 5G entrants or regulatory changes that mandate for structural separation.

Source:  Company accounts, stock market data; STL Partners analysis

Note: The data for the Telecoms industry covers 165 global telecoms operators

Telecoms industry seeking hyperscaler growth

The telecoms industry’s response to threats has traditionally been to invest in better networks to differentiate but networks have become increasingly commoditised. Telcos can no longer extract value from services that exclusively run on telecoms networks. In other words, the defensive moat has been breached and owning fibre or spectrum is not sufficient to provide an advantage. The value has now shifted from capital expenditure to the network-independent services that run over networks. The capital markets therefore believe it is the service innovators – content and SaaS players and internet giants such as Amazon, Microsoft or Apple – that will capture future revenue and profit growth, rather than telecoms operators. However, with 5G, edge computing and telco cloud, there has been a resurgence in interest in more integration between applications and the networks they run over to leverage greater network intelligence and insight to deliver enhanced outcomes.

Defining telcos’ roles in the Coordination Age

Given that the need for connectivity is not going away but the value is not going to grow, telcos are now faced with the challenge of figuring out what their new role and purpose is within the Coordination Age, and how they can leverage their capabilities to provide unique value in a more ecosystem-centric B2B2X environment.

Success in the Coordination Age requires more from the network than ever before, with a greater need for applications to interface and integrate with the networks they run over and to serve not only customers but also new types of partners. This calls for the need to not only move to more flexible, cost-effective and scalable networks and operations, but also the need to deliver value higher up in the value chain to enable further differentiation and growth.

Telcos can either define themselves as a retail business selling mobile and last mile connectivity, or figure out how to work more closely with demanding partners and customers to provide greater value. It is not just about scale or volume, but about the competitive environment. At the end of the day, telcos need to prepare for the capabilities to do innovative things like dynamic slicing.

Group Executive, Product and Technology, Asia Pacific operator

Responding to the pace of change

The introduction of cloud-native technologies and the promise of software-centric networking has the potential to (again) significantly disrupt the market and change the pace of innovation. For example, the hyperscale cloud providers have already disrupted the IT industry and are seen simultaneously as a threat, potential partners and as a model example for operators to adopt. More significantly, they have been able to achieve significant growth whilst still maintaining their agile operations, culture and mindset.

With the hyperscalers now seeking to play a bigger role in the network, many telco operators are looking to understand how they should respond in light of this change of pace, otherwise run the risk of being relegated to being just the connectivity provider or the ‘dumb pipe’.

Our report seeks to address the following key question:

Can telecoms operators realistically pursue hyperscale economics by adopting some of the hyperscaler technologies and practices, and if so, how?

Our findings in this report are based on an interview programme with 14 key leaders from telecoms operators globally, conducted from June to August 2021. Our participant group spans across different regions, operator types and types of roles within the organisation.

Related research

Beating the crash: What’s coming?

Signs of tougher times

Tough times are ahead…

As we look ahead, the world faces a number of significant challenges:

  • Global / OECD consumer confidence is diving to startling new depths as people increasingly feel the impact of inflation, supply constraints and a cost of living crisis.
  • This follows the war in Ukraine, the Covid pandemic and long Covid, stresses resulting from diverging political ideologies, growing social unrest, and the ever increasing realisation of the impact of climate change.
  • These seismic tensions are all driven by nearly 8 billion (and growing) people vying for resources and a vision of the future that they can continue to thrive in.

…but it’s not our first rodeo…

We have previously written about, for example:

And before that, there was the Credit Crunch series (2008), the Eurozone Crisis (2012), and technology and market disruptions too numerous to name.

There is always a temptation to think that the latest crisis is the worst. Each one tends to temporarily obliterate one’s view of the future as our imaginations are so absorbed in dealing with the nearby threat that all other considerations become secondary.

…and we believe we can bring some hope

Our solution to these challenges is two-fold. First, there is a lot that can be learned by looking at the lessons from previous traumas. Secondly, it is extremely helpful to be able to position all the individual events within an overall context, as it enables us to more rapidly reorientate after the latest shock.

Our context is The Coordination Age – the vision that the world is entering into a new era where:

  • The primary need is to make better use of available resources (e.g. money, carbon, time, assets, etc)
  • And that connecting technologies (e.g. telecommunications, data, automation and AI) are key elements of the solution.

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Making the Coordination Age work

making-the-coordination-age-work

Source: STL Partners

This report uses these learnings to look ahead to what we see as a challenging time. While some of the forces we outline in this report may seem alarming, this is not a pessimistic picture. We believe that the vision we describe brings opportunities for telecoms – but only if leaders in telecoms and elsewhere act on the vision. We are striving to make this happen, and we hope we can help you do that too.

A scale of discovery

To help contextualise the many forces of change, we have developed a six-stage schematic to generalise how people deal with new forces and changes in their lives. It progresses from the first recognition of a new theme or issue through to normalisation, the point where something is no longer new or different. The graphic below highlights the six stages, and general heuristic descriptions of what you might hear said, risks and threats, mitigations, and the general psychological and emotional mindset of those processing the change or issue in question.

Six stages of dealing with new ideas

six-stages-dealing-with-new-ideas-stl-partners

Source: STL Partners

The body of the report covers the drivers, their impact and consequences for telecoms:

  • Economic drivers, such as consumer confidence, inflation, and rising living costs
  • Environmental drivers, including climate change and carbon reduction
  • Political drivers, including the War in Ukraine, China / US tensions, trade wars and tensions
  • Social drivers, including Covid and Long Covid, inequalities and social polarisation.

Economic drivers: A crisis of confidence

In this section we examine drivers in consumer confidence, inflation / cost-of-living concerns and the consequences for telecoms.

Consumer confidence: An all-time low

The OECD consumer confidence index is a barometer of consumer sentiment. It reflects people’s confidence in their economic prospects. The chart below shows that it is currently reaching record new lows.

The OECD Consumer confidence index is at its lowest ever level

OECD-consumer-inflation-index-june-2022

Source: OECD

This means that consumers feel extremely pessimistic about their economic prospects. The average score is now below where it was at the peak of anxiety about Covid in early 2020, and below where it was in the financial crash in 2008-09. Indeed, the OECD average is now at its lowest ever level since global measures were introduced in the early 1970s, with only Mexico and Indonesia bucking the downward trend.

People are now preparing for a tough period in their economies. Some are worried about making ends meet – having enough to live to the standard they normally expect. This usually means that they will look to cut back on spending, especially for non-essential things.

Inflation is worrying everyone in Summer 2023

The pressures behind this trend are a generalised concern about inflation (rising prices on essential items like food) leading to a cost-of-living crisis.

Inflation overtook other global concerns in April 2022

Inflation-overtook-global-concerns-april-2022-stl-partners

Source: Ipsos

The Google trends chart below shows search interest in ‘inflation’ globally, which is an even more immediate signal of concern. It clearly spikes in July 2022.

Google Trends – searches for “inflation” spiked in Summer 2022

google-trends-searches-for-inflation-summer-2022-stl-partners

Source: Google

The problem is not confined to one or two economies: it is widespread, as the image from the interactive chart below shows.

inflation-global-challenge-2022-stl-partners

Source: FT

The rest of the analysis in this report reviews the macro-economic trends – i.e. the economic, environmental, political and social drivers of change. In a second report, we will cover telecoms industry trends, including technologies, policy, propositions and industry structure.

 

Table of Contents

  • Executive Summary
    • Not one crash, but many
    • 1. Actively realigning with stakeholders
    • 2. Accelerating operational innovation
    • 3. Enhancing resilience and customer security offerings
    • Next steps
  • Introduction: Signs of tougher times
    • A scale of discovery
  • Economic drivers: A crisis of confidence
    • Consumer confidence: An all-time low
    • Inflation is worrying everyone in summer 2022
    • Interest rates: A blunt tool?
    • Stock markets: Not quite sure…yet
    • Moving out of denial on economic problems
    • Consequences in telecoms demand
    • Recommendations
  • Environmental factors: Heating up fast
    • Climate change: Denial is hard these days
    • Decarbonisation: Digitising the industrial landscape, fast
    • Environmental concerns are now mainstream
    • Consequences for telecoms
    • Recommendations
  • Political: Drawing new lines
    • Ideo-conflict: Who’s side are you on?
    • The war in Ukraine: The first Coordination Age war?
    • China and Taiwan: Watching, waiting, wondering
    • Trade wars and barriers in general
    • Global instability: More trouble ahead
    • Consequences for telecoms
    • Recommendations
  • Social: A new order
    • Covid and Long Covid: Living with the virus
    • Rising resentment of inequalities
    • The United Nations Sustainable Development Goals
    • Consequences and recommendations for telecoms
  • Analysis
    • Getting the news in context
  • Appendix 1: Waste, pollution and air quality
    • Waste and pollution: Cleaning up
    • Refugees and migrations: Seeking solace in troubling times
  • Appendix 2: The 17 Sustainable Development Goals

 

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The three telco Metaverse strategies

The Metaverse offers opportunities beyond connectivity for telcos

The Metaverse is the increasingly accepted term for a set of interconnected virtual worlds. One way to think about the Metaverse is to see it as a 3D version of the world wide web in which organizations operate their own virtual 3D worlds, rather than 2D web sites. Represented by avatars, visitors to a virtual world can interact with other users or with avatars controlled by artificial intelligence. The term Metaverse entered the popular consciousness when Facebook renamed itself Meta in October 2021.

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The renaming of Facebook sparked a surge of interest in the Metaverse

Source: Google Trends

Whereas the existing Internet is essentially a 2D digital overlay of the world, composed of text, voice, images and video, the Metaverse will provide a 3D digital overlay. This is the way Nvidia’s CEO Jensen Huang, portrayed the Metaverse in a speech in November 2021. As a leading provider of graphics chips, Nvidia is thinking deeply about how to build a business case for the Metaverse, which could drive rapid growth in demand for its products.

For a fully immersive experience, the Metaverse will need to be accessed through virtual reality (VR) headsets, but it could also be explored by moving through 3D environments using a conventional handset, laptop or television. Indeed, it is important to stress that the fortunes of the Metaverse won’t necessarily depend on the fortunes of VR. Hundreds of millions of people already play video games in 3D, interacting with each other, without wearing headsets.

The Metaverse looks set to host both entirely fictional virtual spaces where people can socialise, play and enjoy entertainment, as well as simulations of the real world, where people can test new product designs, learn new skills or watch concerts and sports events they can’t attend in person.

The first part of this report considers how the Metaverse could create value and the obstacles that lie in its way. It also outlines the strategies of Improbable, Meta (formerly Facebook), Microsoft and Nvidia – four companies developing many of the key enabling technologies.

The second part explores the Metaverse strategies of telcos. Broadband networks and related telco services are fundamental to the smooth running of digital environments today, and will be the building blocks of the Metaverse. We believe that telcos could play a coordination role that will help prevent the Metaverse from fragmenting into silos that are unable to interoperate with each other.

Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of Metaverse, telcos can help people and businesses to interact and transact with each other safely and securely in 3D environments.

As it considers the opportunities for telcos, this report draws on the experiences and actions of SKT, Telefónica and Verizon, which are each deploying strategies to help coordinate the development of the Metaverse.

Table of Contents

  • Executive Summary
  • Introduction
  • What is the Metaverse for?
    • The lure of the virtual road
    • Corporate worlds take over from web sites
    • Dominance or democracy?
    • The non-fungible flexibility paradox
    • Facebook pursues metamorphosis
    • Microsoft has most of the pieces
  • What will the Metaverse mean for telcos?
    • Recreating the real world is challenging
    • Traffic implications for telcos
    • Opportunities for telcos
    • SK Telecom – the full stack standard bearer
    • Telefónica looks to play coordination role
    • AT&T and Verizon – connectivity plus edge
  • Conclusions
  • Index

Related Research

 

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Scaling private cellular and edge: How to avoid POC and pilot purgatory

Evaluating the opportunities with private cellular and edge

The majority of enterprises today are still at the early stages of understanding the potential benefits of private cellular networking and edge computing in delivering enhanced business outcomes, but the interest is evident. Within private cellular for example, we have seen significant traction and uptake globally during 2020 and 2021, partially driven by increased availability and routes to spectrum due to localised spectrum licensing models across different markets (see this report). This has resulted in several trials and engagements with large companies such as Bosch, Ford, Rio Tinto, Heathrow Airport and more.

However, despite the rising interest, enterprises often encounter challenges with a lack of internal stakeholder alignment or the inability to find the right stakeholder to be accountable and own the deployment. Furthermore, many enterprises feel they lack the expertise to deploy and manage private networking and/or edge solutions. In some cases, enterprises have also cited a lack of maturity in the device and solution ecosystem, for example with lack of supported (or industry-grade) devices which have a 5G/LTE/CBRS capability embedded in them, or a significant inertia in the installed base around other connectivity solutions (e.g. Wi-Fi). Therefore, despite the value and business outcomes that private cellular and edge compute can unlock for enterprises, the opportunity is rarely clear-cut.

Our research is based on findings and analysis from a global interview programme with 20 enterprises in sectors that are ahead in exploring private cellular and edge computing, primarily in the industrial verticals, as well as telecoms operators and solutions providers within the private cellular and edge computing ecosystem.

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Telcos see private cellular and edge as two peas in a pod…

Telecoms operators see private cellular and edge computing as part of a larger revenue opportunity beyond fixed and public cellular. It is an opportunity for telcos to move from being seen as horizontal players providing increasingly commoditised connectivity services, to more vertical players that address value-adding industry-specific use cases. Private cellular and edge compute can be seen as components of a wider innovative and holistic end-to-end solution for enterprises, and part of the telcos’ ambition to become strategic partners or trusted advisors to customers.

We define a private cellular network as a dedicated local on-premises network, designed to cover a geographically-constrained area or site such as a production plant, a warehouse or a mine. It uses dedicated spectrum, which can be owned by the enterprise or leased from a telco operator or third party, and has dedicated operating functions that can run on the enterprise’s own dedicated or shared edge compute infrastructure. Private cellular networking is expected to play a key role in future wireless technology for enterprise on-premises connectivity. Private cellular networks can be configured specifically to an individual enterprise’s requirements to meet certain needs around reliability, throughput, latency etc. to enable vertical-specific use cases in a combined way that other alternatives have struggled to before. Although there are early instances of private networks going back to 2G GSM-R in the railway sector, for the purpose of this report, we focus on private cellular networks that leverage 4G LTE (Long Term Evolution) or 5G mobile technology.

Figure 1: Private cellular combines the benefits of fixed and wireless in a tailored way

benefits of private cellular

Source: STL Partners

Edge compute is about bringing the compute, storage and processing capabilities and power of cloud closer to the end-user or end-device (i.e. the source of data) by locating workloads on distributed physical infrastructure. It combines the key benefits of local compute, such as low latency, data localisation and reduced backhaul costs, with the benefits of cloud compute, namely scalability, flexibility, and cloud native operating models.

Figure 2: Edge computing combines local and cloud compute benefits to end-users

benefits of edge computing

Source: STL Partners

Within the telecoms industry, private cellular and edge computing are often considered two closely interlinked technologies that come hand-in-hand. Our previous report, Navigating the private cellular maze: when, where and how, explored the different private cellular capabilities that enterprises are looking to leverage, and our findings showed that security, reliability and control were cited as the most important benefits of private cellular. In many ways, edge compute also addresses these needs. Both are means of delivering ultra-low latency, security, reliability and high-throughput real time analytics, but in different ways.

…but this is not necessarily the case with enterprises

Although the telecoms industry often views edge computing and private cellular in the same vein, this is not always the case from the enterprise perspective. Not only do the majority of enterprises approach edge computing and private cellular as separate technologies, addressing separate needs, many are still at the early stages of understanding what they are.

There is oftentimes also a different interpretations and confusion of terminology when it comes to private cellular and edge compute. For example, in our interviews, a few enterprises describe traditional on-premises compute with local dedicated compute facilities within an operating site (e.g. a server room) as a flavour of edge compute. We argue that the key difference between traditional on-premises compute and on-premises edge compute is that with the latter, the applications and underlying infrastructure are both more cloud-like. Applications that leverage edge compute also use cloud-like technologies and processes (such as continuous integration and continuous delivery, or CI/CD in short) and the edge infrastructure uses containers or virtual machines and can be remotely managed (rather than being monolithic).

The same applies when it comes to private cellular networking, where the term ‘private network’ is used differently by certain individuals to refer to virtual private networks (VPNs) as opposed to the dedicated local on-premises network we have defined above. In addition, when it comes to private 5G, there is also confusion as to the difference between better in-building coverage of public 5G (i.e. the macro network) versus a private 5G network, for a manufacturing plant for example. This will only be further complicated by the upswing of network slicing, which can sometimes (incorrectly) be marketed as a private network.

Furthermore, for enterprises that are more familiar with the concepts, many are still looking to better understand the business value and outcomes that private LTE/5G and edge compute can bring, and what they can enable for their businesses.

 

Table of Contents

  • Executive Summary
  • Introduction
    • Evaluating the opportunities with private cellular and edge
    • Telcos see private cellular and edge as two peas in a pod…
    • …but this is not necessarily the case with enterprises
    • Most private cellular or edge trials or PoCs have yet to scale
  • Edge and private cellular as different tracks
    • Enterprises that understand private cellular don’t always understand edge (and vice versa)
    • Edge and private cellular are pursued as distinct initiatives
  • Breaking free from PoC purgatory
    • Lack of stakeholder alignment
    • Ecosystem inertia
    • Unable to build the business case
  • Addressing different deployment pathways
    • Tactical solutions versus strategic transformations
    • Find trigger points as key opportunities for scaling
    • Readiness of solutions: Speed and ease of deployment
  • Recommendations for enterprises
  • Recommendations for telco operators
  • Recommendations for others
    • Application providers, device manufacturers and OEMs
    • Regulators

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How video analytics can kickstart the edge opportunity for telcos

Processing video is a key use for edge computing

In our analysis and sizing of the edge market, STL Partners found that processing video will be a strong driver of edge capacity and revenues. This is because a huge quantity of visual data is captured each day through many different processes. The majority of the information captured is straightforward (such as “how busy is this road?”), therefore it is highly inefficient for the whole data stream to be sent to the core of the network. It is much better to process it near to the point of origin and save the costs, energy and time of sending it back and forth. Hence “Video Analytics” is a key use for edge computing.

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The edge market is evolving rapidly

Edge computing is an exciting opportunity. The market is evolving rapidly, and although still fairly nascent today, is expected to scale significantly over the next 2-3 years. STL partners has estimated that the total edge computing addressable market was worth $10bn in 2020, and that this will grow to $534bn in 2030. This is driven by the increasing number of connected devices, and the rising adoption of IoT, Industry 4.0 and digital transformation solutions. While cloud adoption continues to grow in parallel, there are cases where the increasingly stringent connectivity demands of new and advanced use cases cannot be met by cloud or central data centres, or where sending data to the cloud is too costly. Edge answers this problem, and offers an alternative option with lower latency, reduced backhaul and greater reliability. For the many enterprises who are adopting a hybrid and multi-cloud strategy – strategically distributing their data across different clouds and locations – running workloads at the edge is a natural next step.

Developments in the technologies enabling edge computing are also contributing to market growth. For example, the increased agility of virtualised and 5G networks enables the migration of workloads from the cloud to the edge. Compute is also developing, becoming more lightweight, efficient, and powerful. These more capable devices can run workloads and perform operations that were not previously possible at the edge.

Defining different types of edge

Edge computing brings processing capabilities closer to the end user or end-device. The compute infrastructure is therefore more distributed, and typically at smaller sites. This differs from traditional on-premise compute (which is monolithic or based on proprietary hardware) because it utilises the flexibility and openness of cloud native infrastructure, i.e. highly scalable Kubernetes clusters.

The location of the edge may be defined as anywhere between an end device, and a point on the periphery of the core network. We have outlined the key types of edge computing and where they are located in the figure below.

The types of edge computing

It should be noted that although moving compute to the edge can be considered an alternative to cloud, edge computing also complements cloud computing and drives adoption, since data that is processed or filtered at the edge can ultimately be sent to the cloud for longer term storage or collation and analysis.

Telcos must identify which area of the edge market to focus on

For operators looking to move beyond connectivity and offer vertical solutions, edge is an opportunity to differentiate by incorporating their edge capabilities into solutions. If successful, this could result in significant revenue generation, since the applications and platforms layer is where most of the revenue from edge resides. In fact, by 2030, 70% of the addressable revenue for edge will come from the application, with only 9% in the pure connectivity. The remaining 21% represents the value of hardware, edge infrastructure and platforms, integration, and managed services.

Realistically, operators will not have the resource and management bandwidth to develop solutions for several use cases and verticals. They must therefore focus on key customers in one or two segments, understand their particular business needs, and deliver that value in concert with specific partners in their ecosystem. As it relates to MEC, most operators are selecting the key partners for each of the services they offer – broadcast video, immersive AR/VR experiences, crowd analytics, gaming etc.

When selecting the best area to focus on, telcos should weigh up the attractiveness of the market (including the size of the opportunity, how mature the opportunity is, and the need for edge) against their ability to compete.

Value of edge use cases (by size of total addressable market by 2030)

Source: STL Partners – Edge computing market sizing forecast

We assessed the market attractiveness of the top use cases that are expected to drive adoption of edge over the coming years, some of which are shown in the figure above. This revealed that the use cases that represent the largest opportunities in 2030 include edge CDN, cloud gaming, connected car driver assistance and video analytics. Of these, video analytics is the most mature opportunity, therefore represents a highly attractive proposition for CSPs.

Table of Contents

  • Executive Summary
  • Introduction
    • Processing video is a key use for edge computing
    • The edge market is evolving rapidly
    • Defining different types of edge
    • Telcos must identify which area of the edge market to focus on
  • Video analytics is a large and growing market
    • The market for edge-enabled video analytics will be worth $75bn by 2030
  • Edge computing changes the game and plays to operator strengths
    • What is the role of 5G?
  • Security is the largest growth area and operators have skills and assets in this
    • Video analytics for security will increasingly rely on the network edge
  • There is empirical evidence from early movers that telcos can be successful in this space
    • What are telcos doing today?
    • Telcos can front end-to-end video analytics solutions
    • It is important to maintain openness
    • Conquering the video analytics opportunity will open doors for telcos
  • Conclusion
  • Index

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Telco edge platforms: Balancing speed vs value

Defining the edge

Edge computing has been hailed as key to help deliver the promises of 5G, enabling transformative use cases and experiences. Significantly for mobile service providers, deriving value from their networks and presence at the edge remains an aspiration for a new source of revenues and a more favourable position in the value chain. There is strong belief that this needs to exceed what was achieved with 3G and 4G, where OTT players built entire businesses through successful services using centralised platforms leveraging fast, ubiquitous internet access. Mobile operators remain hopeful that they can evolve from ‘dumb pipes’ and derive more value from dynamic connectivity services, value added platforms, and partnerships.

The edge means different things to different people, so it is useful to define terminology and clarify the scope of this report. We understand the edge to refer to compute, storage and networking infrastructure, facilities, software, and services which exist physically or architecturally between typically non-telco cloud data centres and end-devices. This report will focus on the ‘telco edge’ for both mobile and fixed line telecoms operators.  The term MEC (initially ETSI’s Mobile Edge Computing which evolved to Multi-access Edge Computing) has historically been used for telco edge predominantly with a focus on deployment in the access network, however as we will see its use has somewhat broadened as telcos initially deploy edge computing more centrally.

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The edge continuum spans between end devices and hyperscale cloud

It is common practice to define an edge continuum in a diagram such as below which shows the different edge locations between an end device and the hyperscaler cloud. Typically, the physical distance, the number of network hops, and network latency will increase the further the edge location shifts to the right.

The edge continuum

edge platform

In considering the telco edge, we will primarily be focussed on the network edge, consisting of data centres logically situated in telco’s access, transport, and core network facilities. The on-premise edge (sometimes referred to enterprise or private edge) may be offered by telcos and others to enterprises but is closely related to private 4G/5G networks and single tenant propositions which are out of scope of this report. STL has written about this in reports such as Private networks: Lessons so far and what next and Combining private 5G and edge computing: The revenue opportunity.

The network edge affords a wide range of choices to deliver edge services from within the network. Network edge also includes neutral host providers that offer facilities for multiple infrastructure providers, which support enterprise applications, as well as radio access networks. These may be offered by traditional telcos, tower infrastructure providers and others.

The regional edge sits outside telco networks at internet exchanges, carrier exchanges, interconnect points, co-location, and data centre facilities. Multiple parties can deploy infrastructure at such locations which are designed as neutral, well-connected locations for third party equipment.  For some use cases, these locations are considered as ‘close enough’ or ‘near enough’ edge sites.

Edge computing drivers and benefits vary depending on the use case

While low latency is often cited as the justification for moving application workloads from the cloud to the edge, there are other drivers such as reduced data transit, data sovereignty and improving redundancy. These factors may be just as relevant as low latency, or more so, depending on the specific use case.

Edge computing benefits

Migrating workloads from end-devices to the edge can also bring benefits such as reduced power consumption, allowing smaller form factors at lower costs, and enabling experiences that are simply not possible on existing devices due to heavy computational requirements. Processing in the cloud may have been previously dismissed due to its limitations or constraints. One consumer example would be Instagram or Snapchat real-time video filters with heavy machine learning processing requirements. The processing for these may move to the edge to improve and standardise performance across devices, by not relying on the end-device’s processing power. Partners

However, the public cloud is well established and here to stay, so it is prudent to view the edge as complementary to and an extension of the public cloud, offering characteristics which may be important for specific components of certain use cases.

Table of Contents

  • Executive Summary
    • Most telcos do not yet see demand for a fully distributed edge
    • The platform is an important piece of the edge, but the verdict is still out on which approach to take
    • Telcos need to guarantee multi-cloud and multi-edge orchestration for their customers
    • Next steps
  • Introduction
    • Defining the edge
    • The state of the edge
  • Cloud vs edge
    • Contrasting public cloud and public edge
    • Latency in fixed vs mobile networks
    • The rationale for telco edge
  • Telco edge propositions and use cases
    • Internal applications for telcos
    • External applications for telcos
    • Telco edge propositions based on telco’s capabilities
    • Potential use case opportunities for telco edge
  • Where is the telco edge?
    • Edge really means core for now
    • Challengers to the telco edge
  • Building the telco edge platform
    • Edge developers want a consistent and seamless experience
    • The potential providers of network edge platforms
    • Cloud-centric capabilities and business models are key the success of telco edge platforms
  • Overcoming challenges
    • Telco industry challenges
    • External challenges
  • Conclusion: What should telcos do?

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VNFs on public cloud: Opportunity, not threat

VNF deployments on the hyperscale cloud are just beginning

Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date

The past three years have seen many major telcos concluding collaboration agreements with the leading hyperscalers. These have involved one or more of five business models for the telco-hyperscaler relationship that we discussed in a previous report, and which are illustrated below:

Five business models for telco-hyperscaler partnerships

Source: STL Partners

In this report, we focus more narrowly on the deployment, delivery and operation by and to telcos of virtualised and cloud-native network functions (VNFs / CNFs) over the hyperscale public cloud. To date, there have been few instances of telcos delivering live, commercial services on the public network via VNFs hosted on the public cloud. STL Partners’ Telco Cloud Deployment Tracker contains eight examples of this, as illustrated below:

Major telcos deploying VNFs in the public cloud

Source: STL Partners

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Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’

The telcos in the above table are all of comparable stature and ambition to the likes of AT&T and DISH in the realm of telco cloud but have a diametrically opposite stance when it comes to VNF deployment on public cloud. They have decided against large-scale public cloud deployments for a variety of reasons, including:

  • They have invested a considerable amount of money, time and human resources on their private clouddeployments, and they want and need to utilise the asset and generate the RoI.
  • Related to this, they have generated a large amount of intellectual property (IP) as a result of their DIY cloud– and VNF-development work. Clearly, they wish to realise the business benefits they sought to achieve through these efforts, such as cost and resource efficiencies, automation gains, enhanced flexibility and agility, and opportunities for both connectivityand edge compute service innovation. Apart from the opportunity cost of not realising these gains, it is demoralising for some CTO departments to contemplate surrendering the fruit of this effort in favour of a hyperscaler’s comparable cloud infrastructure, orchestration and management tools.
  • In addition, telcos have an opportunity to monetise that IP by marketing it to other telcos. The Rakuten Communications Platform (RCP) marketed by Rakuten Symphony is an example of this: effectively, a telco providing a telco cloud platform on an NFaaS basis to third-party operators or enterprises – in competition to similar offerings that might be developed by hyperscalers. Accordingly, RCP will be hosted over private cloud facilities, not public cloud. But in theory, there is no reason why RCP could not in future be delivered over public cloud. In this case, Rakuten would be acting like any other vendor adapting its solutions to the hyperscale cloud.
  • In theory also, telcos could also offer their private telcoclouds as a platform, or wholesale or on-demand service, for third parties to source and run their own network functions (i.e. these would be hosted on the wholesale provider’s facilities, in contrast to the RCP, which is hosted on the client telco’s facilities). This would be a logical fit for telcos such as BT or Deutsche Telekom, which still operate as their respective countries’ communications backbone provider and primary wholesale provider

BT and Deutsche Telekom have also been among the telcos that have been most visibly hostile to the idea of running NFs powering their own public, mass-market services on the public and hyperscale cloud. And for most operators, this is the main concern making them cautious about deploying VNFs on the public cloud, let alone sourcing them from the cloud on an NFaaS basis: that this would be making the ‘core’ telco business and asset – the network – dependent on the technology roadmaps, operational competence and business priorities of the hyperscalers.

Table of contents

  • Executive Summary
  • Introduction: VNF deployments on the hyperscale cloud are just beginning
    • Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date
    • DISH and AT&T: AWS vs Azure; vendor-supported vs DIY; NaaCP vs net compute
  • Other DIY or vendor-supported best-of-breed players are not hosting VNFs on public cloud
    • Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’
    • The reluctance to deploy VNFs on the cloud reflects a persistent, legacy concept of the telco
  • But NaaCP will drive more VNF deployments on public cloud, and opportunities for telcos
    • Multiple models for NaaCP present prospects for greater integration of cloud-native networks and public cloud
  • Conclusion: Convergence of network and cloud is inevitable – but not telcos’ defeat
  • Appendix

Related Research

 

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Telco plays in live entertainment

Enhancing live entertainment

Live entertainment spans everything from a handful of people enjoying stand-up comedy in a pub to a football match attended by 100,000 fans. Although there are many different forms and formats of live entertainment, they share three inter-related characteristics – immediacy, interactivity and immersion. The performers make things happen and people tend to react, by clapping, shouting, singing or gesticulating at the performers or by interacting with each other. A compelling event will also be immersive in the sense that the spectators will focus entirely on the action.

For telcos, live events present specific challenges and opportunities. Simultaneously providing millions of people with high quality images and audio from live events can soak up large amounts of bandwidth on networks, forcing telcos to invest in additional capacity. Yet, it should be feasible to make a return on that investment: live events are an enormously popular form of entertainment on which people around the world are prepared to spend vast sums of money. This is a market where demand often outstrips supply: tickets for top tier sports events or music concerts can cost US$150 or more.

With the advent of 5G and Wi-Fi 6E, telcos have an opportunity to improve spectators’ enjoyment of live events both within a venue and in remote locations. Indeed, telcos could play a key role in enabling many more people to both participate in and appreciate live entertainment, thereby helping them to enjoy more fulfilling and enriching lives.

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The opportunities to use new technologies to enhance live events

Live entertainment

Source: STL Partners

More broadly, telecoms networks and related services have become fundamental to the smooth running of our increasingly digital economy. Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of live entertainment, telcos can help people to make better use of their leisure time – a precious and very finite resource for most individuals.

This report begins by providing an overview of the live entertainment opportunity for telcos, outlining the services they could provide to support both professional and amateur events. It then considers the growing demand for high-definition, 360-degree coverage of live events, before discussing why it is increasingly important to deliver footage in real-time, rather than near real-time. Subsequent sections explore the expanding role of edge computing in facilitating live broadcasts and how augmented reality and virtual reality could be used to create more immersive and interactive experiences.

This report draws on the experiences and actions of AT&T, BT, NTT and Verizon, which are all very active in the coverage of live sports. It also builds on previous STL Partners research including:

Contents

  • Executive Summary
  • Introduction
  • Opportunities to enhance live entertainment
    • Amateur entertainment – a B2C play
  • Delivering high-definition/360-degree video
    • New broadcast technologies
    • Real-time encoding and compression
    • Traffic management and net neutrality
  • Real real-time coverage and stats
    • More data and more stats
    • Personalised advertising and offers
  • Edge computing and the in-event experience
    • Refereeing automation/support
    • In-venue security and safety
    • Wi-Fi versus 5G
  • Augmented reality – blurring the lines
  • Conclusions
    • Tech can enrich people’s experience of live events
    • The role of telcos
  • Index

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Forecasting capacity of network edge computing

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Telco edge build has been slower than expected

Telecoms operators have been planning the deployment of edge computing sites for at least the last three years.

Initially, the premise of (mobile) edge computing was to take advantage of the prime real estate telecoms operators had. Mobile operators, in particular, had undergone a process of evolving their network facilities from sites which housed purpose-built networking equipment to data centres as they adopted virtualisation. The consolidation of networking equipment meant there would be spare capacity in these data centres that could easily host applications for enterprises and developers.

That evolution has now been accelerated by the advent of 5G, a mobile generation built on a software-based architecture and IT principles. The result will be a proliferation of edge data centres that will be used for radio access network and core network hardware and software.

However, the reality is that it has taken time for telcos to deploy these sites. There are multiple reasons for this:

  1. Cost: There is a cost to renovate an existing telco site and ensure it meets requirements common for world-class data centres.
  2. Demand: Telcos are hesitant to take on the risk of building out the infrastructure until they are certain of the demand for these data centres.
  3. 5G roll-out: Mobile operators have been prioritising their 5G RAN roll-out in the last two years, over the investment in edge data centres.
  4. Partnership decisions: The discussion around who to partner with to build the edge data centres has become more complicated, because of the number of partners vying for the role and the entrance of new partners (e.g. hyperscalers) which has slowed down decision-making

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Early adopters have taken significant strides in their edge strategy in 2021

2020 and 2021 have been seen as inflection points as a number of leading telecoms operators have launched edge sites: e.g. AT&T, Verizon, Cox Communications, SK Telecom and Vodafone. Arguably, this was triggered by AWS announcing partnerships on AWS Wavelength with four telecoms operators in November 2019, with more recently announced (e.g. Telstra in 2021).

Going forward, key questions remain on the trajectory of telco edge build:

  • How many edge data centres will telcos build and make available for consumer/enterprise applications?
  • How much capacity of telco edge computing will there be globally?
  • How much of telco edge computing will be used for distributed core network functions vs. consumer/enterprise applications?
  • What proportion of telco edge data centre capacity will be taken up by hyperscalers’ platforms?

This report seeks to forecast the capacity at telecoms operators’ edge data centres until 2025 and provide clarity on the nature and location of these sites. In other words, how many sites and servers will be available for running applications and where will these sites be located, both physically and logically in the telecoms operators’ networks.

Before reading this report, we would recommend reading STL Partners’ previous publications on telco edge computing to provide context for some of the key themes addressed, for example:

The report focuses on network edge computing sites

Edge computing comprises of a spectrum of potential location and technologies designed to bring processing power closer to the end-device and source of data, outside of a central data centre or cloud. This report focuses on forecasting capacity at the network edge – i.e. edge computing at edge data centres owned (and usually operated) by telecoms operators.

The initial version of the forecast models capacity at these sites for non-RAN workloads. In other words, processing for enterprise or consumer applications and the distributed core network functions required to support them. Future versions of the forecast will expand to RAN.

Forecast scope in terms of edge locations and workload types

The report covers two out of three scenarios for building the network edge

Table of content

  • Executive summary
  • Introduction
  • There are 3 key factors determining telco edge data centre build out
  • Logically, most network edge will be in the transport aggregation layer
  • Geographically, we will see a shift in the concentration of network edge data centres
  • The limited capacity at network edge DCs will largely be used for edge applications
  • Most telecoms operators are taking a hybrid approach to building their edge
  • Conclusions and next steps
  • Appendix: Methodology

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Edge computing market sizing forecast

We have updated this forecast. Check the latest report here

Introducing STL Partners’ edge computing market sizing forecast

This report presents the key findings of STL Partners’ new demand forecast model for edge computing services. Its purpose is to:

  • Assess the demand from 20 use cases which currently rely on edge or will require edge to fully develop;
  • Identify the total revenue across the value chain: hardware, connectivity, application, edge infrastructure (network and on-premise), and integration and support;
  • Output a full set of results for over 180 countries over the 2020–2030 period per use case and per vertical.

This report is accompanied by a dashboard which presents a summary of our model output and the associated graphics for the world’s regions and for 20 major markets. The dashboard also presents the full revenue output for the 180+ countries.

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Edge computing addressable revenue will reach US$543 billion by 2030

High-level findings from the model indicate that:

  • The growth in the number of connected devices, as well as the need for higher levels of automation, operational efficiency and cost reduction, will drive the adoption of edge computing across many use cases and verticals over the next 10 years. This will result in increased spend across the value chain.
  • The total edge computing addressable market will grow from US$10 billion in 2020 to US$543 billion in 2030 at a CAGR of 49% over the 10-year period.
  • The total value chain breaks into five main components which are hardware, connectivity, application, integration & support, in addition to the edge infrastructure which includes both on-prem edge and network edge.

Total edge computing addressable revenue

Edge computing

Source: STL Partners

Table of contents

  • Executive Summary
  • Methodology
  • Revenue by value chain component
  • Revenue by use case
  • Revenue by vertical
  • Revenue by region
  • Appendix

For more information on STL Partners’ edge-related services, please go to our Edge Insights Service page.

The new forecast is intended to complement:

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