Policy & Charging in the 5G era

Increasingly agile and programmable networks are giving operators new ways to deliver benefit for their customers. Policy and charging network functions are key levers for enterprises to deliver the next generation of network services. In this article, we explore how these functions will be fundamental to driving greater revenue, speed and control for operators. 

Patrick Montague-Jones, Senior Consultant  

What is policy control? 

Network policy control is the process of creating, implementing and maintaining rules in the network to determine how the network, data or services should behave. The rules have influence over network Quality of Service (QoS), access and data control and in-life service tracking. These end-to-end rules ensure structured and efficient operation of the network, increasingly important traits as operators virtualise and expand their networks. 

What is charging? 

 Charging is a network function that monitors usage of products and services and generates records based on this. Charging can come in two main models: offline and online. Offline charging monitors usage and processes the charge at the end of a given session or timeframe. These charges then flow down and are reflected on the bill. Online charging processes data and service usage in real time and customers can view their bills in real time too. Where a customer follows a pre-paid model, services may be impacted if the user does not have sufficient funds. 

How have these systems transformed by 5G? 

As operators virtualise their networks in preparation for the next generation of solutions and a chance to increase revenue, policy control and charging systems have been central to this transformation. Customers are looking for flexible, scalable service and operators need systems to support this demand. Moreover, ability and desire to manipulate the network, both from operator and customer perspective, has increased.   

The new wave of mobile connectivity, 5G, has ushered in change in this respect. From an architectural perspective, policy and charging functions sit in a consolidated function for 4G. For 5G, however, the PCRF (Policy and Charging Rules Function) has been bifurcated, into two discrete functions and takes direct input from more network functions. The reduced number of hops will serve to reduce network latency. From a business perspective this means that operator decisions can be optimised for policy application and network resource allocation. 

5G Charging and policy

What are the benefits of combining the two functions? 

Operator transition to cloud-native technology platforms and an increasing vendor willingness to offer open platforms means IT stacks can work in concert with far less integration work. This model supports ‘best of breed’ approaches, where operators choose the best vendor for a given module based on the features available. With the possibility of interweaving different vendor solutions together with decreasing complexity, operators may wonder what benefit efficient policy control and charging systems might bring them. 

Operator revenue opportunity – use of agile and scalable systems means that operators will have new means of monetisation. The policy control function will be able to track and enforce policy on a deeper level. This applies across B2B and B2C segments. In B2B, an operator could apply a different QoS to devices based on location (e.g. inside the customer manufacturing plant vs back office) over the same network. Charging can also progress to become more tightly linked with customer outcomes (e.g. a price per successful hour of uptime; price per successful VoIP call). Customers may see this as more equitable and a step change in operator approaches to demonstrating direct business value. Operator commercial and technology teams must collaborate to understand what metrics will be the most useful to apply policy and charges on for end customers. 

Quick provisioning and charging – customers increasingly expect services to be provisioned and data to be available in real time. As network slicing becomes more prevalent, businesses are likely to want specific slices spun up at will to cover specific use cases. One such example might be a 5G slice, with specific QoS requirements, for broadcast at a live music or sporting event. Network customers will want to ensure that all footage is received without interference from mobile users in the venue and quickly transmitted back to the base station. Operators will want to charge in real time for these services and so a ‘hand-in-glove’ relationship between policy and charging is vital. 

Service granularity – next generation policy and charging systems have created greater network visibility and control than ever before. Turning data into real insight is a challenge that telcos have faced for many years. The next step in this journey is understanding that insight to drive tailored offerings that are relevant to end customers. Policy can be applied to a network based on location, time of day, current data usage in the billing period. For example, a consumer’s network speed could be throttled if they consume more than their data allowance in a month.  This could apply to both B2C and B2B customers. For the B2B sector, in a manufacturing facility a higher QoS could be applied to the production line than to devices located in the administrative back office. The real challenge for operators is to decide on which policy metrics to apply charging. Getting this right will ensure an equitable transaction where the operator is generating revenue on a service that the customer feels is being charged for on real business outcomes. 

Learn more about our work on new 5G policy and charging

How STL Partners Consulting can support you

STL Partners has developed industry-leading expertise, backed by extensive thought leadership, and supported telecoms vendors in identifying the best approach to engage telcos on the topic of 5G.

There are three main ways we can do this:

  1. Strategic positioning: Evaluating how telcos are thinking about their IT evolution with 5G, and analysing how vendors can support in their roadmap and address key pain points stalling growth
  2. Business model development: Developing potential business models for new strategic opportunities, including potential go-to-market strategies
  3. Customer engagement: Creating thought leadership and (marketing and/or sales) collateral that can accelerate engagements with existing customers and new prospects

Get in touch to understand how STL Partners can support you:


Or visit our website to discover more about our consulting work and expertise:


Closing the digital divide: How regional ISPs should innovate

The COVID-19 pandemic highlighted the severity of the digital divide globally, which cannot be solved by large telecoms operators alone. STL Partners’ research into regional ISPs demonstrates the role they can play, particularly by evolving their business model to open new opportunities.

What is the digital divide? 

The digital divide refers to the gap in connectivity between urban areas and rural areas. This “broadband gap” affects approximately 47% of the world’s population and 25 million people in the U.S. alone. In some cases, the digital divide is so stark that there are areas that are completely unconnected. In other cases, there are significant differences between the broadband speeds and quality of service in urban areas and rural areas.

Funding does not completely solve the digital divide problem 

It is no secret that the digital divide is a global problem now: as people’s lives become digitised further, access to the internet has become a fundamental need. The COVID-19 pandemic shone new light on the debate and brought it back to policymakers’ attention. In the U.S., for example, several funding initiatives have recently been introduced or expanded: Connect America Fund Phase II Auction (CAF II), the Rural Digital Opportunity Fund (RDOF) and Infrastructure Investment and Jobs Act. Additionally, the U.S. Department of Agriculture has launched the Rural Development Broadband ReConnect Program, and the FCC has been issuing grants to connect low-income households through the Emergency Broadband Connectivity Fund during the pandemic.

However, each of these hold limitations and, although they incentivise large telecoms operators and ISPs to accelerate network roll-out, they do not necessarily solve the challenges that service providers face in covering rural areas. Providing ubiquitous broadband coverage for these various terrains is challenging because return on investment for provisioning sparse populations is low, and carriers must navigate local permitting laws (which may differ by state, or type of land, e.g., tribal lands) to get access to rights-of-way.

There are specific challenges that regional ISPs face, which makes building their networks, upgrading core capabilities and infrastructure security, and rolling out services more difficult: 

  1. Making the business case
  2. Justifying the cost of technology
  3. Gaining access to skills and resources
  4. Modernising the network

Why innovation across the business model is key for closing the digital divide

STL Partners has written about business model innovation for decades, mainly focusing on traditional telecoms operators. Some of these learnings are applicable to regional ISPs, for example the need to expand ecosystems, however there are nuances within regional ISPs that are unique.

Following a research programme evaluating over 30 regional ISPs and interviewing leading players, we developed a framework that highlighted four key factors for business model innovation: technology, partnerships, financing models, and new services and customer segments.

• Use of new, innovative technology to accelerate access network build and optimize the network core for scale
• Working with unique companies and organizations to share skills, technology and increase value provided to customers
Financing models
• Accessing capital for investment through different models and partners - public or private
New services and customer segments
• Improving the business case by developing new services and taking these to (new) market(s)

Examples of regional ISP business model innovation

Our research identified numerous examples of business model innovation happening across types of regional ISPs:

1. Inland Cellular

Inland Cellular demonstrates the value of a partnerships, ecosystem approach to provide services to rural industries through the Rural Cloud Initiative

2. Alaska Communications

Alaska Communications highlights how technology can dramatically change the economics of the network and allow an ISP to scale more quickly

3. Bluewater Regional Networks

Bluewater Regional Networks showcases the value regional ISP services can bring to new customer segments – especially in B2B

4. Ting Internet

Ting Internet and Westminster share risk through innovative financial model using payback mechanism

5. Microsoft Airband

Microsoft Airband provides TV white space as an alternative wireless access technology

Recommendations for regional ISPs tacking the digital divide

Regional and rural ISPs are well-positioned to tackle the broadband gap through innovative business models. In order to taking a driving role in closing the digital divide while tackling business model challenges, ISPs should seek to evaluate different aspects. Firstly, this can be about how network infrastructure is funded for and looking outside traditional means. Secondly, it can be about exploring partnerships with new organisations and taking a more ecosystem approach to these, as opposed to linear supplier-customer models. Third, ISPs can explore new products and services that are easy to take to market, yet can make a huge difference to their business case. And, finally, innovative technologies open up new ways to cover large areas using more cost-effective means.

Discover more about on this topic

This article is based on a report commissioned by A10 Networks, which was prepared independently by STL Partners. 

Dalia Adib, Director – Consulting 

How STL Partners Consulting can support you

STL Partners has been supporting telecoms operators, including regional ISPs to develop new business models and open up new revenue opportunities. There are four main ways we can do this:

  1. Growth strategy: Analysing new markets for regional ISPs to enter into, e.g. new vertical industries or new service domains (e.g. smart home, ICT services and solutions, security, etc.)
  1. Business model development: Developing potential business models for new strategic opportunities and creating an ROI business case for these.
  1. Go-to-market strategy: Building a go-to-market strategy to determine how regional ISPs can enter these new markets, either through existing channels or new ones, plus the pricing and packaging the ISP must consider.
  1. Customer engagement: Creating thought leadership and collateral that can accelerate engagements with existing customers and new prospects to build brand leadership in new domains.
Get in touch to understand how STL Partners can support you:
Or visit our website to discover more about our consulting work and expertise:

8 edge computing pricing models

8 edge computing pricing models​

Customers are in the process of learning about edge computing and its benefits. However, a key component of their decision-making process is how to pay for the edge. In the article, we outline potential pricing models for accessing edge computing.

Edge computing pricing models are still evolving, however there are trends emerging. Some models look to replicate pricing models from the cloud and IT, others seek to provide new ways to allow customer to access edge computing infrastructure, platforms and applications by creating new economic models for a distributed, edge cloud. Here are ten example pricing models that STL Partners has come across through our research and consulting work in edge.

1. IaaS

In many cases, edge computing is an extension of the cloud, or at least an extension of cloud business models. As with the cloud, edge computing can be charged for as-a-service at different levels, depending on how much the customer wants to control the stack. Some service providers are opting for an infrastructure-as-a-service (IaaS) model, which allows customers to pay only for the physical and virtual infrastructure they use and the infrastructure is operated and maintained by the service provider. Public edge IaaS models are emerging with AWS Wavelength, Azure Edge Zones, and private edge IaaS models driven by companies such as telecoms service providers, e.g. Cox Edge. Consumption-based IaaS models become much more complicated in an edge computing paradigm, given that there is finite resource at each edge and customers’ workloads moving between edge nodes, therefore edge IaaS providers must have sophisticated charging engines to track this.

2. PaaS

A platform-as-a-service (PaaS) model is another cloud usage-based model, however at a higher level that infrastructure. Within the context of edge computing, there are two main PaaS models emerging. One is a software platform that allows the customer to monitor and orchestrate its applications across different underlying edge infrastructure platforms. A second model is a platform that allows a customer to deploy on edge infrastructure, without having to control and manage the infrastructure itself. An example PaaS in the cloud world include Force.com; developers create applications on Force.com’s platform, but Force.com manages the underlying infrastructure. A PaaS model is often charged as a subscription, with prices ranging depending on usage and number of tools being used by the customer (e.g. amount of infrastructure that needs to be managed). Section, for example, has an edge hosting solution pricing model today based on CPU/RAM, consistent with cloud-based pricing models. Cloud has been dominated by business customers, however companies such as Shadow (Blade) are allowing consumer (gamers) to pay for a subscription to access a gaming PC in an edge data centre.

3. SaaS

The other typical cloud as-a-service model is software-as-a-service (SaaS). This is where the customer accesses an edge application, but does not control or manage any of the underlying data or infrastructure. Although the market is nascent, independent software vendors (ISVs) are already exploring how they can leverage edge computing to improve their customer experience, continuing to offer their applications in an as-a-service model. Some ISVs may be able to charge a premium to customers for offering this super experience.

4. Hardware-as-a-Service

Much of the edge will be at customer premises, rather than in a third-party data centre, therefore the customer is responsible for its own infrastructure, whether it is in its on-premise data centre or in a smaller, containerised environment. Given the trend towards OPEX-based models to help customers avoid the need to invest large amount of capital to set up their edge computing infrastructure, hardware companies are offering their servers in an as-a-service, consumption-based model too. For example, HPE offers GreenLake, which is charged for through a monthly subscription fee. In fact, HPE’s CEO claims that all of the vendor’s products will be available as a service by 2022.

5. CDN

Many CDN (content delivery network) service providers are expanding their offering through edge, as outlined in our article CDN: what is edge CDN and virtual CDN (vCDN)? This is a combination of them caching at point of presence deeper in the edge, but also incorporating more compute-based services, alongside the storage/caching-focused services. CDN pricing models are often consumption-based models, using bandwidth as a key driver. However, some edge CDN companies are providing alternatives, e.g. charging by page view.

6. Licence models

Software has traditionally used a licence model, which is usually a fixed fee per month or year, based on the number of users, seats or devices. Although the trend is now towards more consumption-based models, licencing is still preferred for some organisations. It allows customers to spread the cost over time, rather than pay upfront, but still ensure a level of certainty. Consumption-based models have a degree of volatility, for example if your application experienced a sudden surge in demand, thus skyrocketing demand for its underlying edge/cloud infrastructure, this would be incurred as a huge spike in cost for the customer (the application provider in this instance). A similar more is fixed monthly charges, which AWS offers for its Outposts racks on a 3-year term.

7. Managed service

Service providers, including telecoms operators, prefer offering an edge computing solution as a managed service offering, combining the infrastructure, applications, networking, plus the maintenance/servicing of these, in one bundle. This is then billed to the customer on a monthly or yearly basis, depending on the level of service they need, e.g. in terms of availability, security, responsiveness, etc.

8. Co-location

The co-location pricing model is a traditional model for providing space, power, cooling and bandwidth services to customer who want access to a data centre, built and run by a third-party. Space is often leased by the rack, cabinet, cage or room. The key difference in edge computing vs. central/cloud data centres is that edge data centres are much smaller. Therefore, the economics for the co-lo provider are dramatically different; an average co-lo data centre can hold about 800 racks of servers, whereas an edge data centre could have only 4-10. However, innovation in this space is emerging. For example, Vapor IO, a startup creating a distributed edge across metropolitan cities in the US, provides an edge-to-edge co-location service.

Author: Dalia Adib is a Director at STL Partners, specialising in edge computing, cloud and enterprise services.

About Dalia Adib

Edge computing practice lead

Dalia is the Edge Computing Practice Lead at STL Partners and has led major consulting projects with Tier-1 operators in Europe and Asia Pacific on edge computing strategies, use cases and commercial models. She co-authored the research report “Edge Computing: Five Viable Business Models” and been an active speaker at events including Edge Europe and Data Cloud Congress. Outside of edge computing, she supports clients in areas such as 5G, blockchain, digital transformation and IoT.

Read more about Edge Compute


About edge compute and edge cloud

An overview of edge computing and edge cloud to highlight the key questions being asked by the wider ecosystem and telecoms operators who are exploring the opportunity

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Turning vision into practice

Our Telco edge computing: Turning vision into practice research gives an overview of the telco opportunity and seeks to address the key challenges for operators pursuing edge

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Edge business models and how to execute them

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What is telco federated edge?

What is telco federated edge?​

The idea of federating the telco edge has been around for some time and there is strong operator interest in pursuing this opportunity. However, it’s yet to be seen how federation will work in practice. This article is our take on answering some of the open questions on this topic.

If you’ve been following the telecoms industry, you might have come across the terms ‘federated edge’ or ‘telco edge federation’. Major industry players, including the GSMA (mobile industry organisation with 750+ members), Bridge Alliance (a telecoms alliance of 34 major operators in APAC and MEA), and ETSI (European industry standardisation organisation), plus others have been exploring the idea of federating the telco edge for some time and there is significant operator interest in pursuing this. It is, however, yet to be seen how edge federation will work in practice. This article answers the key questions of how this will work technologically, what it aims to do, what progress has been made to date and the potential business models telco federated edge opens up.

What is federated edge?

In a nutshell, federating the telco edge is the process of interconnecting operator edge platforms to enable the consistent delivery of edge computing services across networks and national boundaries.

GSMA has proposed the idea of developing a single Operator Platform which, in Phase 1, will “federate multiple operators’ edge computing infrastructure to give application providers access to a global edge cloud to run services through a set of common APIs”.  Additionally, GSMA’s Telco Edge Cloud (TEC) group aims to align multi-access edge computing business models, charging principles, and commercial deployments and is currently working with 20+ leading operators to promote the initiative.

What we are trying to do is to enable interfaces between operators and simplify APIs to enable federation” – Faisal Zia, Telco Edge Operator Platform Lead, GSMA.

On the other hand, Bridge Alliance is working on interconnecting its own telco members’ edge clouds to give unified propositions to enterprise customers with the goal of interconnecting with other aggregators down the road. The aggregators could include non-telco edge platforms, hyperscale cloud providers, etc.

“We can’t operate in siloes; our goal is to ultimately achieve hub-to-hub interconnection with other edge aggregators to enable a truly global offering” – Claudio Checchia, Senior Manager in Research & Analysis, Bridge Alliance.

These initiatives have created a great deal of interest in a future where the telco edge is federated. We visualise what that future would look like through an example use case: video analytics for health and safety. This is where enterprises use video sensors to automatically detect any incidents which post health and safety risks, e.g. identifying a fire, a machine malfunctioning, two employees fighting, etc.

How will it work?

Federated edge

In an ideal world, an edge application developer interfaces with a single platform to gain access to global/regional edge cloud services. In this example, the customer is a developer of video analytics solutions for health and safety in manufacturing facilities. Naturally, the manufacturers’ sites, that the video analytics solution serves, are likely to be geographically dispersed, and it is in the customers’ best interests to provide a consistent quality of service across all manufacturing sites, regardless of location. Hence, the ability to interact with a single point of contact (the platform) to get consistent and reliable telco edge services without having to worry about navigating multiple relationships with operators in different countries is an attractive proposition for application developers.

Other important benefits of edge federation include roaming support and low latency interconnection between the edge clouds of operators serving the same geographical area. Additionally, federation supports the integration of edge and network capabilities enabling integrated offerings and mobility. This would apply to the video analytics health and safety use case in a smart city context. For example, in a situation where a random event occurs, bringing a large number of people together in one area in a town or city, the video analytics application may need to move to a new edge and/or scale up accordingly.

Benefits of federated edge

Both operators and application developers will benefit significantly from edge federation. For telecoms operators, it will increase the size of their opportunity and improve the proposition they can take to customers; for developers, it will ease their ability to work with telecoms operators and allow them to scale telco edge-based applications.

federated edge

Reality check: progress has been made but there is still work to do

There are a number of POCs, developer workshops, trials, and industry initiatives aimed at advancing telco edge federation. As part of the GSMA TEC Pre-commercial Trials Foundry project, KDDI came together with Deutsche Telekom (DT) to develop a mobile application proof-of-concept on augmented reality leveraging remote rendering and visual positioning and running on a common platform (MobiledgeX) across the edge networks of KDDI and DT.

Another trial by Bridge Alliance, Singtel, and SK Telecom (SKT) demonstrated cloud gaming on Singtel’s and SKT’s MEC platforms deployed through the Bridge Alliance Federated Edge Hub. This POC validated the possibility to host and deliver edge compute resources across multiple geographies through a federated platform.

Most recently, Bridge Alliance, MobiledgeX, Singtel and Telefonica announced that they successfully achieved hub-to-hub interconnection between the Bridge Alliance Federated Edge Hub (FEH) and MobiledgeX Edge-Cloud platform allowing edge applications to be deployed across different edge platforms and regions served by each hub. Another important announcement was at MWC’22 where Telefónica unveiled the CAMARA industry initiative in partnership with GSMA, the Linux Foundation, DT and other players with the mission of defining APIs for exposing network capabilities to third parties.

Despite this positive traction, it’s important to note that there have been previous attempts by operators to work jointly on industry-wide projects which have not necessarily delivered the desired outcomes e.g., API programme, IoT, mobile identity/authentication, etc.

But, there is reason to believe that it will be different this time around. First, considering their stagnating revenues and significant investments in 5G, telcos see edge as the key to delivering revenue growth in the future. In fact, according to our recent research, the edge computing addressable revenue will reach US$543 billion by 2030, with revenues from edge infrastructure growing at the fastest pace (CAGR 102% during 2020-2030). Secondly, operators are increasingly looking to take a front-seat role with end-customers, i.e. developers and enterprises. Thirdly, there is the potential threat of competition from non-telcos, which is encouraging telecoms operators to work together and ensure they create a differentiated value to customers. The combination of these factors creates a more favourable environment for telco edge federation to succeed.

Challenges of making federated edge happen

It is important to recognise that there is still a long road ahead for edge federation to become a reality as operators work together to solve a range of technical and commercial challenges.

Technical challenges

To materialise the concept of a unified telco edge offering, operator mobile edge computing (MEC) platforms must be adapted significantly. ETSI has been working on a set of standards that operators must comply with to futureproof their MEC platforms for federation. At the same time, it’s important to keep in mind that to capitalise on the current momentum, the efforts to meet technical requirements must be accelerated. Open APIs are a potential solution to this problem. The challenge is to adapt those APIs in a way that will drive their adoption by the developer community.

Commercial challenges

The operator community needs to define the commercial arrangements suitable for federated edge computing. While a significant amount of work has been done to address the technical challenges, it’s quite early days when it comes to the commercial side of things.

MEC federation requires an extremely modular approach to enable a unified telco edge offering in the future. But beyond this technical challenge, it is even more important to address the problem of the business model for MEC federation, that ultimately will drive the technical solutions adopted”- David Carrera, Co-founder & CTO, Nearby Computing

Commercial models

We at STL believe that there are 3 viable commercial models for federated telco edge:

  1. Aggregator model: a 3rd party aggregates the individual members’ edge offerings and sets uniform pricing across the federation footprint.
  2. Settlement model: No aggregator, members settle differences internally at an agreed settlement rate. For example, if operator A’s customers use operator B’s MEC platform equivalent to 100 vCPU hours, while operator B’s customers use operator A’s MEC platform for 50 vCPU hours, operator B will settle the difference in fees for the 50 vCPU hours at the agreed settlement rate. This model allows operators to pursue their own commercial strategies.
  3. Roaming model: No uniform pricing, prices are determined through bilateral agreements between operators. In some cases, prices will also differ within a single operator based on demand and availability of edge resources. This model gives operators more flexibility on pricing but complicates the system which is not aligned with developer goals.

Author: Ani Keshishyan is a Consultant at STL Partners, specialising in edge computing, 5G, and

About Dalia Adib

Edge computing practice lead

Dalia is the Edge Computing Practice Lead at STL Partners and has led major consulting projects with Tier-1 operators in Europe and Asia Pacific on edge computing strategies, use cases and commercial models. She co-authored the research report “Edge Computing: Five Viable Business Models” and been an active speaker at events including Edge Europe and Data Cloud Congress. Outside of edge computing, she supports clients in areas such as 5G, blockchain, digital transformation and IoT.

Read more about Edge Compute


About edge compute and edge cloud

An overview of edge computing and edge cloud to highlight the key questions being asked by the wider ecosystem and telecoms operators who are exploring the opportunity

Read more


Turning vision into practice

Our Telco edge computing: Turning vision into practice research gives an overview of the telco opportunity and seeks to address the key challenges for operators pursuing edge

Read more


Edge business models and how to execute them

A joint webinar with MobiledgeX and STL Partners exploring edge cloud business models and the value proposition for application developers in augmented reality

Read more

The emergence of new service providers

Thanks to the “democratisation” of shared spectrum, virtualised networks, fibre and cloud – plus the demands of industry, government and local communities – a plethora of new service providers are emerging in the 5G-era.

New service provider types

New service providers

Source: STL Partners

In a recent report, New telcos: A field guide, STL Partners classified these into three main groups of service provider types, with the remainder grouped into a “miscellaneous” category for completeness.

  • “Evolved” traditional telcos: operators, or units of operators, that are recognisable from today’s companies and brands, or are new-entrant “peers” of these. The category includes separate systems integration / enterprise units of telcos, crossover between fixed and mobile operators and greenfield telcos, among others.
  • Adjacent wireless providers: service provider types that have been established for many years, but which are now overlapping ever more closely with “traditional” telcos. Examples include tower companies, neutral-host networks and satellite companies.
  • Enterprise and government telcos, i.e. large organisations shifting from being “users” of telecoms, or building internal network assets, towards offering public telecom-type services. They include industrial / enterprise specialist MNOs, government and municipal networks and utility companies offering telecom services.
  • Others: the catch-all category that spans various niche innovation models. One particular group here, decentralised/blockchain-based telcos, is analysed in more detail in the report. The category includes community networks, industrial systems vendors, property companies and advanced (“thick”) MVNOs.

Each of these groups poses different challenges to traditional telcos, depending on the specific national market, and the focus areas for each operator. For example:

  • The implications for incumbent MNOs in markets where greenfield operators like Rakuten Mobile and Dish have launched include the need to compete with lean new rivals, with no technology legacy or existing network loads. These “evolved” telco competitors are often willing to undercut prices substantially and make a huge splash of publicity. At the same time, their emergence is also leading to telco wariness in other markets, especially around M&A and market consolidation, in case regulators decide that mergers need to be paired with the arrival of a new entrant.
  • Tower companies (under the category of Adjacent wireless providers), while not new, own important parts of network infrastructure that used to be considered fundamental assets for MNOs. Players like Cellnex and Digital Bridge are now moving up the value chain and increasingly encroaching on the broader services space that 5G telcos are hoping to occupy themselves. This means that traditional operators risk being squeezed by technology application and hyperscale firms on one side, and players like these tower companies on the other. While this may mean that operators are able to become more opex-driven than capex dependent, it may also reduce the scope for vertically-integrated services innovation going forward.

The net effect of new service providers

While the net effect of the emergence of new service providers is hard to predict, what is clear is that it will be more difficult for traditional operators to monetise general-purpose networks in the future. Our report contains several recommendations for telcos as they navigate a new reality in which they will likely need to embrace customisation and localisation in order to compete with new, nimble and specialist players in multiple domains. 

Stakeholders: turn growth killers into growth makers

The seven stakeholder groups

This report identifies seven stakeholder groups, and the ideal relationships within each group that lead to the best conditions for driving growth.

An ideal growth company can demonstrate these relationships with their stakeholders

Source: STL Partners


To be successful, we believe that management needs to exhibit three broad behaviours and capabilities.

1. Stable and committed long term vision for growth aligned with the Coordination Age.

2. Suitable knowledge, experience and openness.

3. Effective two-way engagement with stakeholders. (N.B. We cover the board and most senior management in this group. Other management is covered in the People stakeholder group.)


However good the senior management team, an organisation’s ability to deliver growth and change depends on the capabilities of a much wider group of people, which we articulate within three sets:

• People in general: the company’s people support the vision generally, and it has a suitable culture

• People in key units: the business areas which enable new growth have the differentiating skills and experience(s) needed

• General management: the broader management of the company is open to new ideas, close to customer needs, and diverse

Customer propositions

A company’s ability to grow is directly connected to its ability to produce and develop valued products and services. It is what customers pay for and hence drives the revenue element of growth. Even when companies are valued based on their expected growth (e.g. have a higher P/E ratio), it is with the belief and expectation that profits will grow in the future, and this is largely driven by expected improvements in demand or a company’s ability to address new demand. In other words, revenue growth.

Many of the factors that enable a company to create, design and deliver great propositions relate to the capabilities in other stakeholder groups. For example, the ease of making changes and adding partners (Technology and partners), the skills of its people (People), and the customer orientation of its culture and the experience of its management team (People and management).

The factors that are more generically revealed in externally visible signs of a company’s capabilities are:

• The track record of the company in building new propositions, such as how good its existing customer relationships are and how far it has successfully moved into new areas

• Its investment focus, to indicate the degree to which the company is backing its desire to get into new areas that will grow in the Coordination Age by investing in them.

Partners & technology

The role of partners and technology in creating new propositions and market plays is complex and multifaceted, and they contribute to many different aspects of business performance.

Their ability to contribute to a company’s growth will depend on the extent to which any new initiative needs to use the existing company’s ecosystems, and how the experience of the company’s technology team can contribute to the new area. In general though, three characteristics of the existing ecosystems will give some indication of how well equipped they are to support new initiatives.

• The company’s adoption of disruptive new technologies and business models that embrace and enable change

• Resilient economics of scale in the core business so that it can deal with changes with minimum impact on growth investments

• Effective use of technology so that it is easy and fast to change and reconfigure internal and external offerings on demand


Getting and keeping the support of investors for growth is a critical part of the puzzle for management, and telcos sometimes bemoan their inability to get investor support for their growth plans.

This is because growth investments are generally riskier than investments to bolster a mature concern like a telecoms network, and therefore should be accompanied by the chance of superior returns from an investors’ perspective. In contrast, most investors choose to place money with telcos because they consider it relatively ‘safe’ and therefore accept a lower promise of return.

In an ideal situation to support growth, the three characteristics showing supportive investors are:

• A stable investor base, so that agreed strategies have a better chance of running their course

• Investors’ historical happiness and relationship with the management – nothing to suggest fundamental unrest

• A match between current and projected returns and investor expectations

Government & regulatory

Three characteristics that convey the basis of the government and regulatory relationship are:

• The tone of the government and regulatory environment

• Current status of regulatory discussions

• The company’s approach to government and regulatory relationships


The model looks at three components of the company’s engagement with the broader societies to which it belongs.

• Brand presence, engagement and image

• Company alignment with societal priorities

• Media portrayal

5G business models: how does telco IT need to evolve?

5G promises to enable new business models, driven by innovative, flexible, and scalable solutions. CSPs will need to evolve their underlying systems to be more dynamic, and ensure they have the right technological, organisational and commercial practices in place, in order to capture value and maximise their monetisation potential.

Reah Jamnadass, Senior Consultant

We estimate that 5G could unlock $1.4tn of value across a handful of key industries by 2030. Basic connectivity is no longer a big source of differentiation or a revenue-generator for telcos, but 5G is an opportunity for growth. If telcos are able to exploit 5G’s advanced capabilities and flexible architecture, it could be a way for them to move up the value chain, tap into new revenue streams, and capture a solid share of this market with new 5G business models. 

To achieve this, they must prepare their underlying systems to not just handle but truly monetise 5G.  

What do we mean by “new 5G B2B business models”? 

Cloud-native by design, the 5G network is more complex than previous generations of connectivity, but it is also more flexible, scalable, and programmable. Its advanced capabilities (e.g. low latency, high bandwidth, strong reliability) can support innovative and dynamic new use cases for both consumers and enterprises. Its architecture also makes it easier for non-network internal teams (e.g. product, strategy) to have greater visibility over the network and therefore to help define services to meet the demands of customers.  

This presents an opportunity for telcos to rethink their innovation models and move from providing product-centric to more service-based solutions. It is also an opportunity to engage a wider ecosystem of partners to co-innovate, especially if telcos want to provide more end-to-end solutions and capture a higher share of value. The B2B space is particularly compelling here, holding strong revenue potential, particularly for customised solutions that meet the specific requirements of enterprises or their applications. 

However, as telcos define their roadmaps to monetise their 5G investments, it will be critical to evaluate how their underlying IT infrastructure must evolve to support this.   

How does telco IT need to evolve? 

 As telcos provide services that are more flexible and scalable, they will need to ensure that their IT and BSS systems follow suit. For example, they will need to: 

Monitor dynamic services for device volumes at scale
May be monitoring QoS levels for 100s or 1000s of devices per customer, each of which might have different SLAs
Support low-latency, real-time processing
This will be critical to enable low-latency, high-bandwidth 5G use cases for enterprises e.g. to charge accurately
Migrate legacy BSS stacks to cloud-native platforms
This will allow integration across different applications and provide scalability to support edge applications
Meet 5G standards and adopt open frameworks

TMF Open APIs make it easier for telco and enterprise systems to interface for B2B2X solutions

 This will require systems that are more automated and designed to be flexible and scalable to ensure that telcos are providing a strong QoS to customers, but also that they are exploiting monetisation opportunities. 

Network slicing 

A good example of this is network slicing. Though an opportunity that is still 2-3 years away (if we are talking about dynamic, customisable slicing running on 5G SA), telcos should explore monetisation strategies for this today, especially from an IT perspective. It is a service-based solution that will give telcos the ability to deploy new services quickly and provide tailored solutions to customers across a range of verticals while using minimal infrastructure.  

However, because it is not easily productised, there is no straight forward answer for how telcos should charge customers. This raises a number of considerations: not just how to charge in this more complex environment, but how to then provide visibility to customers over how they are being charged, and to ensure that every chargeable event is being processed and exploited. Beyond charging, this will have implications on systems such as billing, policy and CEM. Hence, telcos need to consider which solutions they seek to enable, how they intend to provide these to customers, and evaluate which systems need to evolve and how.  

How can telco prepare to exploit these new 5G business models? 

This is not just a discussion about technology. Alongside this, telcos will need to evolve their organisations to monetise the 5G opportunity and adopt cloud-native business practices alongside the physical infrastructure. There will need to be defined strategies in the following areas: 


Greater cross-team collaboration

•Convergence between IT and network teams to fuel innovation e.g. product teams have visibility over how customers are using the network

•This will require upskilling to fill gaps e.g. in software development


Flexible architecture

•Monolithic legacy systems will need to be replaced by open, flexible and scalable infrastructure with open APIs

•Customers and partners will want more service visibility and to be able to interact more directly with telco systems


Clear propositions

•To justify investments internally, proposition teams will need to frame 5G’s value and monetisation potential

•This includes the ability to differentiate its connectivity play (e.g. with slicing) and innovate with partners

Telcos with more evolved 5G deployments are already moving towards more converged IT and network teams in line with their infrastructure changes, either with both sitting under a CTIO, or with some level of cross-functionality. This puts them in a strong position to evaluate and prepare for the future of 5G business models.  

Learn more about our work on new 5G business models 

How STL Partners Consulting can support you

STL Partners has developed industry-leading expertise, backed by extensive thought leadership, and supported telecoms vendors in identifying the best approach to engage telcos on the topic of 5G.

There are three main ways we can do this:

  1. Strategic positioning: Evaluating how telcos are thinking about their IT evolution with 5G, and analysing how vendors can support in their roadmap and address key pain points stalling growth
  2. Business model development: Developing potential business models for new strategic opportunities, including potential go-to-market strategies
  3. Customer engagement: Creating thought leadership and (marketing and/or sales) collateral that can accelerate engagements with existing customers and new prospects

Get in touch to understand how STL Partners can support you:


Or visit our website to discover more about our consulting work and expertise:


Telco edge computing data centres: 3 approach factors

Telecoms operators want to build their network edges where there is demand. In other words, where there is a sufficient number of end-users or customers that will benefit from the capabilities that come with edge.

In general, the approach has been to create a plan for a network of edge data centres that guarantees a maximum level of 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 number of edge data centres 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.

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

  1. Edge computing strategy;
  2. The speed at which it has or will deploy 5G (if it is a mobile operator);
  3. The country’s geographic profile.

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

Source: STL Partners

STL Partners’s forecasting capacity of network edge computing 2021 to 2025 details a forecast of the capacity available for non-network applications at the network edge over the next five years. Network edge capacity is forecast to build slowly reach an inflection point in 202X and although edge does not need 5G, it is certainly helping drive the market. Telecoms operators also see hyperscalers as key partners in helping to bringing compute and storage to the edge.

There is much debate in the industry on the topic of telco edge computing, but little clarity for players within the telecoms industry and potential customers on how much capacity will be available.

STL Partners Edge Insight Service

The edge computing market is an ever-evolving space. This coupled with the parallel changes in the telecoms ecosystem make it an exciting space to watch. STL Partners will continue to update this forecast with the latest information on telcos’ network edge deployments. Future versions of the forecast will include:

  • New application domains: RAN network functions
  • Network edge data centres provided by non-telcos

Outside of this forecast, STL Partners is adding to its Edge Insights Service, ensuring we publish reports on key topics and incorporate insights through our tools (see an overview of the service below). If you have any questions you would like to discuss with us, or any suggestions for what we should be covering, please contact the lead analyst on edge computing, Ahmed Ali (ahmed.ali@stlpartners.com).

STL Partners’ Edge Insights Service

Source: STL Partners

STL Partners telco edge computing coverage

Vonage: What is Ericsson’s end game?

Rationale for acquisition

In late November 2021, Ericsson announced it would purchase Vonage, a global cloud-based communications provider for $6.2bn. The acquisition is part of Ericsson’s expansion into the enterprise segment through Vonage’s communication platform as a service (CPaaS) offerings and follows on from Ericsson’s purchase of US-based Cradlepoint in late 2020. Cradlepoint’s enterprise solutions include wireless wide area networks (WAN) over LTE and 5G edge routers delivered as an all-in-one solution with more than a million (NetCloud) endpoints under subscription. Ericsson believes the enterprise market offers attractive software as a service (SaaS) revenue opportunities that can be scaled and aligned to strengthen its core business. Vonage is the latest acquisition in this strategic direction.

STL Partners has been talking extensively about the growing need for greater network intelligence amongst applications and platforms as a key opportunity to provide unique value in a B2B2X environment. We believe if Ericsson can leverage the developer community in the way it wants, it has the potential to become a strategic partner and a channel for operators to access developer communities, perhaps even challenge the hyperscalers by acting as an aggregation point for developers and network operators to engage with each other.

However, it may be too early to tell how Vonage’s existing developer community will see value and differentiation in the network APIs and 5G capabilities Ericsson and its operator base has to offer. Given many developers still do not have strong understanding of 5G technology, its capabilities and applicability to them, the opportunity for Ericsson rides on its ability to successfully encourage the developer community to see the value in leveraging these advanced network capabilities and programmability.

The Vonage Communication Platform

Founded in 2001 as a consumer VoIP provider, from 2013 Vonage has evolved through acquisitions into an integrated communications platform as a service provider (CPaaS) with sales of $1.24 billion in 2020 and $1.4bn expected in 2021. Of the company’s two business divisions, its cloud-based Vonage Communications Platform (VCP) accounted for over 73% of Vonage’s 2020 revenues serving over 120,000 customers, from SME to large enterprise business across a range of sectors (healthcare, finance, education, retail).

The Vonage Communication Platform (VCP) has three offerings:

  • Application Programming Interface (API) platform enables developers to embed communication services such as messaging, voice and video services into their applications and services. Through acquisition of Nexmo’s API platform and TokBox’s WebRTC programmable video integration, Vonage offers a range of communication APIs (such as voice, SMS, video, verify, messages and dispatch, number insight) enabling businesses to integrate programmable capabilities such as communication and authentication quickly into their products.

Vonage Communications Platform 


Source: Ericsson Vonage Announcement Presentation November 2021

  • Unified Communications as a Service (UCaaS) – Vonage Business Communications (VBC) is the company’s cloud-native over-the-top unified communication service. Vonage also offer a Business Enterprise unified communication and collaboration service in the US (offering voice, data, video, mobile and contact centre services) for mid-market and enterprise customers delivered over a private secure IP MPLS network.
  • Contact Centre as a Service (CCaaS) solutions – Vonage Contact Centre is a cloud-based contact centre as a service (CCaaS) aimed at the middle market. The service integrates Vonage’s unified communications service and its APIs to deliver a full communication suite for enterprises.
    • Vonage’s unified communication (UCaaS) and contact centre (CCaaS) services come with third-party enterprise software applications to support workflow and productivity. Integrations include Salesforce, Microsoft Dynamics, Teams, NetSuite, Zendesk, and Hubspot, which are available via Vonage App Centre ecosystem. According to Vonage, its Contact Centre solution currently holds the esteemed position of “Premier partner status” on the Salesforce AppExchange with a five-star rating and number one ranking across 800 reviews.

In late 2020, Vonage’s API revenues overtook UCaaS and CCaas revenues highlighting the growing demand for its API solutions from its developer network. Vonage’s recent API business growth has been driven by the popularity of its messaging and video APIs. It’s API revenue grew 43% year-on-year in Q3 2021.

The Vonage acquisition offers Ericsson the opportunity to introduce network and API capabilities to a wide developer community. Announcing the acquisition, Ericsson CEO said the company’s first step will be to embed its advanced network capabilities into Vonage’s existing communication APIs which have the potential to be adopted quickly on the back of existing 4G and 5G network build outs.

API business driving VCP growth

Source: STL Partners, Vonage Q3-21 results

Multi-vendor and multi-operator developer ecosystem

In announcing the acquisition, Ericsson’s CEO pointed out how the company has already developed quality of service APIs, but up to now they have only been tested in operator networks around the world. Accessing Vonage’s developer community would put the APIs into the hands of developers and convert them from “nice to know” capabilities into user friendly and valuable APIs.

Ericsson wants an engaged developer community/ecosystem to take these APIs and advanced network features and design real-world applications leveraging the capabilities of 4G and 5G advanced networks. It believes it can unlock value from its network APIs and 5G advanced capabilities by combining its deep network expertise of 26,000 R&D specialists with Vonage’s 1.1 million global developer community, 780 API platform engineers and Vonage’s back-end connections across over 200 CSPs.

These 200+ CSP connections are made possible by underlying technology supplied by vendors such as Ericsson. The developer and API ecosystem will be open to competitor network vendors and the wider MNO community in order to ensure the fullest possible participation in 5G innovation for enterprise. Ericsson is confident its worldwide market share position (outside China) and network capabilities will give it a strong starting position in developing new applications and that the openness of this developer, vendor and MNO ecosystem will be good for the industry overall.

It is hoped this developer ecosystem can leverage next generation of 5G advanced services and functionalities such as latency (across device types for example), quality on demand and network slicing across industry verticals and that developer/enterprise innovation will drive usage of the CSPs networks, providing an ROI on their 4G and 5G network investments.

  • A key test will be whether the developer ecosystem will see the value in Ericsson network APIs and capabilities, and whether Vonage hosts the right app developers that can see value in and will actually use these new network APIs (e.g. slice configuration, dynamic traffic routing, bandwidth management etc.)

Up to now, telecom operators have established their own API platforms or used third-party API developer platforms to attract developers and foster innovation on their networks. Ericsson wants to ensure that it is compensated for the innovation that occurs on its next generation (5G) network equipment as opposed to losing value to over-the-top players. It may believe it can reach a more global developer community more efficiently than MNOs.

Competing with Twilio at API and ‘super network’ level

Given that Ericsson (among other vendors) supplies the underlying network technology to and has extensive relationships with network operators globally, it may be in a position to compete with other communication platform players such as Twilio by having the advantage of advanced 5G network knowledge and capabilities in addition to its close MNO relationship ties.
Twilio’s developer-first platform approach consists of four core elements; its Programmable Communications Cloud, it Super Network, its Business Model and its Engagement Cloud or Customer Data Platform.

  • Programmable Communications Cloud consists of the APIs that enable developers to embed voice, messaging and video capabilities into their applications.
  • The Super Network is Twilio’s software layer enabling its customer’s software (Amazon, Airbnb) to communicate with connected devices globally by connecting to CSP networks and internet service providers in 80 countries. Twilio has agreements in place with CSPs globally to route communication through their networks. The Super Network also contains a set of APIs giving Twilio customers access to more foundational components of the platform such as phone numbers, and SIP Trunking.
    • Twilio highlights its extensive carrier agreements ensure resiliency and redundancy for its customers. By using real-time feedback data on handset deliverability from carriers and across geographic markets, the Twilio Super Network can detect issues and make routing decisions quickly. It can optimise communications flow through its platform based on network quality and cost.
    • According to Twilio, network service provider fees account for a substantial majority of its costs particularly outside the US.
    • Twilio has said its Super Network provides it with massive volumes of data from end users, their applications and from communications. As more communication is handled by Twilio, the Super Network “becomes more robust, intelligent and efficient” improving its performance in terms of quality and cost, making it, according to Twilio, difficult for others to replicate.
  • Segment Customer Data Platform / Engagement Cloud – Twilio offers their customers (Amazon, Airbnb) the ability to gather and analyse customer data from across all their communication channels. This helps Twilio customers generate new customer insights which they can use for personalised targeted marketing communication.
  • Business Model – To empower developers to experiment and innovate on its platform, Twilio offers a low friction model that eliminates up-front costs, offers a free-trial and free developer resources, and more importantly, adopts usage-based consumption pricing.

Twilio customer engagement platform


Source: Twilio investor presentation, March 2021

Mavenir and Telestax

There may be parallels between Ericsson’s tie up with Vonage and Mavenir’s (August 2021) acquisition of Telestax, a global communication platform as a service (CPaaS) enablement and application provider.

Mavenir has said it expects Telestax to enhance its Mavenir Engage solution, a cloud-based customer engagement and messaging monetisation solution offering RCS Business Messaging, A2P and P2A campaign management, templated chatbots, visual flow builders, payment integrations and advanced analytics. Mavenir’s CEO Pardeep Kohli has stated CPaaS can help service providers enhance their 5G enterprise offerings in areas such as IoT, Smart cities and Automotive. The rationale being that 5G capabilities and associated APIs will be integrated into these 5G enterprise use case verticals creating new value and new revenue opportunities.

Ericsson’s view of the market opportunity

Overall Ericsson believes Vonage will see strong growth across its three VCP offerings as enterprises accelerate their digitalisation. Ericsson cites analyst expectations of 17% growth in the CPaaS business up to 2025 and a total addressable market (TAM) worth $69 billion by 2025.

It expects Vonage to outperform due to its strong position in the API market, citing Vonage’s 7% share of the API market today. Ericsson expects the total API market to be worth more than 50% of the global RAN market by 2025 and conservatively estimated the global API market to be worth $8bn by 2030.

The question is: what role is Ericsson seeking to play as a result of this acquisition? If Ericsson is able to successfully leverage Vonage’s developer ecosystem to drive the use of 4G and 5G APIs, then it could play an interesting role as a strategic partner and channel for operators as a means of accessing developer communities. Ericsson could position itself a potential alternative to the hyperscalers as an aggregation point for developers and network operators to enable both to engage with each other. However, whether Vonage’s existing ecosystem of developers see 5G as a means of competitive differentiation (either by enabling new types of applications or enhancing existing ones) or whether Vonage’s customer base will be interested in leveraging 5G capabilities, is still up for debate.

Vonage Communication Platform future market opportunity


Source: Ericsson Vonage Accouchement Presentation November 2021

During 2021, Vonage found itself under the scrutiny of the activist investor Jana Partners, who urged management to consider selling all or parts of the business. The activist investor believed Vonage’s growing API business was undervalued (compared to pure play API players such as Twilio) and that its overall valuation was weighed down by its legacy consumer VoIP business for which it is better known. In February 2021, Vonage abandoned plans to sell the consumer VoIP business citing the unit’s $600m projected cash flow generation over the next five years.

Edge computing forecast 2020-2030: 20 use cases

STL Partners has developed extensive expertise in edge computing, working with telcos and tech companies to identify their strategies and select suitable use cases.

Based on our industry knowledge, we have developed an Edge computing market forecast model to estimate the size of the edge computing market over the next 10 years (2020-2030) in terms of revenue, broken down for the entire value chain: what we call total edge computing addressable revenue. Our analysis provides country-level revenue forecasts for 186 countries, 7 regions and the world. STL Partners analysed the demand for edge computing from 20 main use cases and the projected spend over the next 10 years.

These 20 use cases are listed below with In-hospital patient monitoring displayed for illustrative purposes. Our assumptions for high-income countries show how application processing will migrate from its current locations (mainly on-device and cloud) to edge infrastructure (on-prem and network edge) during the forecast period.

The use cases that represent the biggest opportunities in 2030 are edge CDN, cloud gaming, connected car driver assistance, video ingest & analysis for production and maintenance, and edge application delivery network (ADN).

You can access STL Partner’s country-level revenue forecast and 20 uses cases in our December 2021 report Edge computing market sizing forecast

  1. Advanced predictive maintenance
  2. AR/VR for training
  3. Automated guided vehicles
  4. Cloud gaming
  5. Connected car driver assistance
  6. Contextual DOOH advertising
  7. Drone inspection and navigation
  8. Edge ADN (Application Delivery Network) & web content optimisation
  9. Edge CDN
  10. Flow analysis – video ingest and analytics
  11. In-hospital patient monitoring……..(see use case graphic below)
  12. Live video/broadcast
  13. MR for working safety & productivity
  14. Production & maintenance – video ingest and analytics
  15. Real-time collaboration in design and engineering
  16. Real-time precision monitoring and control
  17. Remote monitoring and care
  18. Security – video ingest and analytics
  19. Smart city traffic management
  20. Temporary compute for events

Edge computing forecast model and use case

Source: STL Partners

Additional resources

STL Partner’s Edge Insights Service offers extensive reports and articles as well as our Edge Computing Use Case Directory and our Edge Computing Ecosystem Tool


Top 10 telco cloud vendors

STL Partners recently updated (November 2021) its Telco Cloud Deployment Tracker, a our comprehensive database of live, commercial deployments of virtualised and cloud native network functions (VNFs and CNFs) and SDN technologies by leading telcos worldwide. It builds on an extensive body of analysis by STL Partners over the past eight years on NFV and SDN strategies, technology and market developments with over 900 individual deployments. 

Our recent analysis of vendor deployments between 2018 and 2022 shows the current top 10 telco cloud vendors to be:

Source: STL Partners’ Telco Cloud Deployment Tracker

1. Ericsson – has come from third place in 2018 to top in 2020 and 2022, overtaking Nokia due to its greater number of 5G core deployments

2. Nokia –  remains strong in core, with several 5G SA core deployments slated for launch in 2022

3. Cisco –  has strengths in multiple parts of the telco cloud stack, particularly SD-WAN, transport SDN and orchestration

4. VMWare –  deployments both in telco cloud infrastructure and SD-WAN

5. Huawei – Huawei has declined sharply, owing to political pressures to remove its tech from Western mobile networks

6. Fortinet – has a growing presence in telco networks, linked to both SD-WAN and SASE

7. Mavenir – Open RAN and IP multimedia systems

8. Metaswitch Networks – IP voice and multimedia platforms

9. Affirmed Networks – diverse, cloud-native core and orchestration solutions

10. Juniper –  SDN and telco cloud platform components

Access a trial of our Telco Cloud Tracker here

Previous telco cloud tracker releases

Each new release of the tracker is global, but is accompanied by an analytical report which focusses on trends in given regions from time to time:

AT&T / WarnerMedia’s HBO MAX performance

In October 2016, AT&T announced it would acquire Time Warner and completed the acquisition in June 2018 for $85.4bn ($108.7bn including debt) branding the business as WarnerMedia.

Despite the COVID-19 pandemic, which created real disadvantages in a number of areas, AT&T successfully launched HBO MAX in May 2020.

Indoor restrictions affected its 5,550 retail store footprint, which would have been heavily involved driving HBO MAX adoption, especially across its wireless, broadband and pay-TV offerings. Cinema closures impacted movie releases and resulted in AT&T adopting a unique hybrid distribution model whereby movies would be released on HBO MAX simultaneously alongside the theatrical release. Live sports also shut down as did content production for HBO MAX originals.

In June 2020, one month after launch, AT&T reported a combined subscriber base of 36.3 million US HBO and HBO MAX subscribers, up from 34.6 million domestic customers at the end of 2019. The operator reported a total of 4.1 million subscribers had activated their MAX account. Almost three million were retail HBO MAX subscribers18 and more than one million were wholesale subscribers through AT&T. In effect, a large number of HBO subscribers from wholesale partners had yet to switch across to HBO MAX.

AT&T noted that while more rapid activation occurred amongst existing HBO digital subscribers, more had to be done to educate and motivate the exclusively linear subscriber base and AT&T would work with wholesale partners to drive the activation rates.

In Q4 2020 the WarnerMedia unit wrote down $780 million of its business due to the impact of COVID-19 on content production and inventory with $520 million accounting for the closure of theatres and the dual same day release of movies on HBO MAX.

AT&T finished 2020 with almost 6.9 million retail HBO MAX customers and a cumulative HBO MAX activation rate of 17.1 million subscribers.

In April 2021, AT&T reported 11 million customers combining one or more of its connectivity products with HBO or HBO MAX, and that same day theatrical releases had been a catalyst for HBO MAX subscriptions despite underpinning a write down to the business.

In October 2021 AT&T reported a global HBO and HBO MAX subscription base of 69.4 million subscribers consisting of 45.18 million domestic and 24.23 million international. Domestic wholesale subscribers fell in Q3 2021 reflecting AT&T’s decision to “no longer cede customer control through Amazon’s channels offering” and close this element of Amazon’s wholesale platform.

AT&T now blends HBO and HBO MAX subscriptions and no longer reports HBO MAX activations.

HBO MAX performance from launch

In 2019 AT&T originally set out to obtain 50 million HBO MAX domestic subscribers by 2025. It now raised global expectations to 70–73 million by the end of 2021 on the back of launching its AVoD domestic service as well as HBO MAX (SVoD) internationally in Latin America in June 2021 and in Spain and Northern Europe in October 2021. AT&T expects the bulk of HBO MAX subscriptions to come from Latin America in the second half of 2021. It expects to have between 120–150 million subscribers by 2025.

The graphic below compares HBO MAX ARPU to competitors Netflix and Disney+.

Netflix, Disney, HBO/HBO MAX ARPU, Q3 2021

AT&T Spins off WarnerMedia

In May 2021, AT&T announced it would spin off WarnerMedia into a new entity with Discovery, a media company specialising in unscripted content. Subject to approval by mid-2022, the deal is worth $43bn to AT&T in the form of cash, debt securities and WarnerMedia’s retention of certain debt. 

STL Partner’s report Lessons from AT&T’s bruising entertainment experience looks at AT&T’s media purchases of DirecTV and Time Warner which combined cost the company over $175bn. AT&T believed owning TV and streaming subscription video on demand (SVoD) services would take its broadband communications business into the next decade, spurring growth in fixed and mobile broadband, reducing churn, growing advertising and new revenue streams in global SVoD streaming. However, global streaming services require significant investment in original content production as does rolling out 5G and fibre nationwide, and AT&T found itself unable to do both under one roof with the approach it applied.

Our report looks at AT&T’s decisions and actions over six years running DirecTV and WarnerMedia and their consequences, and the lessons for others attempting adjacent market moves and M&A.


A role for telcos in public safety

The pandemic, environmental concerns and increasing incidence of natural disasters and social unrest are serving to focus public attention on what can be done to preserve health and ensure the safety of people and property going forward. STL Partners supports the position that telecoms companies are strongly placed to help address these concerns. The vision is that telcos can connect large numbers and types of sensors to monitor different events in real-time. Telcos can harness the data collected by these sensors, cameras and other monitors, combine it with data already captured by mobile networks (e.g. subscriber location) and thereby alert organisations and individuals to imminent threats to their health and safety.

Public safety solutions now

Telecommunications providers are already involved in solutions of this kind:

  • KT Corp. is involved in Air Map Korea, which collects data from public telephone booths, telecom poles, and base stations nationwide to provide air pollution information through an app, as well as other service channels such as GiGA Genie and Olleh TV.
  • LG Uplus offers a consumer proposition (in partnership with Weather I) leveraging a small device to measure fine dust, temperature, and humidity indoors in order to provide the user with ventilation advice.
  • BT will integrate Everimpact’s climate monitoring system into next generation Street Hub units (i.e. telephone box replacements) in order to combine Everimpact’s satellite data and AI technology with air quality and CO2 data (collected via BT sensors) to provide local councils with the ability to track emissions.
  • IQ FireWatch, which uses AI and connected cameras to detect fires both visually and through heat disturbances, is being deployed in the Napa Valley by Illuminations Technologies – a relative of a large private telecommunications infrastructure provider.
  • ShakeAlert is working with Google and others (public and private mass alert system operators and cellular carriers) to send earthquake alerts to the Android operating system in smartphones in California (Google has also begun using accelerometers in Android phones to detect tremors).
  • The South Korean government has used a combination of electronic transaction data, mobile phone location logs, and surveillance camera footage to track (and publish) the movements of people who tested positive for Covid-19.
  • Magenta Telecom (Austria) is trialling the use of drones for search and rescue missions in Vienna, where 200 people a year fall into the Danube River.

Our report, How telcos can make the world a safer place, provides further detail on these solutions, and more. It considers opportunities for telcos to use data from connected devices in conjunction with data from its networks to tackle health and safety issues. It looks at who telcos are partnering with in trials as well as actual solutions and highlights prospective business models and the potential revenue streams that could result. In theory, at least, individuals, organisations, insurers and governments should be prepared to pay for systems and solutions that help protect them against serious threats to health and safety, such as infectious diseases, pollution and wildfires. In practice, it can be more difficult to sell systems that prevent an often-nebulous negative impact, rather than generate a clear positive benefit.

For more insights on the consumer opportunity, go to Recharging consumer revenues.

Telco strategies in edge computing and private networks​

Webinar: Telco strategies in edge computing and private networks​

CSPs are seeing huge opportunity in taking private LTE/5G and edge solutions to market. However, they are at different stages of their journey: some are trying to understand use cases, some developing the business model and others assessing how to build the infrastructure – whether to do it with partners (e.g. hyperscalers) or not.

This webinar leverages data from a survey with over 150 global CSPs to answer key questions, such as:

  • How are CSPs building their edge?
  • What makes a private cellular + edge solution?
  • What do customers in key industries, such as manufacturing, look for in a solution?

You’ll need to submit your name and email to access the webinar

Edge computing investments in 2021

Edge computing investments in 2021

In 2020, STL Partners hosted a webinar and wrote an article looking at edge computing investments in 2019. This article analyses edge investments since then: which trends have continued and which new ones are starting to emerge.

Our last edge investment update

In March 2020 STL Partners conducted an analysis of edge computing investments from January 2019 to February 2020. The main finding was that investment levels remained low despite the increased hype for the technology. The article looked at the 30 companies in our Edge Computing Ecosystem Tool which were split out into 7 categories:

1. Facility: The physical site that includes the land/location for the edge data centre, the data centre itself, power and cooling to support it and additional services to maintain and operate the site.
2. Network: Connectivity infrastructure to and from the edge site, as well as traffic routing controls and types of networks to optimise the delivery of content (e.g. CDN).
3. Hardware: This includes the hardware inside the data centre (racks, servers, processors and the maintenance and operators for these) as well as end-devices.
4. Cloud Infrastructure: Virtual infrastructure supporting the edge workloads and applications, from the operating system, the virtualisation layer (which may be container-based), and the platforms for developers to access and manage the storage and compute infrastructure.
5. 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.
6. Integration & Services: Services that provide support to the customer employing and integrating edge computing at any stage of the value chain – including design and engineering services to create platforms for edge computing applications, or more traditional integration into existing (enterprise) systems.
7. Open Source & Forums: Communities that seek to accelerate edge computing – either by creating forums for discussion across stakeholders and industry partners or open platforms to enable developers to build technology.

The total amount invested during this period was $3.1 billion, with the majority of this going to firms in the Facility category. At that time, we predicted a continued rise in investments in data centre facilities and other parts of the value chain driven by:

1. VCs and private equity (PE) and other investment firms (e.g. infrastructure funds);
2. Hyperscalers looking to exploit the physical locations of telecoms operators (and others);
3. Tech companies;
4. Telecoms operators themselves looking to build positions beyond basic infrastructure.

Edge computing investments in 2020/21

Since our last update we have continued to track investments in the edge computing space. We have tracked investments of over $3m from a single transaction across the different areas above (as before Open Source & Forums has been excluded as it does not attract much investment).

Data centre investments have driven edge investments

Figure 1: Edge investments have remained dominated by Facility

As Figure 1 shows, Facility investments still dominate: total edge investments in the period were $13.95bn with over $12bn coming in the Facility segment. This was driven by a number of large M&A deals in the data centre space. The maturity of this foundational infrastructure is further illustrated by the significant investments coming from Private Equity firms who tend to seek mature companies with stable cash returns in which to invest.

It is interesting to note that Facilities made up nearly $1.5bn of the $3.1bn total invested in the 30 companies tracked previously (around 48%) but this has now risen to 86% of total investments. The first step of investment at the edge was always likely to come at the Facility level – the physical edge must be built out before it can be filled – so it is unsurprising to see the trend continue.

Facility can, however, be a difficult category to track for several reasons:

• It can be hard to segment investments in much larger data centre facilities (which are not really at the edge) from those at smaller facilities.
• There are many acquisitions within the data centre market from one data centre firm acquiring another, this may therefore not be new investment in the edge ecosystem but rather cash being swapped in by an alternate player.
• Many acquisitions such as these are for undisclosed amounts.
• There will be organic investment by regional data centre companies around the world that is hard to capture.

To understand how the edge market is developing it is, therefore, worth examining investments in the other segments in a little more detail.

Edge computing has seen an overall increase in investment in other areas

Figure 2: Edge investments have been similar across Hardware, Edge cloud infrastructure and Application/software

Source: STL Partners

Note: Systems Integration tends to be OPEX-based and grow after the market has reached greater maturity, it therefore did not see any investment in the past year and has been excluded.

Investments in Hardware, Edge cloud infrastructure, and Application/software have been at a similar level. Network only saw a small amount of investment. The total amount invested in these 4 categories totalled over $1.9bn, which is 20% bigger than the $1.6bn invested in the previous period we analysed.

81% of investments in this time period were conducted as part of venture capital rounds. This is evidence that investments are still in their early stage for companies in these edge segments. The more mature Facility segment was seeing large M&A activity driven by large players in the market, whereas the less mature segments are still looking to VCs to fund their growth.

Application/software companies are less mature than in other segments

As well as Facility, to actually build out the physical edge Hardware, Network and Edge cloud infrastructure all require a level of investment. We would then expect investment in the applications which sit on top of this infrastructure. It is therefore unsurprising to see that Application/software received only slightly less investment than Hardware, and more investment than both Network and Edge cloud infrastructure. Without applications there is no justification for building the infrastructure that they will run on. Investment in applications therefore follows closely any investment in infrastructure.

Source: STL Partners

As clearly visible in the above table, while Application/software had a greater total amount invested than Edge cloud infrastructure, the average amount invested per investment was almost 4 times larger for Edge cloud infrastructure. This speaks to the nature of hardware vs software. Hardware, Network and Edge cloud infrastructure require lots of capital whereas Application/software require less. You tend to get larger infrastructure players (owing to economies of scale) and smaller independent software vendors (ISVs) that are easier to set up and serving more niche markets. This is why each individual investment in applications is likely to be smaller, there are lots of companies receiving investment to create an ecosystem. The numbers therefore show the early signs of a vibrant applications ecosystem developing.

This may also suggest that the applications are at earlier funding rounds than Hardware, Network, and Edge cloud infrastructure. This reflects what we might expect: as the edge is still being built out the more mature firms are at the Hardware and Edge cloud infrastructure level than at the Application/Software level where start-ups are receiving initial rounds of funding. As the edge matures these application providers will begin to see bigger investments in future rounds of capital funding.

Why is Network investment low?

It is surprising to see that Network investment is so much lower than investment in the other areas – in our last analysis Network attracted $306m of investment. Even controlling for the number of investments we see that the average is below Application/software. There are a couple of possible explanations for this:

• Given the small sample size we would expect a high level of variance with any results. Just 1 or 2 large investments would raise both the average and total amount invested to a level that we would expect.
• Telcos are beginning to invest more in their own network edge and this is crowding out investment to other players. Most of the investment in networks will be made organically by the big telcos, we are therefore less likely to see much external investment unless the private networking space takes off and new players enter that market.
• The companies in the Network segment are reaching maturity as the physical edge is built out further. This similarly seems unlikely given we do not see a similar trend in Hardware and Edge cloud infrastructure.

We can safely assume that the fall in investment in the Network segment is due to a combination of year-on-year natural variation and organic telco investment crowding out the market.
More predictions for edge computing investments

We expect edge computing investments to continue accelerating year-on-year for the foreseeable future as we are still in the early stages of the growth curve. As the market matures and applications start to generate returns from enterprises it is natural for investment to grow throughout the stack.

However, we would also expect the composition of this investment to continue to change. The Facility segment will likely remain the largest area of investment in the short term, these are large infrastructures that take advantage of economies of scale and need large amounts of capital. However, we would expect to see investment in this area plateau somewhat in the medium term in markets where the edge becomes closer to full build out. Hardware, Network and Edge cloud infrastructure are likely to follow a similar trend to Facility, albeit at lower overall levels of investment. We would expect investment in Applications/software to continue to grow as the edge market matures. Once the edge has been fully built out, the number of applications that can be run does not cease to grow so we would therefore expect to see investment in Applications/software to grow long after the other segments plateau. The size of the investments in this segment should also grow as companies mature and reach later funding rounds.

In the short and medium term we would expect investment to continue from the venture capital community before larger investment funds and PE houses enter the market in earnest. As highlighted in our previous article we also expect investment to come from other groups, namely hyperscalers and tech companies. Hyperscalers are already investing massively in their edge strategies and we would expect them to look at acquiring Application/software companies as they mature. Telecoms operators will also invest as they look to move beyond pure connectivity.

Author: Matt Bamforth, Consultant

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Commercial 5G: Factors influencing the approach

5G monetisation

The commercial 5G services of 5G pioneers SK Telecom, Verizon and Telstra focused on 5G-ready versions of mobile and data plans across consumer and business segments, with SK Telecom the only operator promoting 5G-specific plans and applications early on. Some are now moving beyond the premium propositions that targeted early adopters/heavy data users with speed and data generosity, towards a mainstream audience as device pricing has come down and coverage increased. Efforts to secure new revenues have centred around FWA, Cloud/edge computing and private network services (skewed towards Enterprise).

Multiple factors are influence the approach that operators can take in terms of 5G monetisation: some constrain the choice of approach, while others enable new options. These factors can shift in intensity and change over time.

SKT was initially constrained by device availability and cost (it offers 5G-specific plans which would be of no interest to customers without a device). It offered generous subsidies to overcome this, but is now facing government pressure over those subsidies, as well as plan pricing as government wishes to democratise 5G access further. The South Korean 5G market is also highly competitive, which further impacts pricing possibilities. SKT is choosing to leverage several commercial enablers in order to extract revenue from its 5G network investments. Examples include providing unique 5G-optimised content (e.g. it has its own studio to create mixed-reality content), using non-communications specific capabilities (AI, robotics, cloud) to deliver 5G enterprise solutions and packaging up compelling 5G-inclusive propositions to address identified use cases.

Verizon’s choice of 5G spectrum constrained its commercial approach, particularly due to mmWave’s range and propagation issues. This has resulted in the sacrifice of some of its first mover advantage to T-Mobile, whose 5G mid band coverage is now wider. Verizon offers a “multi-band” 5G proposition, which has the potential to confuse customers as to the value of 5G (particularly versus its 4G network). On the plus side, it does offer a range of devices to improve 5G affordability and is leveraging unlimited data allowances and quality of service advantages in its 5G-inclusive propositions (particularly for 5G Ultra wideband offerings). It is also offering broad propositions for use cases including fixed wireless access and 5G Edge (it has initiated commercialisation of a 5G-inclusive IoT solution, venue/stadium specific services and private 5G, though these do not appear to be mainstream in the US yet).

Factors that confound 5G monetisation at Telstra include network coverage (5G coverage lags that of 4G) and market competition (competitors include 5G in all plans, while Telstra does not). Telstra has chosen to leverage its 5G leadership to boost the perceptions and performance of its network as a whole. Many of its propositions are not singled out as 5G services, though they may depend on the cost efficiency, capacity and performance improvements that are delivered by 5G (e.g. Network Optimisation Services, such as the Adaptive Mobility Accelerator). Telstra is focused on ensuring customer 5G readiness (it offers a wide range of devices) and 5G network development to maintain network leadership. It is building its understanding of 5G capabilities with new services and laying the foundations for new business models. Adjacent capabilities (provided by Telstra Purple) are a further monetisation enabler.

Operators are working to minimise the impact of constraining factors (e.g. extending device ranges, securing additional spectrum) whilst building/leveraging the enablers to provide a 5G monetisation toolkit. Their commercial 5G journeys continue.

See our in-depth case studies on commercial 5G

Strengths and capabilities of different private network stakeholders

The different private network requirements and vertical dynamics, along with the need for flexible private network deployment options and scenarios, will drive various opportunities and business cases for new operators and owners to emerge across these industries. Traditional and new telcos have varying strengths and limitations across spectrum holdings/access, asset ownership, and telecoms and vertical expertise.

In addition to leveraging spectrum and public network infrastructure to support different deployment scenarios, MNOs’ major advantage over other players is that they know how to build and manage a cellular network, which grants them a leading role in many private network projects even if the deployment uses local spectrum and is isolated from the public network. Traditional telcos can also leverage private networks to access new regional markets where they do not own spectrum but want to support their international enterprise clients. An example is Verizon which is looking for private network opportunities in Europe.

In contrast, vertical players usually lack telecoms expertise, but their knowledge about specific industry applications, IT networking and stakeholders’ requirements is often a crucial factor in successfully designing and building a private network. Some players in industries such as railway and utility services often already have experience using wireless networks and technologies, and have highly specialised and mission-critical needs, and will therefore be less inclined to engage with telcos when developing their private networks.

Our report Private networks: Lessons so far and what next explores the recent developments in the private network market, regulatory activities and policies on local and shared spectrum, and the different deployment approaches and business cases for traditional telcos and the expanding range of other stakeholders.

See our in-depth research on private networks