Battle at the Edge: Telcos versus Cloud Giants

When telecom companies look at the market in 2020, the word “multiplication” springs to mind. On every front, you are seeing more devices, more users, and more data taking a massive and critical industry into a period of almost incomprehensible complexity.

Look at it from a consumer perspective. Even a decade after the launch of the iPhone, traffic per phone is exploding worldwide, reaching levels of ten times or more compared to just a few years ago. Meanwhile, enterprises are eagerly dismantling their own monolithic tech stacks into microservices that improve performance but pose massive challenges in understanding network and application performance issues.

This should be a rosy scenario for large telco players – a traffic explosion and greater degrees of complexity are both growth opportunities. But it’s also worryingly familiar. When the public cloud began to emerge, telcos should have taken control, given their massive infrastructure. Instead, it fell to an online retailer – Amazon – to take the lead on building the public cloud. Their closest followers were an enterprise software giant and an online advertising business. All three established such a lead that telcos had no choice but to accept the role of junior partners.

In 2020, telcos have the chance to strike back. Two factors – the rise of edge computing and the advent of 5G – will be the catalysts. Millions of new devices will join the network, and the distinction between network and computing will grow less clear. But to take advantage of this moment, telcos need to transform themselves even as they learn to work with one another.

Complexity at the Edge

Just as the volume of data being processed is exploding, so is the volume of devices being brought online. The number of IP devices worldwide will multiply to 3x the global population in a few short years. It is simply not feasible that all the data, support queries, and analytics generated by this explosion will be transferred back to the central cloud. Instead, more data will be processed at the edge.

Creating an edge ecosystem is all about real estate - data centers have to be close to the devices. That gives telecom players an immediate advantage over AWS, Azure, and GCP. But all viable implementation options of where the servers might live require the provisioning of network, computing, applications, and content. And the question of who provides what – between telcos, solution providers, cloud providers, or even enterprises themselves – is up for discussion. AT&T and Verizon have both struck strategic alliances with cloud giants - should others follow suit? If they do, will they risk becoming dumb pipes for cloud infrastructure?

The 5G Revolution is Here

We’re currently in the midst of the 5G revolution. First implementations are mostly focused on telecoms - in the US, AT&T is rolling out 5G in 15 cities; in South Korea, there are already more than 2 million 5G users; in Singapore commercial 5G services will be rolled out this year with the intention of having 5G in at least half of the city-state by the end of 2022.

But there are also areas where 5G will have an immense impact outside of speeding up text conversations. Let’s look at one early implementation use: gaming. Gamers are a uniquely engaged audience, hungry for every opportunity to improve the speed and quality of their experience. Even a small dollar cost for lower latency time-bound to a battle royale planned on Friday night could represent a multi-billion dollar opportunity for major gaming companies. Equally, a network providing the features and network for major gaming could allow smaller gaming companies to scale rapidly - what we are referring to as a “Universe-as-a-Service” offering. In both cases, telcos will be serving new technology to a new customer. In an industry where microseconds of latency could kill the business model, telcos need the confidence that they will be able to support the technology immediately and be able to scale rapidly. In a 5G world, slow is the new down.

Learning to Trust

As it is for these first responders, so it is for the entire industry – trust is key. For a developer or a software provider, the benefits of the planet-scale cloud providers are precisely that they are planet size. You have the benefit of working with broadly the same UI and capabilities worldwide. Telcos need to embrace this mindset if they want to seize the opportunities that 5G and the edge provide.

The first part of this involves creating standardization. The developers and device makers that will make up the edge ecosystem will not want to work on a different UI depending on which location and telecom provider they are working with. They need a single standard to work with, whether they are providing services to first responders, gathering data from an industrial facility, or connecting smart home devices. They also need to know that the network will be fast and adaptable – in the edge, a slow network is as bad as no network at all.

This instantly raises the fear of commoditization - that telecoms will become interchangeable parts. But as an industry, telecoms need to approach this revolution without resorting to a defensive posture. If they can learn to work together, they can create a level of trust that has never previously existed between the industry and the leading software and device makers - trust that they have reliable partners and network reliability to power the new era. Only that way can they take their natural place and prevent the edge era being another chapter of Amazon, Google, and Microsoft's dominance.