Today in the United States, the three Tier 1 service providers are all offering “nationwide” 5G coverage. T-Mobile is using its 600 MHz and AT&T and Verizon are delivering with Dynamic Spectrum Sharing. And with the recent release of the iPhone 12 lineup, which supports sub-6 GHz and millimeter wave 5G across all four models, many industry watchers are expecting a supercycle of handset upgrades. 

But handset upgrades, while certainly providing a revenue boost, don’t necessarily change ARPU dynamics sufficiently to let a major operator realize a return on investment against the multi-billion dollar annual capital cost that has gone into building 5G. After all, as it stands right now, none of the big three in the U.S. are charging a premium for 5G as compared to LTE. For that matter, there are so many promotions associated with the iPhone 12 release, that seems to be more of a play to show incremental subscriber adds rather than recognizing revenue from premium device sales or steering users toward higher-cost rate plans. 

Regardless, the real revenue from 5G isn’t going to come from me, you or our grandmas. It’s going to come from enterprises looking to leverage 5G as part of their own digital transformation. The disconnect there is that how a consumer uses 5G is very different from how a business will use 5G. Grandma likely doesn’t need a bespoke network slice capable of autonomously onboarding thousands of sensors or ultra-reliable, low latency support for autonomous guided vehicles picking and sorting inventory in a logistics facility. Amazon, on the other hand, very well may need to tap into the full 5G feature set which is the enhanced mobile broadband being peddled today to consumers plus massive internet of things and URLLC. 

Moving from that consumer focus to a robust enterprise 5G service set requires even more network investment. Early 5G deployments follow the non-standalone mode wherein 5G radios and new component carriers are connected to an LTE core. The evolution of that contemplates a cloud-native 5G core as well as a distribution of cloud capabilities—compute and storage—out of regional data centers all the way to the network edge, whether that’s a compute node colocated with a central office or at a tower site, or even on an enterprise premise. Creating a horizontal, cloud-based, distributed network is a seachange to how telco networks have been built; moves toward infrastructure virtualization, hardware/software disaggregation and openness are shifting vendor dynamics, opening the door for non-traditional service providers to grab market share and otherwise upending deployment and operational models. 

Citing research from BPI Network, A10 Networks Vice President of Worldwide Marketing Gunter Reiss, in an interview with RCR Wireless News, said, “A lot of operators realized that if they want to really deliver the use cases people are talking about, you see standalone 5G becoming more important. We see that move to a cloud-native, microservices approach quite vividly. That’s where 5G differentiates from 4G. I do think the big driver for service providers over the next few years is how to address the enterprise.” 

Distributed and multi-cloud is necessary to enable the full 5G feature set to enterprises

From the BPI report: “Many of the key advances under 5G, including [URLLC], network slicing, edge services, and others, will require the adoption of cloud-native architectures, including virtualization and container technologies.” To that end, BPI surveyed operators and found that 81% of respondents see cloudification and related technologies as enabling “faster deployment of network services” and 77% see it as key to scalability.

Responsive application delivery at scale is part-and-parcel of delivering the type of differentiated services needed to drive enterprise 5G revenues. As established earlier, grandma doesn’t really have a pressing need for single-digit latency or localized computing but the manufacturing, automotive, financial, healthcare and other high-value sectors do. And as operators work on deploying the infrastructure that will enable these applications, the pressure is on to turn network investments into new service revenues. 

For the past three years, as it has built out its 5G network and mobile edge computing facilities, Verizon has spent north of $15 billion annually. In reporting third quarter earnings in October, CEO Hans Vestberg stuck to projections the operator will see 5G mobility service revenues in 2021 followed in 2022 by revenues associated with the combination of 5G and MEC.

Reiss said he’s a “big believer” in the relationship between 5G, MEC and operator’s ability “to deliver network-as-a-service, enterprise services and new use cases. That’s where the mobile edge plays a key role.” He also addressed the need for partnerships in delivering on edge use cases as no one company, operator or cloud providers like AWS or Equinix, “can be everywhere. But [cloud providers]have access to larger and larger customer bases. I think that’s where we see hybrid models and more and more ecosystem partnerships. Why should SK Telecom or AT&T or Verizon build all their own infrastructure?”

Back to Verizon: the operator has partnered with Microsoft in pursuing 5G/MEC service revenues. With Microsoft, Verizon is working to integrate its on-site 5G Edge with Azure edge services to enable ultra-low latency and faster connectivity to help businesses enable and utilize real-time data analysis and delivery. The goal is to more easily enable on-site private 5G for applications that incorporate computer vision, augmented, mixed and virtual reality, digital twins, machine learning, and so on.

“We have built a network that provides real-world, 5G-enabled solutions today,” said Rima Qureshi, EVP and chief strategy officer at Verizon. “By bringing together Verizon’s 5G network and on-site 5G Edge platform with Microsoft’s expertise in cloud services, we will enable the development of the next generation technologies everyone has been envisioning.”

Identifying colon polyps in real time as a scope moves to scan the inside of a patient’s organ and tracking a basketball player’s position and speed as he or she moves through the arena to provide never-before tracked statistics were the first real-world applications to make use of use of both Verizon’s 5G network and mobile edge computing capabilities tied in through AWS Wavelength.

The AWS Wavelength partnership initially provided pockets of AWS computing on the carrier’s network in Boston and in the San Francisco Bay Area that can be accessed by developers to deploy latency-sensitive applications. In conjunction with its edge news, Verizon said it has turned up 5G coverage in San Jose — meaning that both 5G and AWS-based MEC capabilities will be available in Silicon Valley. The combined technology set was subsequently made available in Atlanta, New York and Washington, DC.

Reiss gave the example of Equinix, which is prescient. In Japan, Rakuten Mobile has built a cloud-native LTE and 5G network using an open architecture. Rakuten has packaged that architecture into Rakuten Communications Platform and is selling it globally to other service providers, enterprises and governments. As part of that push, RCP has partnered with Equinix to use the the company’s global footprint of data centers and interconnect facilities to accelerate delivery of RCP first in Singapore and Los Angeles with global expansion mapped from there. 

Rakuten Mobile CTO Tareq Amin said the partnership will “support the global expansion of our telecommunications business…Equinix’s global footprint, enterprise-grade facilities and strong network capabilities make it the ideal partner for us to bring the deployment of cloud-native mobile networks to telecom and enterprise companies around the world.” 

In the context of building out sufficient distributed cloud computing facilities, “The sheer budget the big cloud providers have to build out more and more infrastructure is significantly larger” than what’s available to traditional telecom operators, Reiss said. 

Infrastructure monetization in a hyper-competitive market at hyper-scale

As we see companies like Microsoft, AWS, Equinix and others play more and more in telecom, competitive dynamics are shifting. Take Microsoft’s acquisitions earlier this year of core specialist Affirmed Networks and cloud-native network function specialist Metaswitch. Viewed reductively, Microsoft can deliver core and other network functions, on-prem and centralized cloud, a raft of data analytics services, and enterprise communications and productivity tools. All that’s missing in terms of delivering a turnkey private network is radios and spectrum, the latter of which is becoming increasingly liberalized with enterprise set asides and localized shared access like CBRS in the U.S. To bottomline that, Microsoft is close to delivering full on private networking on its own in competition with service providers, while also working service provider partnerships like with Verizon–in the card game bridge you’d call that a simultaneous double squeeze. 

How should we contextualize this? “The answer,” Reiss said, “is Microsoft has many assets now which a traditional service provider would have…They can now operate a network as a service provider. I think Microsoft is in a strategic position to take more share in the evolution in the way cloud, 5G, and data is going to be consumed and managed by enterprises as well as service providers.” 

And it’s not just Microsoft. As telecom networks become more disaggregated where hardware and software is decoupled and cloud-native network functions are hosted on COTS hardware rather than proprietary boxes, companies like HPE and Dell Technologies are upping their telco focus. Dell Technologies COO and Vice Chairman hit on this during an introductory session at the recent virtual Dell Technologies World event.

“The future is distributed…constantly connected and digitally transformed,” he said, “enabled by distributed computing and analytics and real-time outcomes at the edge,” which Clarke characterized as “the center of gravity for digital transformation.” He said 5G for wide-area human and machine connectivity, along with data-driven business models, automation and embedded intelligence, will open up long-touted 5G use cases like smart factories, distance learning and connected health care. “This is the ultimate disaggregation of data, moving at high speed, further away from traditional core data centers, requiring hybrid cloud architectures…and management at the edge,” Clarke said.

What we have here are technological and business confluences at the intersection of 5G and MEC that will create winners and losers. The common goal is keeping up with the pace of change while building and monetizing an increasingly flexible, distributed infrastructure. 

“It’s a bit of a race and this race is more on than ever,” Reiss said. “These operators have to take care of their infrastructure, basically transform their infrastructure to be absolutely agile and secure; they have to roll out 5G and have a cloud-native, microservices-based architecture. They have to do all that and they have to market it. The holy grail is about finding the right applications, monetize the infrastructure and drive profitable growth. It’s not just mobile broadband. It’s the enterprise.” 

The post As 5G and MEC converge, enterprise services will drive profit appeared first on RCR Wireless News.