Edge Computing Space Gets Crowded as Hyperscalers Move on 5G MEC Opportunity

In recent months, several hyperscale cloud providers have signed deals with major MNOs, signalling their intent to target the Multi-Access Edge Computing (MEC) space.

In December, Amazon launched its new AWS Wavelength 5G edge computing platform and announced that Verizon will be running Wavelength on its new edge computing platform, 5G Edge. This follows the partnership between AT&T and Microsoft announced earlier in 2019, which integrates Azure cloud services into AT&T’s 5G network edge. To date, Microsoft has partnered with eight managed service providers which will enable enterprises to connect to its Azure cloud, including Reliance Jio, which is building data centers for Microsoft in its home Indian market. Google and IBM are also signing similar deals with MNOs.

AWS Wavelength

AWS’s Wavelength embeds cloud compute and storage services at the edge of MNOs’ 5G networks. This enables developers to build next generation ultra-low latency applications using familiar AWS services, APIs, and tools which they can potentially use across other 5G networks around the world, thus providing a consistent developer experience. First customers using AWS Wavelength include Mapbox, Vario and games company Bethesda. AWS is also collaborating with Vodafone, SK Telecom and KDDI to launch AWS Wavelength across Europe, South Korea and Japan in 2020 with more global partners expected later in the year.

AWS’s Wavelength software will be installed on Verizon’s own computing resources located inside the MNO’s network and developers pay for access to those computing resources. Verizon claims that the partnership with Verizon is non-exclusive, which may suggest that it will offer similar cloud solutions with other hyperscalers such as Microsoft’s Azure, etc. However, Verizon has seemingly ruled out using third-party edge computing infrastructure offered by companies such as Vapor.io, EdgeConneX, etc.

In addition to partnering with MNOs, the hyperscalers are investing in developing their own edge infrastructure as well as leveraging the facilities of other big data center providers such as Equinix. The company recently launched a $1 billion-plus joint venture to operate data centers in Europe for Amazon and Microsoft. Other major cloud companies are also leveraging Equinix’s data centers to increase their edge presence.

To bolster this expansion, Equinix announced this month that it was acquiring US start-up Packet, which provides bare-metal “Computing-as-Service” hardware to more than 20 data center locations worldwide. The acquisition will allow it to offer dedicated “single-tenant” servers (often preferred by enterprises for regulatory and security reasons) rather than the multi-tenant servers more common in the cloud and will enable it to expand its existing data center footprint to central offices, tower base stations and C-RAN hubs.

Start-ups lining up

The AWS Wavelength deal with Verizon is not good news for the various telco-backed start-ups hoping to build an industry-based standard middleware platform, such as Deutsche Telekom-backed MobileEdgeX and Ericsson’s Edge Gravity.

Nor is it particularly good news for the host of micro data center providers eyeing opportunities with MNOs such as Vapor io, EdgeConneX, EdgeMicro, DataBank, Compass Datacenters, Baselayer, Switch, DartPoints, vXchnge and 365 Data Centers. For example, Vapor.io is proposing using its “Vapor Chamber” to provide edge facilities at MNOs’ C-RAN hubs (Exhibit 1). The company recently raised $90 million from backers Berkshire Partners and tower giant Crown Castle.

However, Verizon’s deal with AWS suggests that MNOs (or at least the major MNOs) will insist that MEC services should run on MNO-owned hardware located at their own edge premises. As a result, it is likely that these small players may need to re-focus on other opportunities, such as private networks, for example.

Exhibit 1: Vapor Edge Telecom Architecture

Counterpoint Vapor Edge Telecom Architecture

MNOs versus Hyperscalers

The edge is now shaping up to be a future battleground between telecom operators and the hyperscalers. Telcos believe that the fact that they own real estate at the edge (central offices, C-RAN hubs, etc.) gives them an advantage which means that the Internet companies will be forced to partner with them. However, there is mounting evidence that AWS, Microsoft et al. are moving fast and developing their own edge infrastructure. There is therefore a real risk that MNOs could lose edge business opportunities to the Internet companies if they prevaricate.

As recent events show, it seems that the big MNOs believe that they have more to benefit than to lose by partnering with the likes of Amazon, etc. Given the impact these giant Internet companies have already had on their businesses, Counterpoint believes that they should be wary of such partnerships, as the danger is that they will be relegated to the role of connectivity provider. However, there is also the chance that 5G MEC could be disruptive for the hyperscalers themselves, particularly as most enterprises do not want all their operational data going to AWS or Azure clouds. This could therefore be an opportunity for the telcos to offer an alternative, neutral, edge platform. However, the industry must move quickly and overcome challenges regarding standards, etc. if they are to seize the opportunity – a seemingly tall task at present!