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Edge Computing for Mobile Operators: Revenue Opportunity or Defensive Necessity?

Simon Sherrington
Heavy Lifting Analyst Notes
Simon Sherrington
3/22/2018
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In a competitive and developed market the business case for 5G is quite simple, really. If a mobile operator does not deploy 5G, it will lose out to its competitors that do. Few people in developed economies buy 2G phones now, and they won't buy 3G and LTE in the future. The business case for mobile edge computing (MEC) is equally simple. If an operator doesn't deploy it, it won't be able to achieve 5G objectives in terms of latency reduction for high performance or mission critical services. And it will lose out to competitors who do.

But the question of whether operators deploying MEC will open up opportunities to substantially grow their revenue is a much more complex one. Recent months have seen edge computing investments and service announcements by several significant operators. For instance, AT&T plans to begin MEC deployment in 2018; Deutsche Telekom has spun out a MEC specialist whose technology it seems likely to install in its own network; Reliance Jio is deploying MEC to create a mobile content delivery network (CDN); and Telstra is selling off half its central offices (COs) and converting the others to edge data centers.

If they intend to be or remain mobile market leaders, all operators must deploy MEC, otherwise they simply cannot deliver the products and services for which 5G is the promised platform. MEC will be an intrinsic part of many value-added services, including delivery of popular content to mobiles as a CDN, enabling cloud processing for augmented and virtual reality mobile applications, providing low-latency cloud control for delivery drones, low-latency analytics and control for campus enterprise applications, or low-latency safety-related communication for connected vehicles and transport systems.

However, mobile operators look set to enter a market already being targeted by a host of enterprise service providers, Internet of Things (IoT) specialists, cloud computing and IT vendors, and even their own network equipment providers. They have some intrinsic technology advantages (such as access to location and service quality data or ability to integrate the edge compute with the mobile access network), but operators will be competing for revenues that can often be captured by others using unlicensed and alternative wireless technologies. It is also hard to envisage that the edge computing capability itself will deliver premium revenues. Compute capability is already a commoditized market, and the massive players in that market will move to protect their share. It will be all about how the MEC-enabled services are packaged within other high-value services by mobile operators -- here is where the potential revenue lies.

The question is whether mobile operators will be able to resist the race for share, collectively hold their nerve and introduce valuable differentiated services at premium prices. In the consumer and small-to-medium enterprise (SME) markets, at least, history suggests someone will blink, and everyone will follow in a race to the bottom. And in totally new service markets, such as automotive safety, it is not yet clear who will pay for the shiny new networks.

Heavy Reading's latest report, Edge Computing: 2018-2019 Market Outlook, considers what we might expect from edge computing -- and specifically MEC -- over the next 12 to 24 months. It reviews who is targeting the MEC market. It asks where the earliest opportunities will open up and who might grasp them, as well as how mobile operators will fare when they do. It considers MEC's role in IoT and automotive markets, investigates possible wholesale opportunities, and ponders the MEC market's likely near-term developments.

— Simon Sherrington, Contributing Analyst, Heavy Reading

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