Why a Megadeal Between Mobile & Hypercloud Could Happen
If you talk to top executives in the edge computing industry long enough, you eventually arrive at one whispered, usually off-the-record conclusion: An agreement between a mobile network operator like AT&T and a cloud provider like Amazon is virtually inevitable. And that's because each side has something the other really, really wants.
There's no telling when and how a megadeal between these two sectors might happen. But if it does, it would have major implications for both industries.
Let's start with the mobile side of the equation. What do wireless network operators have that cloud providers want? Mobile network operators like AT&T and Verizon control the onramps into their mobile networks. Meaning, it doesn't matter how physically close the cloud provider puts a data center next to an AT&T 5G user, AT&T can still route that traffic wherever it wants to.
At issue here are Internet exchange points (IXPs). These are the locations where traffic from a data center, for example, is allowed onto the network of a mobile operator. Incredibly, there are only around 240 of these kinds of major, public exchange points in the entire world, and only 40 or so of them are in the United States.
This is important because edge computing is all about reducing latency -- the time it takes for a digital request from a user to be answered by a computer. So, for example, you probably can't play a VR game online right now because of the delay between when you move your head and when the game reacts to that movement. That delay can be caused by the physical distance between you and the data center hosting the game. However, if the game is hosted in a data center that's physically close enough to you, you won't get sick because the game will almost instantly respond to the movements of your head, given the correct network architecture.
Now, if the company operating your online VR game has a direct relationship with your mobile ISP, they can then route their VR traffic directly from their data center to your 5G device. But if they don't have that kind of direct relationship, their traffic will be routed from its origin to one of these 240 or so exchange points, with the rest of the regular traffic on the Internet, before it can actually reach you.
This is the sticking point that many edge computing companies are running into when they start talking about the 5G opportunity. Yes, 5G supports really, really fast connections and super low latency, but the 5G mobile network operator is still the one calling the shots here.
So 5G mobile network operators are holding all the cards, right? Not really. Cloud providers are the ones with the customers who might actually pay for edge computing services.
Cloud providers like Microsoft Azure, Google Cloud and Amazon Web Services have built billion-dollar businesses around their ability to create cloud computing services and then, more importantly, to sell those services.
And demand for these kinds of cloud computing services is growing like crazy: Synergy Research Group estimates that cloud infrastructure service revenues approached $20 billion in the fourth quarter of last year, up 45%, giving the space a full-year 2018 total of almost $70 billion.
What's important here is that cloud providers like Amazon and Google have largely worked to meet this demand by building massive, centralized data centers, including ones located next to Internet exchange points. And though cloud providers have been building new data centers in lots of new locations in recent years, they don't have the kind of distributed computing footprint necessary for widescale edge computing services.
Meeting each others' needs
So cloud providers have some leverage, and mobile providers have some leverage. But what turns this whole concept from a regular deal to a megadeal is the fact that both sides also have needs.
Mobile providers like AT&T and Verizon increasingly need cloud infrastructure to run their services. AT&T, for example, has made a well-documented promise to "virtualize" 75% of its network by 2020, an effort that essentially involves replacing expensive pieces of hardware with bits of software. That software needs to run in some kind of cloud environment.
Cloud providers could certainly help there.
Meanwhile, cloud providers need to be able to expand their computing footprints. They need to be able to run their computing services at the edge, as close to their customers as they can get. And they need to be able to quickly obtain physical locations where they can do that.
Mobile network operators could help there, considering they already count thousands of computing sites running equipment including cell towers, CRAN hubs (central processing locations for multiple radio elements) and central offices.
So it's clear that there are several key areas where mobile network operators and cloud providers fit well together. And presumably a major teaming between the companies in these two adjacent spaces would seem to satisfy the needs of both sides.
When questioned about AT&T's edge computing business model, AT&T's Igal Elbaz said that "everything is on the table." Already, in a possible hint of things to come, AT&T announced recently that it's testing Microsoft's Azure in a 5G edge computing scenario.
"Everything is under consideration," Elbaz added.