THE HAGUE -- SDN NFV World Congress -- China Unicom will invest in thousands of edge data centers in the next few years as part of a broader network overhaul linked to the rollout of 5G services, a senior company executive said in The Hague on Tuesday.

The Chinese operator, which competes against China Mobile Ltd. (NYSE: CHL) and China Telecom Corp. Ltd. (NYSE: CHA) in its domestic market, plans to build "thousands" of edge data centers alongside "hundreds" of regional facilities and "tens" of core data centers, said Xiangyan Tang, China Unicom's chief technologist, during a keynote presentation at the SDN NFV World Congress.

"Today we have constructed core and many regional centers and as a next step we will migrate to edge data centers," Xiangyan told attendees at the conference.

China Unicom Ltd. (NYSE: CHU) is eyeing a launch of 5G services in 2020 and the edge data centers could help to support a range of new services requiring much lower "latency" -- the delay that occurs when sending signals over data networks -- than today's 4G-based offerings.

Edge computing promises to reduce this latency by moving IT resources out of centralized facilities and relocating them near basestations or other access network equipment, where they are much closer to end users.

The move could open up opportunities in areas such as factory automation, robotics and connected cars.

Xiangyan's comments further suggest that operators covering vast geographical areas are showing greater interest in edge networking than telcos in much smaller markets, where the benefits of a costly network overhaul may not be as obvious.

"Customers in those markets might already be physically close to the network core and all the content," said Gabriel Brown, a principal analyst with the Heavy Reading market research group, during a previous conversation with Light Reading. "Deploying in that gap can be expensive and messy, and in a 4G environment how much benefit do you get?" (See Edge Inertia Grips Telcos as Rival Interests Jockey for Position.)

All three Chinese national operators are now looking at opportunities outside the consumer market following the smartphone boom of the last few years, which has seen millions of Chinese consumers sign up to higher-speed 4G services.

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Besides alerting conference attendees to China Unicom's edge networking plans, Xiangyan also said the operator would continue to make investments in software and virtualization technologies to support the rollout of new services and boost efficiency.

But he outlined several challenges the industry has yet to address in this area, complaining that "ossified management and operation don't fit SDN and NFV" and noting the lack of software and IT engineers right now.

Xiangyan also complained that open source software and white box hardware technologies are still not ready for commercial deployment.

The construction of new edge facilities could prove costly for many telcos, although China Unicom plans to spend just 45 billion Chinese yuan ($6.8 billion) in capital expenditure this year, down from RMB72.1 billion ($11 billion) in 2016 and RMB133.9 billion ($20.4 billion).

The reduction follows a period of heavy investment in the rollout of 4G networks as operators raced to sign up customers to more lucrative data services.

China Unicom saw revenues dip by 1.5% for the first six months of this year, to about RMB138.2 billion ($21 billion), compared with the year-earlier period.

Its net profit rose by nearly 70% over the same period, to about RMB2.4 billion ($360 million).

— Iain Morris, News Editor, Light Reading