Just prior to the outbreak of COVID-19 in the US, a wide number of startups were planning to ramp up major investments into the edge computing industry. It was the very beginnings of a land grab – after all, the first company to build a mini data center for edge computing in, say, Socorro, New Mexico – a tiny town of around 8,000 an hour south of Albuquerque – would be the first to reap the eventual benefits of that deployment.

The reasoning for such deployments is relatively simple: Small, unmanned data centers in modest cities, such as Socorro, would be the only way to provide super low-latency services to residents in such locations. Otherwise, their Internet traffic would have to travel all the way to bigger data centers in Denver or Dallas, adding precious milliseconds to services like streaming virtual reality that basically need to be instantaneous.

Prior to the pandemic, some companies began investing into the physical construction of those far flung mini data centers, while others pursued investments into the software necessary to run them and tie them into broader cloud computing operations.

And then, in the early part of 2020, the coronavirus put all those hopes on hold.

"When COVID happened, we were in a fortunate spot," explained Jason Hoffman, president and CEO of MobiledgeX, one of the many startups in the edge computing space. "We were always very well capitalized by Deutsche Telekom."

Importantly, Hoffman said MobiledgeX closed a funding round in early 2020, just prior to the outbreak of the pandemic. "We were basically heading into the lockdown with years and years of capital in the bank," he said.

Thanks to that funding, MobiledgeX is still working to design network application programming interfaces (APIs) for developers to use to design low-latency services, just as it was before the pandemic struck. However, the company is now mainly targeting the business market rather than consumer applications. Further, some top executives have moved on. Sunay Tripathi, the company's former CTO, is now working on edge computing at Google. And Geoff Hollingworth, the company's former CMO, recently joined Rakuten Symphony.

Redirecting edge spending into the core

According to a number of executives in the industry, the shifts in the edge computing market can be directly traced to pandemic-driven Internet traffic spikes. After all, stay-at-home orders during 2020 pushed huge numbers of workers and students online.

Indeed, according to a new, detailed study from Recon Analytics, US Internet traffic on fiber/copper networks peaked at 27.3% above normal levels during the pandemic, while mobile Internet traffic spiked 22.6% above pre-pandemic levels. Traffic on cable networks crested at 22.1% above pre-pandemic thresholds.

As a result, operators that had earmarked money for edge computing tests and deployments before the pandemic immediately redirected that spending into their core operations to handle the spikes. That left companies hoping to support operators' edge computing services – whether it was cloud gaming or streaming virtual reality – high and dry.

Perhaps not surprisingly, some edge computing players didn't make it through COVID-19. For example, Ericsson shuttered its Edge Gravity business for edge computing last year. And, according to multiple industry sources, startup EdgeMicro recently entered liquidation. The company had planned to build mini data centers for edge computing in locations all over the US, but it only managed to build around half a dozen in markets including Austin, Texas, and Raleigh, North Carolina. EdgeMicro executives declined to respond to questions from Light Reading.

And EdgeMicro isn't the only company that has faced problems financing the construction of mini data centers for edge computing.

In 2019, EdgePresence said it would build EdgePods – its own mini data centers – across almost two dozen markets. Today, though, the company lists just 11 locations that are up and running. Importantly, during the height of pandemic lockdowns last year, DigitalBridge's DataBank announced a $30 million investment into EdgePresence. And now, DigitalBridge's cell tower business, Vertical Bridge, said it plans to eventually install EdgePresence's mini data centers at the base of some of its cell towers.

Similarly, mini data center provider DartPoints launched in 2012 with "an ambitious vision to build a national network of micro data centers," according to Data Center Frontier. But private equity firm Astra Capital Management invested into the company in May of last year and installed a new CEO. Today, DartPoints counts data center operations in just nine markets, several of which it purchased in the past few months.

Shifting focus, shifting schedule

The situation has pushed a number of companies to join MobiledgeX and rework their strategic focus. For example, Alef launched in 2009 as AlefEdge, but last month announced a leadership overhaul and a slightly updated corporate identity: "Alef, the edge Internet leader."

"There has been an impact due to COVID," acknowledged Ganesh Sundaram, CEO of the company's Alef Innovations division. He said the startup initially targeted wireless network operators with its edge products, but is now working to sell its offerings to businesses and others looking to build private wireless networks.

Vapor IO, however, has not pivoted, according to marketing chief Matt Trifiro. The company – backed by the likes of cell tower giant Crown Castle – still plans to build mini data centers for edge computing all over the country, but the pandemic did slow its rollout. As reported by FierceWireless, Vapor IO had initially hoped to end 2021 with edge computing data centers in 36 markets. Instead, it expects to count operations in just six markets.

Nonetheless, Trifiro argued that Vapor IO remains on track. "We are years ahead of other companies trying to do this," he said.

Trifiro said cloud computing giant Amazon Web Services is running some of its services on one of Vapor IO's new mini data centers in Las Vegas. He said that's a signal of demand for the company's software and services. "The economics of shared infrastructure delivered from a cloud-neutral and carrier-neutral facility is, I think, completely unbeatable," he said.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano