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Straight Talk Telecoms

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Mobile edge computing (MEC) is part of the mobile industry’s vision for 5G and IoT. The concept involves putting cloud-computing capabilities at the edge of the network – potentially within the base station architecture – and developing innovative consumer and enterprise services, sometimes in partnership with third-party service providers.

Operators have been cautious to adopt the small cell architectures that will facilitate MEC. This should be a lesson to the vendor community that MEC might not be adopted uniformly by the operator community. Until a stronger business case is developed for MEC it is likely to remain a vision rather than a business plan.

In a white paper in September 2015, standards body ETSI reflected on the aspirational nature of the MEC concept:

 “Operators can reposition themselves in the value chain and redefine personalized services. They can capitalize their networks and open them up to authorized third-parties (in a secure way), exposing capabilities to Over the Top (OTT) players and application developers to flexibly, agilely and rapidly deploy innovative applications and services towards mobile subscribers, enterprises and vertical segments. Operators will be able to create new revenue streams, delight their customers by developing a new breed of applications that provide incremental value, and open up new market opportunities.”

The increasingly cost-conscious operator community is unlikely to be won over by such optimism given its lack of success to date in reversing (or even slowing) the decline in services (as opposed to connectivity) revenues. Operators like the idea of repositioning themselves in the value chain, building two-sided business models, and creating innovative new services, but to build an investment case for 5G on such a flimsy set of assumptions is a different matter.

Nevertheless, even without buying into the new revenue/new business model vision, operators have good reason to start pushing out their network resources closer to the edge. The search for new spectrum is taking them into higher frequencies and denser networks both to plug gaps in coverage and provide more capacity. Delivering millisecond latency is a central part of the 5G-enabled IoT vision, and computing power will have to sit close to the edge of the network to achieve this.

Small cell vendors are hoping that the adoption of MEC will help propel a technology that has been slow to achieve commercial success. Few large-scale deployments have so far been implemented or planned, although there are indications that market momentum might be building.

Many of the challenges around the metro small cell market still relate to the practicalities of site acquisition and deployment costs. Operators need to gain access to large numbers of key sites, often in very public and potentially sensitive locations. Regulators are only now beginning to think about how to remove bureaucratic hurdles and streamline the approval process.

Enterprises still need a compelling business case to select small cells as an alternative to Wi-Fi and to address closer integration into business applications.

The enterprise is widely tipped to be the next big growth area for small cells as businesses demand better in-building voice coverage and mobile support for business-critical applications and functions. Therefore service providers have an opportunity to tap into new revenue streams through the provision of services directed towards enterprise needs.

Many enterprises still see small cells as part of the operator’s network and believe the operator should fully pay for the network. There is still a lack of compelling applications to encourage enterprises to pick up the full cost of small cell deployment. Wi-Fi also provides an obstacle to wider small cell adoption because for an enterprise it removes the risk of being locked in to a single mobile network.

In many respects the discussion around the merits of MEC and small cells mirrors the one taking place around SDN and NFV. Benefits can be measured in terms of cost savings and improvements to the existing business. They can also be measured by changes to the overall network architecture that make it easier for operators to bring new services to market and partner with third parties.

For existing businesses, MEC could lead to savings on backhaul costs by shifting computing, caching, and storage closer to the point of consumption. Delivering a better customer experience through local caching and the deployment of local QoE platforms is also compelling. Ultimately the prospect of creating new services either in competition or in partnership with existing customers might represent more of a game changer. But in the increasingly pragmatic mind of the mobile operator, tangible, measurable benefits to the existing core business are essential for making a realistic investment case.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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