Month: October 2021

Private 5G is even more difficult to assess, in value-proposition terms, than 5G overall. My own chats with enterprises suggest that there’s really not all that much going on. Other sources suggest otherwise, and are looking at possible “private 5G models”. TelecomTV has a story on this, and we’ll use that today to look a bit harder at the private space. We’ll also roll in initiatives like those of the ONF with Ananki and Rakuten’s own Communications Platform.

5G is a 3GPP standard for next-gen mobile networking. Semantically speaking, anything that claims to be 5G would have to conform to that standard, but the standard would allow for two broad 5G subdivisions—public 5G service offered by mobile operators, and private 5G services deployed by users. If you think of 5G at this level as having a sort-of-cloud-like framework, you could also see “hybrid 5G”, which would be a combination of the two. That combination might hybridize with a public 5G service, or with a network slice using that feature of 5G.

There are also mission-based private 5G models. Again, at the highest level, there are “industrial” or “IoT” applications, and then applications designed to offer communications through traditional mobile devices. I’ve not seen very much interest in the traditional-device model so far, but then (as I’ve noted) I’m not seeing a lot of private 5G adoption either, just tire-kicking.

We could also divide private 5G according to the means of implementation, and there are four broad options. First, an enterprise could partner with one of the mobile infrastructure vendors (Ericsson or Nokia, for example), or they could acquire their infrastructure from one of the open-model 5G providers. Finally, they could acquire the technology from an integrator, or they could do their own 5G integration from available elements.

The TelecomTV article I cited references third-party research, and I’ve pointed out in the past that asking enterprises things like “do you plan to adopt private 5G” nearly always yields little in the way of accurate results. I think that’s the case here. The lead graphic says, for example, that the top industrial connectivity options are WiFi, fiber, Ethernet, private LTE, and SD-WAN, with each of the first four having over 60% adoption. That’s in no way consistent with my own findings, unless you broaden “industrial connectivity” to mean anything an industrial company uses, which would of course have little relevance to private 5G opportunity.

The assertion of the same chart is even more striking; over three-quarters of companies expect to adopt private 5G by 2024. Again, this is totally at odds with what I’ve heard from companies actually looking at industrial connectivity; over three-quarters of them said they had no idea when, or whether, they’d adopt private 5G.

What’s really going on with “connectivity in manufacturing” has to be divided to assess. Almost all enterprises have the same basic issues in their enterprise connectivity strategies. Manufacturing differences arise largely because of manufacturing, meaning industrial IoT. That topic divides twice—once by whether the elements are fixed or mobile, and again by whether the application is green- or brown-field. Each of these divisions impacts 5G value, whether public, private, or hybrid.

My (limited by the small number of actual adoptions/considerations of private 5G) contacts tell me that the biggest driver of private or hybrid 5G consideration is the need to support locally mobile IoT elements. If the application is also greenfield, then private 5G is very likely worth looking at. If some IoT elements could be mobile beyond the scope of a facility, then hybrid 5G is a viable option. Users offered the example of warehousing and transportation as an application space where this could happen.

Where IoT elements are fixed, the preference I get from my contacts remains for some form of wiring. True manufacturing/industrial IoT often bundles IoT elements and controllers with the tools involved in creating the product(s), and in most cases they say that the connections are made using wiring. Greenfield versions of these applications seem to follow the same wiring preference, but where something has to be added to a manufacturing/industrial process, wireless may be easier to integrate. There, 5G might be an option.

When does consideration of 5G turn into adoption? There’s some congruence between what the article suggests and what I hear, but not complete congruence. Security and latency are what I hear could be differentiators for private or hybrid 5G, but that’s true only where the alternative is either 4G/LTE or WiFi, since wired IoT is obviously the lowest latency of all. What’s interesting is that a slight majority of enterprises tell me that their applications wouldn’t demand 5G-level latency control, and a significant number didn’t even know what the latency difference would be.

WiFi 6 is another interesting factor. Only about a third of prospective 5G users distinguish between WiFi 6 and earlier versions, and only about a fifth know anything about the latency control available in WiFi 6. Even fewer know anything about WiFi 6 security. Given those points, it’s difficult to justify the assumption that three-quarters of enterprises with manufacturing connectivity needs would be adopting 5G; wouldn’t any serious movement in that direction compare obviously cheaper and easier-to-adopt alternatives?

This is where things like the Ananki/Rakuten announcements come in. Enterprises really want private 5G as a service or in a package. They’d love to get it from a vendor they’re familiar with, but an open approach is nearly as good according to what I’m hearing. Having easy access to a consumable private 5G offering could lower the barrier to adoption significantly, though I still believe that users will have to weigh the value proposition of private 5G for their applications before they move. Thus, I don’t think that even these recent private-5G offerings will create a private 5G avalanche.

Then why would users respond to a survey with what seems obviously incorrect or poorly thought-out comments? I’ve had many opportunities to assess survey responses, and it’s my experience that roughly a third of people surveyed will tell the agent what they believe they want to hear, or give the answer that makes them look smart and up-to-date. I’ve cited in past blogs the specific example of a third of enterprises telling a survey form they used 100 Mbps Ethernet when there was no commercial product available at the time. Survey firms also tend to go back to people they can get answers from, sometimes stretching the knowledge of the people if the new survey topic is out of their area.

The net is this. I see no indication of anywhere near the private or hybrid 5G interest that the article and survey suggests. OK, maybe my data is wrong, but I’ve gotten consistently right information from my contacts over years, often decades. I also see a lot of worrying inconsistencies in the data, places where it contradicts or conflicts with other information whose reliability is almost unquestionable, like sales.

There is a value to 5G, and to private 5G. That value, though, lies more in what applications it might enable than in what it’s going to do on its own. The difference is that things dependent on the enabling of other things are dependent on the pace that those dependent elements actually evolve. Many of those dependent elements are citing the success of 5G to pull them through. If A depends on B, which in turn depends on A, then we don’t have symbiosis, we have a circular argument.

That’s why we need to be realistic about what’s going to happen with 5G; the answer will be “not much” unless we take on the task of creating things that actually justify it.

Many broadband providers have traditionally offered both business and consumer services, but cable companies have often been strongly biased toward consumers because of their cable TV roots. Now, cable giant Comcast, having acquired Masergy, is looking for a stronger business position, even for enterprises. It’s a logical move, given that their telco competitors are all selling in the SMB and enterprise space, but cable companies like Comcast have some work to do, and targeting “enterprises” may not be the way to do it.

In the consumer space, cable companies generally had a lower level of customer satisfaction, and that’s true of Comcast, but Comcast has recently been named the most improved in that metric, and in some surveys they top all broadband providers. Issues with installation, with customer support, and with broadband performance and availability have all been reduced, according to the surveys. One might think that this kind of improvement, which measured over the last two years has been truly significant, would have changed cable, and Comcast’s, market numbers. Not so much. Comcast rode the broadband tide created by COVID lockdowns, and that tide is now receding. The company expects a slowdown in growth now, as work-from-home declines. No wonder business broadband is looking more interesting.

Comcast and other cable companies have long offered “business broadband” from essentially the same infrastructure that supports the consumer, but with enhanced customer care offerings. Most of my SMB contacts who use cable broadband are using it for business Internet access, email and texting, and other services that mirror what consumers use broadband for. The percentage who actually use a service like VPNs or SD-WAN is very small. My surveys don’t have a large SMB representation so statistical significance is hard to come by, but while they show almost 100% growth in VPN usage by cable customers, the 2021 numbers are low single-digit.

The reason this is important is that the ARPU for business broadband depends on how much it can be differentiated from consumer broadband. Businesses will (and do) pay more than consumers for “more reliable”, “more secure”, services, but not all that much more. Adding on other features, such as VPN/SD-WAN capability, is a great way to boost ARPU, but these features aren’t valuable or even useful to all businesses. Since differentiable features are also critical in sustaining pricing power in a competitive market, you can see how important it is that business broadband be more than re-branded consumer broadband.

Data from my surveys (with the same significance proviso) says that the reason given most often for selecting cable broadband was that no other provider was available. This suggests that the growth in business customers for cable companies may be due more to growth in the number of businesses that have come to depend on broadband. Cable companies have to get beyond that, but that means targeting businesses who would value something beyond. The demographics of these businesses offer us a hint of the cable company business service opportunity, because they can help us derive just how many businesses would be prospects.

Of the roughly 8 million business sites in the US, half have fewer than five employees. These have an average of 1.001 sites per business, meaning that they’re nearly all single-site businesses. While most businesses with over 500 employees have multiple sites, there are only roughly 20 thousand of them, representing an average of 66 sites per business. Drop down to businesses with between 100 and 499 employees and the average business has roughly 4 sites, and overall it appears that three-quarters of all businesses are single-site.

These single-site businesses tend to be prospects for consumer-like business broadband, of course. You’re a competitor if you pass the prospect with your infrastructure. Differentiable business broadband, broadband services with non-consumer features, would likely have to be targeted at the rough 120 thousand firms that actually have multiple sites, and this represents only about 2% of the business population. My surveys indicate that multi-site businesses tend to have all their sites in areas where there are several broadband providers available, which makes differentiable business services important for competitive reasons, too.

It’s my view, also based on my surveys, that the single characteristic that identifies a true “business broadband” prospect is that they have multiple sites and need connectivity among them. That would suggest that the Masergy deal Comcast made could have much broader impact than the “enterprise” market that the article cited above says the deal targets.

Just what defines an “enterprise” is slippery, so let’s look at the raw data again for guidance. The top group in US statistics, companies with 20 thousand or more employees, contains only 537 companies, with an average of about 1,100 sites per company. Many use 10 thousand employees as the boundary of an “enterprise”, and this group has just short of 700 average sites per company, but number just about 1,100. Those are obviously high-value prospects, but they’re solidly in the telco’s pocket and tossing the telcos out could be problematic. In addition, the goal of 100G service to an “enterprise” means a fiber network rather than CATV infrastructure, and telcos can build out fiber more easily because they have a lower ROI target than cable companies.

Comcast and cable companies need to think smaller, but not small. The sweet spot, according to my modeling of the data, would be companies between 1,000 and 5,000 employees, a group with an average of about 38 sites per company. My surveys have consistently suggested that the network features and issues users in that group found significant were pretty congruent with those of the top-tier (10,000 employees or more) enterprise companies. However, network literacy and the extent to which companies in the mid-sized group could acquire and retain network specialists, was much lower than for enterprises. That would make this group more likely to respond to a managed services offering built around a VPN and including other Masergy services. This group is also less likely wedded to a telco broadband offering.

I suggested in my blog about the Comcast/Masergy deal that Comcast may hope that being able to serve enterprise sites too small for MPLS VPNs could get their foot in the enterprise door. It could, but the enterprises could actually deploy SD-WAN rather than a managed SD-WAN service, and even if Comcast won the SD-WAN business, they’d still have to displace the MPLS VPNs, which is more than just fiber access. Mid-sized businesses with between 1,000 and 5,000 employees could be a better place to target, offering more sales and a higher return. An average of 38 sites per business could generate respectable business revenue, and managed service add-ons could improve ARPU.

Since most of the data I’ve cited here is public, it’s hard to believe Comcast doesn’t see this, and it may be that they are already planning a push like the one I’ve described. If they aren’t, they need to think seriously about taking a shot, and quickly.

According to the company, Cloudflare wants to be the “fourth major public cloud”, but at the same time EU cloud providers are losing market share steadily to the current three US giants. OK, bold aspirations make good ink, but there do seem to be some significant barriers rising in the public cloud market. Is that bad, and if so what can we do about it? Could the same forces that limit the entry of new cloud providers also impact edge computing?

The public cloud giants have been getting steadily bigger, which is usually attributed to their superior economy of scale. It’s more complicated than that. The efficiency of a cloud doesn’t continue to grow as the size of the cloud grows; it’s an Erlang curve that plateaus at a point that a new cloud provider could reach, at least in one data center. It is true that the three largest public clouds can deploy in multiple geographies with near-optimum resource efficiency, but that’s not the biggest barrier.

Over the decade since public cloud services were first offered, our notion of the cloud has changed radically. At first, people thought the cloud was essentially a virtual-machine-as-a-service, a place that either everything was going to live eventually (wrong) or at least where server consolidation would come to roost. Over time, it’s become clear that the cloud is a partner to the data center, a place where, in particular, application front-end elements relating to the user experience could be hosted. The mission gradually drove the expansion of “web services” or the creation of a “platform-as-a-service”.

Today’s cloud has dozens of hosted features, available to developers via APIs, and multiple hosting options beyond IaaS. Applications for public clouds could be built without these features, but it would be more difficult and require more expertise on the part of developers. This rich set of services would create a major barrier to market entry for other cloud aspirants, and interestingly enough, Cloudflare isn’t (at least now) actually proposing to build most of those features. Instead, it seems to be concentrating on one—cloud data storage.

Databases in the cloud are expensive on two levels. First, the storage itself is (according to many enterprises I’ve chatted with) expensive enough to rule it out for some applications. Second, companies like Amazon (with S3) charge for data entry and egress, and that makes it particularly difficult in hybrid cloud applications where both cloud and data center elements have to access the same data. What Cloudflare proposes to do is to make storage cheaper and eliminate access charges where data has to cross cloud boundaries.

That may be the sleeper issue here. The public cloud giants charge for “border crossing” traffic overall, and Cloudflare created the Bandwidth Alliance to provide for mitigation of these charges by having cloud providers link their networks to reduce the costs. To quote Cloudflare, “Our partners have agreed to pass on these cost savings to our joint customers by waiving or reducing data transfer charges.” Smaller cloud providers are limited in their ability to match the geographic and feature scope of the giants, and that means that they have to focus on a best-of-breed model. However, those border-crossing charges make cross-cloud-boundary transfers more expensive. It’s interesting to note that the number one public cloud provider, Amazon, is the specific target of the savings calculator Cloudflare offers.

Multi-cloud promotion would allow “niche” cloud providers who focus on a specific feature set, either competing with the giants or creating something that they’ve been unwilling or unable to offer. If we had a means of reducing access charges significantly, we could see an explosion in multi-cloud, and that would almost surely drive an explosion in the number of public cloud providers. It would also benefit players like Cloudflare, who offer services that would increasingly commit users to a multi-cloud deployment. Cloudflare’s R2 offering of cloud storage is an example, though the service isn’t yet available. That would mean a transformation of how multi-cloud is used.

Today, enterprises use multi-cloud primarily for backup, or to parallel multiple providers to optimize geographic coverage where one provider can’t offer it where it’s needed. Best-of-breed multi-cloud would mean that almost every enterprise could use multi-cloud for almost any application, and that could vastly accelerate cloud usage. The downside, of course, is that that greater usage would divide revenues across a larger field of competitors, and market leaders like Amazon today, and perhaps Google and Microsoft tomorrow, might see the downside risk in the near term larger than the total-addressable-market (TAM) gain in the long term. Today’s money is always more appealing.

Another interesting question that this raises is whether the whole notion of the Bandwidth Alliance wouldn’t convert the cloud from today’s separate players to something more like the Internet, where the players share an underlying network framework. That in turn might blur the boundary between cloud and Internet.

Edge computing could be a factor here, for a number of reasons. The obvious one is that by definition, “the edge” is much more geographically diverse than “the cloud”. In the US, for example, my model says that you could achieve a near-optimum cloud with only 3 major data centers (neglecting availability issues) and that more than a dozen would likely be inefficient. In contrast, you’d need a minimum of 780 edge data centers to field a credible edge offering nationally, and you could justify over 16,000. Globally, edge computing could justify 100,000 data centers, and surely no single player could hope to deploy that much.

“Competitive overbuild” doesn’t work at the edge; the cost is too high. We need “cooperative edge built” instead, and that’s not going to work unless you have “Internet-like” peering among edge (and cloud) providers. Or, of course, if public cloud providers partner with somebody who has edge real estate and create “federations”. That’s what seems to be happening with the cloud-provider-and-telco partnerships on the edge today.

The Internet is a prime example of the value of community over the benefit of exclusivity. The cloud, not so much. The edge could be more Internet-like in terms of value, and that might drive changes in the way that cloud providers and edge providers do peering and charge for data border crossings. If it does, then it will likely benefit us all…except perhaps those with a chance to win in an exclusivity game.

How could a populist edge, promoting a populist cloud, change things? The edge would have to be the driver, because of that clear need for cooperation, but we’re still struggling with how to make the edge, meaning edge computing, a reality. We lack the model to make it work, the “worldwide web” application framework that made the Internet what it is. The question for Cloudflare is whether they understand that, and are prepared to stake a claim in creating that essential edge model. If they are, then they do have a shot at being the fourth public cloud giant, and they even have a shot of moving up in the rankings.