Verizon’s Vestberg makes private vs. public 5G MEC distinction

Verizon’s chief executive on Tuesday made it clear that the carrier has multiple revenue opportunities from 5G mobile edge compute (MEC), emphasizing the distinction between private and public use cases.

Both tie into next-generation business-to-business applications, which is one of Verizon’s five broad paths (or vectors as they call it) that the carrier is focused on for growth.

Speaking at the UBS Global TMT Virtual Conference, Verizon CEO Hans Vestberg reiterated that the company expects to start seeing meaningful revenue from 5G MEC in 2022.

The 5G mobile edge compute investments are a new area for Verizon, and along with fiber build (between 1,000-1,700 route miles per month) will come into play in later years for growth on the business side, as well as consumer, Vestberg said. That also ties into Verizon’s focus on its high-capacity millimeter wave service dubbed 5G Ultra Wideband for a differentiated network performance.

Some headwinds from legacy networks will be there though continue to go down, he noted “but overtime we should supersede that with our new investment in 5G mobile edge compute.”

While some have doubted Verizon’s mmWave capacity-focused strategy, Vestberg called it a “long-term play that is so strategically right for us and our customers.”

Public 5G MEC use-case

Asked by UBS analyst John Hodulik about new revenues on the business side, Vestberg laid out two paths.

“Here we’re looking to make the distinction because we understand we’re so early on and the market won’t understand, you have two different offerings when you bring in the 5G mobile edge compute,” Vesbtberg said. 

On the public side, Verizon has partnered with Amazon and turned on eight 5G MEC locations so far, with 10 expected by year’s end.

These sites cover a wide area, and as Vestberg explained, means a developer can use the 5G MEC sites where Verizon has its radios to get to the cloud software from Amazon that was built specifically for that purpose.

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There have been skeptics about the business models for telcos teaming up with hyper-scale cloud players. However, Verizon views it as a win-win and made deals with Amazon, as well as Microsoft, as the carrier isn’t planning to create cloud software itself.

For Verizon, “we get a revenue cut every time you use the mobile edge compute,” he said, comparing it to models where users on big data centers of Amazon pay by the minute or hour.

“The public [use case] is the copy and paste from the normal cloud business that Amazon has but we do it on the edge,” Vestberg said, where Verizon takes a revenue share. “That’s the model, how we make money there.”

That’s also revenue “that we’ve never seen before at Verizon, in a great collaboration with Amazon,” he noted. “That is in the forefront and we’re the only one in the world that has launched this.”

In the U.K., Vodafone is working on 5G mobile edge compute, embedding Amazon’s AWS Wavelength.

To make those revenues though, Verizon needs more people developing applications and using the 5G mobile edge.

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Vestberg pointed to the launch of the 5G iPhone 12, noting the large iOS base in the U.S., since more devices can now take advantage of low latency and throughput available from having Ultrawideband 5G support in the phone.

People creating applications for latency, speed, throughput and security, “need to have their loads on that edge,” he said.

Private 5G MEC use-case

The private 5G mobile edge compute side is a little bit of a different model and much more of an enterprise solution, according to Vestberg, but again represents what would be new revenue for Verizon.

For a private 5G use case the network is built for a dedicated and confined areas. Verizon’s chief called out environments like a factory, distribution center or large retail store, where businesses want to have high capacity and retain all of the data, keeping it secure and storing it on site.

That’s where work with enterprises like GM, Corning, Honeywell, and IBM come into play. Last month Verizon announced companies including Honeywell and General Motors are among the first to install 5G at their facilities.  

For private enterprise Verizon brings in partners, software and applications, and “that is where we’re now developing that with Microsoft, for example.”

RELATED: Verizon puts private 5G in focus with Nokia, Microsoft partnerships

In October, Verizon said it would pair up with Microsoft to integrate private 5G MEC capabilities with Azure services for enterprises.

Partnerships are key, and Verizon sees its combination of network, distribution and branding as attracting big players to team up with on the public and private side.

“We are going beyond connectivity again… we’re not planning to build cloud software ourselves, so we bring in the best partners.”

While he said the private market is a multi-billion market opportunity, Vestberg acknowledged that it will take a few years to develop.

There are enterprise solutions on out there already and 5G is that next step, he noted, though conversations are happening and Verizon’s working with leading enterprises across industries including healthcare, retail and banking.

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“We are working with them right now on the 5G mobile edge compute to find their use cases because ultimately they are the thought leader on the business side, and we are the thought leader on the technology side and together we’re making this happen.”

Verizon is seeing good traction on the enterprise side, he said, but said small and medium sized businesses that have been hit hard by the Covid-19 pandemic are the most difficult to predict, making it a more of a wait-and-see situation in terms of those business services revenues in 2021.