At an investor conference this week, American Tower’s technology chief laid out macro trends the tower company sees related to 5G driving network transformation, including cloud-native networking and edge compute.

And it’s the cloud conversion of telco networks that will be an important catalyst for edge data centers at tower sites and movement toward what American Tower sees as a single-digit billion dollar addressable market in the U.S., according to American Tower CTO Ed Knapp, speaking Tuesday at the BCG and New Street Research 5G virtual conference.

For low-latency applications, processing and applications need to move closer to the edge, and he said American Tower’s sites are naturally positioned to support that by acting as aggregation points for edge processing.

New Street analyst Spencer Kurn pointed out that edge compute has been talked about for several years but that data centers at tower sites hadn’t really come to be, until this past year when it started to feel more tangible.

“As you cloudify the network and the network sits at all of these sites, that’s when you’re already starting to position services and compute,” Knapp said, according to a SeekingAlpha transcript.

RELATED: American Tower revenue increases 3% in Q3, CEO talks about edge compute

What has already been happening is distributed compute opportunities based on customer demand and hybrid evolutions in the market with “bare metal players and others that want to be closer to the edge or CNDs [content delivery networks]”

But the real transformation will be “when you move to a 5G network and have local breakout,” Knapp said.

Before, the backhaul network didn’t stop off, or break out the traffic locally when it hit a tower, instead taking encrypted “tunnels” from mobile device back to the core network to get to the internet. Early adopters were looking to get low latency by putting computing power at tower sites but didn’t have that exit point from the backhaul network to leverage the closer distributed point.

With the move to a CUPS architecture, which was included in 3GPP Release 14 in 2017, and now a 5G architecture that’s more distributed, exit points can be put anywhere, he noted.

“So you could build what I would say ‘local train stations’ to let traffic off, as opposed to having the express train,” Knapp said. Because of that shift and the move to 5G “that really opens up the opportunity to really see an explosion in the edge compute and the applications that will drive that.”

It’s still a few years away from that point, according to Knapp, who said early days were slower because outside players from IT or the computing space didn’t understand until more recently what was needed to get the wireless side ready. Hyperscale hybrid cloud from the likes of Microsoft Azure and others have become important and distributed compute models are taking shape though, he said, “setting the table” so that the industry will be ready for the ramp in 5G low-latency applications when they happen.

The total addressable market (TAM) American Tower sees in the U.S. for edge data sits in the several single-digit billions range, with the figure split between two components: the tower edge and the metro edge, depending on applications.

RELATED: American Tower has deployed 6 edge data centers at tower sites

It applies when looking from an infrastructure perspective and the ability to support space, power, and networking to numerous distributed sites. If server hardware and operating the data center itself were included “that could really explode the numbers a lot more in terms of where cloud is today” and where growth is going to be for edge applications.

Early 5G edge deployments have been at the regional or metro level, he noted. Verizon, for one, alongside Amazon Web Services (AWS) has deployed the operator’s 5G Edge mobile edge compute platform (MEC) in a handful of cities.  

Knapp cited sub-10 or 5 millisecond latency for applications in AR/VR, haptics, and potentially automotive requirements that would need to push processing out to the tower edge.

The lion’s share (97%) of American Tower’s revenue comes from leasing its communications infrastructure portfolio, including 40,000 towers in the U.S. alone. However, the tower REIT keeps tabs on and looks ahead to evolving needs through its innovation programs, which includes exploring edge data centers at tower sites. It purchased Colo-ATL data center in Atlanta last year to gain learnings. So far it has deployed six under the American Tower Edge Data Center initiative that officially launched this year.

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