Beyond the Buzz: The True Pulse of the Edge Data Center Market

NOVEMBER 30, 2023

About two years ago, we talked about edge data centers, what the different types are and why they are being used. Back then, we noted that edge computing and edge data centers (some people refer to the combination of the two as “edge infrastructure") are some of the most discussed and talked about innovations in IT.

 

Flash forward to today, and many people are still talking about it.

 

Some people are talking about it and not even realizing they're talking about it.

Some people are talking about it in a completely different way than others.

 

The buzzword-nature of anything 'edge' begs many questions so, today, we’re giving you Mitsubishi Electric’s perspective.

 

 

What are edge data centers?

Edge data centers live on the periphery of a larger network with the primary objective of reducing latency that stem from transmission distance and moving time-sensitive data processing as close to the end user as possible. For a deeper dive, check out our "Edge Data Centers: Why Are They Being Used?" blog.

 

 

 

 

What are the different types of edge data centers?

At Mitsubishi Electric, we place edge data centers into one of three buckets: on premise edge, network edge, or regional edge. You can learn more about this in our previous post. However, we frequently see edge data center applications that historically have not been referred to as edge at all. Let me give you an example.

 

We often see healthcare providers building large enterprise data centers to manage latency across multi-state networks to provide the processing necessary for several hospitals and doctors’ offices to operate as efficiently as possible.

 

Because this data center is placed closer to the medical facility rather than operating from a traditional hub, this would be considered a regional edge data center. But, if you ask the IT Director or the Facility Manager, the data center in question is simply a large enterprise data center.

 

 

 

Where are these edge data centers and who is building them?

Even though the edge data center market continues to be unknown, misunderstood, or even dismissed as a marketing buzzword, we have seen some activity on the edge over the last few years.

 

There are edge data centers being built - in unprecedented numbers - and many companies now offer edge services of some kind. One of the more interesting developments has been announcements coming from American Tower, one of the largest owner/ operators of wireless and broadcast assets in the world.

 

American Tower has 43,000 sites in the US, and late last year they announced that more than 1,000 of them had been identified as Edge sites.

 

The first site of this new edge data center program was announced in July of this past year, with a December 2024 completion target. While details about the full footprint of these sites have yet to be released by American Tower, this first application clearly falls into the network edge / network tower type of edge data center.

 

American Tower has described these sites as being 1MW in terms of power. Perhaps they may be a little large by earlier estimations for network edge sites, which different sources describe as being smaller installations of approximately 100kVA or so, but they are located at the literal edge of their customers’ networks.

 

As stated by Tom Bartlett, American Tower’s CEO, their “understanding of market demand and customer requirements” led them to designing an edge data center plan, at scale, to reduce latency for customers far from their hyperscale data center of the network core and public cloud.

 

Vapor IO’s platform, Kinetic Edge, must be discussed in relation to the network edge because in many ways it could be one of the most definitive examples. First announced in 2021, Kinetic Edge is a network of 20kW mini data centers deployed in containerized modules and capable of being deployed in a "last mile" role.

 

Carrier and cloud neutral, Kinetic Edge infrastructure can be deployed as a small colocation application or as additional onsite processing. Vapor says that modules can be deployed in 90 days and operated remotely, as they were designed to have minimal human interventions.

 

The offering expanded in 2022 to 32 cities in the US, and this past year saw deals inked with the City of Las Vegas, Comcast, and an expansion into Europe via Spanish telco, Cellnex.

 

 

 

What do the industry experts have to say?

Linux Foundation

Last year, the Linux Foundation released its "State of the Edge 2022"* report - an annual report reviewing developments in Edge computing. The report spent significant column space discussing the use cases for Edge in underserved rural communities where network tower applications are crucial for bandwidth and quick processing of information.

 

Unfortunately, low connectivity in rural communities is also hampering progress not just in edge data center development but across digital infrastructure.

 

The 2022 report also took stock of developments in the often controversial 5G rollout, commenting that 5G deployments “often contain edge computing components,” and suggesting that there is overlap between 5G rollouts and Edge infrastructure. New methodologies such as OpenRAN may prove to be gamechangers in certain underserved markets.

 

*Linux Foundations’ “State of the Edge 2023” report was published in November of 2023 but wasn’t referenced as it focused more on the computing rather than the data center side of Edge infrastructure.

 

Dell’Oro Group

Earlier this month, the Dell’Oro Group posted about developments in the telecoms sector as well, where the vast majority of edge data centers are expected to be located. Dell’Oro expects that the telecom server market, currently a $6B market, will grow even faster over the next five years (19%) than the overall data center growth rate (15%).

 

Dell’Oro also predicts that by 2027 edge data center revenues will grow by 38%, relative to the centralized data center’s growth rate of 11%, and that a full 45% of telecom revenues will be driven by Edge data centers.

 

They reason that the ongoing digitalization of legacy telecoms assets (essentially turning telecoms towers and central offices into data centers with IT racks) will significantly speed up the development of edge data centers, especially network edge use cases.

 

 

 

So, what does this all mean for Edge now?

For years, we have heard industry insiders say that the Edge will be huge a year or two from now, and with all the market developments since 2021, we can confidently say… the Edge will be huge a year or two from now.

 

A certain degree of caution and skepticism will be merited because many of these tech “revolutions” have been oversold and underdelivered over the years.

 

Telecoms upgrading their networks with digital infrastructure is a long and expensive process, and the 5G spectrum bands remain available only in densely populated areas or in places like sports stadiums. Many telecom customers still use upgraded 4G bandwidths, such as LTE, on a daily basis. Current use cases for 5G development, including improving rural connectivity, are proving difficult to monetize.

 

As for edge data centers, American Tower just announced its first new edge project this year, and while they operate a few other edge data centers through the US, this new project is the first of a thousand such deployments. I.e., we’re just getting started.

 

Edge data center development is very much in its infancy, and in many ways, completely overshadowed by the introduction of generative AI, a technology that requires hyperscale infrastructure rather Edge.

 

Yet we still need to watch developments in the sphere of artificial intelligence because while generative AI may have minimal impact on Edge infrastructure, many other inferential AI applications, such as computer vision, smart cities, and autonomous vehicles will require extremely low latency processing to support the most basic applications.

 

Over the next year or so, we will be doing deeper dives on how all of these developments in AI, 5G, and the Industrial Internet of Thing (IIoT) are coming together and impacting edge data center deployments and digital infrastructure industries in general.

 

Where necessary, we may need to take a step back and explain how we got to where we are now. We’ll be pointing out challenges and potential problems that lay ahead, or what we hear from our customers out in the data center industry.

 

Stay tuned!