A great deal of attention is being paid to 5G RAN and transport. This makes sense because the greenfield buildout of small cell sites is will be significant. The shorter range of 5G will drive the “densification” of small cell sites. The Small Cell Forum estimates that the number of cell sites will grow from 4.1 million in 2019 to 8.4 million in 2020. In addition, changes like the addition of edge computing as part of the 5G value proposition have garnered significant interest.
However, the peering side will see changes that are just as profound. We use the term peering to describe the interconnection of IP networks separate from the underlying business model. Peering capabilities may be a service providers’ core business or it may be needed to run their businesses. IP peering has become increasingly critical as network traffic volumes continue to explode, technologies like 5G and IoT emerge, and interconnected business ecosystems grow because of digital transformation.
No network can provide complete connectivity. In wireless, roaming required extensive interconnection between MNOs. As IP has come to dominate, roaming has become more of a cost center. Internet exchanges were needed to facilitate data traffic exchange. The voluntary exchange of traffic among providers became known as peering. Peering in carrier-neutral locations evolved to become IT traffic exchange points. These direct, private connections, known as interconnection, and are key to the enterprise build-out of their digital ecosystems.
Clearly, not all peering customers have the same needs. Tier One network operators, for example, take one approach to IP transit services. There is a very high interest in peering among small- to mid-sized regional providers of broadband and general network services, content providers of all kinds, and hosting service providers. As enterprises embrace the cloud and digital transformation, networked ecosystems represent a huge opportunity. It is with these customers and markets where major increases in IP peering is occurring.
According to Equinix’s 2019 Global Interconnection Index, by 2022, installed interconnection bandwidth capacity is expected to reach 13,300 Tbps with a 51% compound annual growth rate worldwide. Service provider band will grow at 4x while enterprises are expected to experience 7x growth to become the largest consumers of interconnection bandwidth. Enterprises are leveraging hybrid multi-cloud for digital business and trade relationships among customers, partners, and employees. Ecosystem participants leverage interconnection hubs to privately exchange data in support of these evolving processes.
There are several technical aspects that will hold across all customers. 5G is critical to service providers because it represents new revenue opportunities to go beyond connecting people and their devices to helping enterprises connect things. This will add new technical requirements to ensure true end-to-end quality as 5G services like network slicing and IoT take hold. One of the key advantages of 5G is the ability to deliver low latency services. That is one of the drivers for edge computing and low latency requirements which will benefit from more interconnection points.
Clearly there are huge opportunities in the interconnection business, but the changing landscape presents technical challenges. Traffic growth drives the demand for faster ports which puts pressure on your legacy routers. Lower latency requires changes to the physical location of devices. Different types of services will need service segregation. This suggests that peering providers follow the lead of the MNOs and look at technologies like open networking and virtual routers to meet these challenges.