AT&T and Microsoft are taking the first step of their recently announced cloud collaboration to the edge with a limited roll out of network edge compute (NEC) technology that ties together Microsoft’s Azure cloud and AT&T’s network edge locations.

The combo will allow AT&T’s software-defined and virtualized 5G core that make up its Network Cloud platform to support Azure services closer to customers. The NEC service will initially be available to “select customers” in Dallas, expanding to Los Angeles and Atlanta next year.

The edge component supports lower latency for devices accessing Azure services. This will initially target Microsoft's Game Stack tools and services, including Azure PlayFab. The two companies had previously stated that NEC testing showed a 40% to 50% network performance improvement compared to testing in the public cloud, and speed tests showed 24 to 40 milliseconds of latency.

AT&T CTO Andre Fuetsch earlier this year explained that the NEC model runs on top of AT&T’s network layer, with traffic transported to the Azure cloud. It’s focused on providing a low latency experience for enterprises without the need for that dedicated on-premises hardware. This results in lower operating costs and can be offered as an as-a-service model.

Fuetsch noted that by just maintaining the transport layer, the carrier is not looking to infringe on the interaction between cloud providers and developers or their customers.

“We are not looking to compete against the cloud providers to work with developers,” Fuetsch explained. “They can plug into our cloud and ecosystem.”

The NEC model is also not as fast as what is available with multi-access edge computing (MEC) deployments where compute resources are deployed at the far edge.

AT&T and Microsoft initially struck their cloud collaboration deal in July. Published reports claimed the multi-year agreement could be worth up to $2 billion for Microsoft.

The deal calls for Microsoft to be the “preferred cloud provider” for AT&T’s non-network applications as part of the carrier’s broader push toward the cloud. This includes Microsoft Azure support for AT&T as it consolidates its data center infrastructure and operations. AT&T will also provide its workforce with Microsoft’s cloud-based 365 tools.

“This agreement is a huge step toward our goal of becoming a public-cloud first company,” AT&T Communications CEO John Donovan noted in a LinkedIn post at that time. “This will reduce costs while making our business faster and more agile. On its Azure platform, we can go faster from concept to deployment for customers. And it assures us of leading-edge AI, machine learning, and security.”

Donovan added that the migration of most non-network workloads to the public cloud will be completed by 2024. The carrier noted that this will allow it to “focus on core network capabilities, accelerate innovation for its customers, and empower its workforce while optimizing costs. (It should also be noted that Donovan has since been replaced by Jeff McElfresh at AT&T.)

Ed Anderson, research VP and distinguished analyst at Gartner, said the deal provides AT&T with “a means to combine its innovations in networking, including 5G, with Microsoft’s strengths in cloud and AI.”

“With the emerging market opportunities in edge computing and distributed cloud, this partnership has noteworthy potential,” Anderson wrote in an email to SDxCentral.

For Microsoft, the deal provides the company access to AT&T’s network capabilities. This includes its recently launched mobile 5G network that it plans to have “nationwide” by the middle of next year.

It also bolsters Microsoft’s presence in the lucrative service provider space. The company is a solid No. 2 in the overall cloud infrastructure space behind industry giant Amazon Web Services (AWS), though it has managed to trump its rival in some metrics.

“First, this is a good customer win for Microsoft,” Anderson noted. “Second, it’s a strong endorsement of Microsoft technologies by another strong technology company. Third, it’s a good competitive win relative to AT&T’s other choices.”

An AT&T spokesman did note that the deal was not exclusive, and that “AT&T will work with select cloud providers on a case-by-case basis for different needs.”