Diverting the data flood

The loud pounding you hear is the sound of telecom giants rushing into the content delivery network business, looking to move video traffic out of their core networks and onto sites closer to their customers. As a result, the CDN industry, which includes as many as 50 pure-play providers led by dominant company Akamai, is about to undergo major change.

“Almost every carrier I've talked to is trying to figure out what they want to do in the CDN space,” said David Vorhaus, analyst with Yankee Group, who earlier this year created a CDN Scorecard to keep track of the players. “There is a recognition among all of them that they need some sort of strategy for content distribution. The easy way to do that right now is some sort of link-up with CDN — either organically like AT&T is doing or buying it like Level 3 did [with its Savvis acquisition in 2007] or partnering like Tata [Communications] did recently with BitGravity.”

Rumors swirl that other major global players such as BT, NTT and more are headed into the CDN space, admits Perry Yu, CEO and founder of BitGravity.

“Is there going to be a shakeup in the CDN space? Absolutely,” Yu said. “When you have this much attention being paid to one area, and this many big companies all looking at this space, we know things are going to change. We've heard rumblings about BT and NTT, but every carrier has someone in their organization that is trying to answer this question about ‘How do we feel about video, and what are we going to do about it?’”

A major impetus for service providers to get into CDN is the simple fact that video is taking over their IP networks and they must address how to handle the expected exaflood as more and more data are transmitted over the Internet. Moving to a CDN architecture, which distributes the video closer to the customer and moves it out of the network core, is a natural step. What happens after that, in terms of new services, competition for CDN business and new revenue opportunities, is somewhat up for grabs.

“Two to three years ago, we had zero video traffic; today we are carrying about 15.8 terabytes of traffic, and approximately 40% of that is video,” said John Watson, executive director of business strategy for AT&T. “There have been very significant changes in the types of traffic we are carrying and the way that it is distributed. Moving video closer to the edge of the network just makes sense — it is closer to where the users are, it improves quality of service to the end users, and it removes the traffic from the core and moves it out to the edge.”