Will Carriers Ever Crack the CDN Nut?

Last week Dan Rayburn went on at some length about the huge effect the major carriers are still NOT having on the CDN marketplace. Specifically he mentioned how few CDN customers either Verizon or AT&T have relative to the field – they come in way behind not just the leaders but the main pack of challengers as well. Only Level 3 has made a real dent in the sector.

And you’d think that if not organically, then perhaps inorganically a network operator might make inroads. There have been a few others: Tata/BitGravity, and more recently KDDI/CDNetworks for example. But those have been a bit more internationally focused and have yet to attract that much overall gravity of their own.  Nobody has yet bought Limelight, and the rumors of a carrier sniffing around have been mainly Level 3.

But the answer probably lies in Level 3’s entry into the space. It has taken them a few hundred million dollars and more than five years of concerted effort to get where they are – not just capex but corporate mojo in general. And the revenue contribution from this segment remains small relative to their total, although it is a bigger and bigger part of their growth now.  AT&T and Verizon have far more resources but they have merely dabbled in the technology in comparison in terms of overall focused effort. Why? Simply because the CDN pie is absolutely miniscule compared to the one they’ve been focusing the bulk of their efforts on for a decade now: wireless, and so it hasn’t gotten the same sort of attention.

To be big in CDN a network operator has to be big enough to spend a few hundred million dollars on a new product line, small enough that the revenues you may get are worth chasing relative to other markets, geographically extensive enough to have advantages, and agile enough to compete with the specialists. So far, not many have fit that description.

And yet, with the mobile experience becoming more and more critical, one wonders how long the big guys will be content with this.

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