CDN: A Service Provider Opportunity
- Digital multimedia environments challenge traditional Content Delivery Networks
- Network service providers can monetize premium content services delivered over the Internet
- Flexible strategies spur service providers to join the content delivery value chain
The opportunity is now
Content Delivery Network (CDN) providers are the incumbent suppliers of digital delivery services to the media and entertainment industries. They have created their own private network of “toll-roads” on top of the Internet. These “toll-roads” provide enhanced quality of service and scale. Media and entertainment companies wanting to offer digital content services over the Internet use these CDN “toll-roads” to assist delivery performance and improve the user experience for their growing consumer audience.
This market is coming under increasing pressure. The volume and blend of traffic flowing over the Internet has shifted from text, small images and MP3 audio files, to full-length high quality video. Maintaining the required delivery performance and achieving acceptable economics is a growing challenge. Simply put, 10-year-old CDN technology concepts and pricing models are not suited to today’s multimedia environment, which includes huge file sizes, massive audiences, enormous traffic volumes and high bit rates.
Regional Internet Service Providers (ISPs), however, can provide the superior local network coverage and delivery performance to flawlessly distribute high-quality video streams and multimedia services to subscribers via their broadband connections. Service providers who decide to embark on a content delivery strategy will be able to fully leverage their existing infrastructure and network assets to offer high-performance delivery at a low incremental cost. They can introduce new digital multimedia storefronts with optimized service delivery. And they can maximize their key advantage as a trusted provider to the end user through their existing subscriber relationships. This means service providers are ideally positioned to enter the multimedia content delivery market with highly differentiated service offerings and delivery capabilities.
From dumb pipe supplier to content retailer of choice
Today’s content consumption patterns show that video and rich multimedia travel mostly within regions. The regional pattern is due to language and cultural barriers, as well as distribution rights agreements for copyrighted material and regional advertising deals. ISPs with their extensive, high-quality national networks have a significant opportunity to play a greater role in delivering content-based services to end users. The challenge will be monetizing delivery which has traditionally been part of an “all-in” subscription. ISPs need to transform the growing cost of delivering increased traffic to their subscribers into an opportunity to drive new revenue streams.
It is not an option for ISPs to continue investing in networks to cope with burgeoning traffic while margins shrink to a vanishing point. Gaining their own advanced content delivery capability allows ISPs to play a broader delivery role and to drive incremental revenues from carrying multimedia. To capitalize on this opportunity, ISP networks need to become “content aware,” so they can manage and optimize the delivery process.
The correct strategy is key
In July 2009, Alcatel-Lucent and Velocix came together to provide an advanced digital media delivery infrastructure solution designed specifically to meet the needs of ISPs. Melanie Posey, IDC Research Director, acknowledged this acquisition by saying:
“With the acquisition of Velocix, Alcatel-Lucent brings a new, unique value proposition to network operators struggling to support their customers’ demands for high-performance delivery of rich media content — technology solutions for localized caching, as well as metro and regional/national overlay CDN services that enable ISPs and content providers to establish mutually beneficial commercial agreements.”
Together, the Velocix Media Delivery Platform and Alcatel-Lucent complementary technology and experience offers service providers a comprehensive solution that allows them to deploy their own advanced delivery capabilities to support their digital content initiatives (Figure 1).
A key characteristic of the Velocix Digital Media Platform is that it is built on dynamic caching principals. This is an architecture that automatically moves popular content to the edge of the network, where it is in close proximity to subscribers and easy to access.
The architecture provides an advantage when offering online video delivery on-demand because massive content libraries can be offered without having to store every item close to the consumer. Without this capability, the number of titles would need to be limited because the network architecture could not differentiate between the most popular titles and everything else in the library (Figure 2).
Investing now can safeguard future revenues
Subscriber revenues and ARPU are declining, while operating costs inexorably rise. This business model cannot be sustained over the long term. In addition, online video and multimedia continue to shape fixed and mobile networks alike. To successfully ride the multimedia wave and survive, service providers need to invest wisely and with minimum risk.
The complexities involved in developing and commercially launching a fully operational content delivery capability should not be underestimated. However, opportunities to expand business and increase revenue are significant and the Velocix solution significantly reduces complexity, risk and time to market. Content-aware service providers are fully equipped to deepen their relationships with their subscribers and to explore these new business models.
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