Verizon, Velocix Team on CDN Express Lane

Written by Ryan Lawler

Tuesday, November 18. 2008 at 04:00 PM EST 2 comments

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Verizon Communications Inc. (NYSE: VZ) will introduce its own brand of content distribution services aimed at providing media companies a faster path to deliver video to broadband customers, and it will do so with equipment and services from Velocix .

Verizon tomorrow will announce the initiative for its broadband FiOS plant as well as its global backbone network. The goal is to ensure quality delivery of video content to broadband subscribers both within and outside of the company's network.

"We have this tremendous global IP network in addition to the best local fiber network in our footprint, so this just layers on top of those strengths additional capabilities," says Marjorie Hsu, Verizon's vice president of network technology.

With the company's network, Hsu believes Verizon is well positioned "to do the best job of delivering rich media to broadband video subscribers, offer the best viewing experience, and the best content."

The news follows on similar announcements from network service providers such as AT&T Inc. (NYSE: T), which announced its CDN initiative earlier this year, and Level 3, which has spent nearly two years building out its CDN story since acquiring Savvis assets in late 2006.

But while those companies launched CDN services primarily on their backbone networks, Verizon is hoping to use its rapidly expanding fiber-to-the-home plant as an incentive for media companies that want to reach its 8.5 million broadband subscribers.

"We've made a tremendous investment in our FiOS infrastructure and we want to enable content companies to get box seats" to those customers, Hsu says.

Velocix chief marketing officer John Dillon says there has been a shift in how content owners look at using CDNs to deliver their content. When the Web was primarily text-based, CDNs helped to make large Websites international. But he says broadcast video providers, like ABC and NBC, aren't looking for a CDN with a worldwide footprint, but better quality delivery in local networks.

"With video, the companies that we're talking to and engaging with want deep delivery mechanisms in a certain geographical region," Dillon says. "Most CDNs today have worldwide networks but thin capability region-to-region."

By using caching equipment from Velocix, Verizon hopes to offer content owners performance advantages -- because the content is sitting closer to the end user -- as well as better economics than they might find on traditional CDNs. It also allows Verizon to get more value from its broadband fiber plant than just selling per-month subscription fees to consumers.

"We need to move up the value chain. We don't want to be just selling access. To the extent that we can work with partners to enable a different video experience or differentiated content, we want to do that. We want to be the company that enables a richer media experience for our customers," Hsu says.

With more and more video being delivered over their networks, Dillon says broadband service providers are looking for ways to profit off their connections to the end user.

"The ISPs saw CDNs get big money to take video into their network and dump that content off for them [the ISPs] to deliver at the access network, without getting any additional revenues," Dillon says. "There was no economic model to cut them in."

The ability to offer content distribution also has a possible three-screen element, since Verizon offers television and wireless services as well as broadband access.

"The whole [CDN] market is evolving and Verizon -- with our 8.5 million broadband households, as well as FiOS TV and 70 to 80 million wireless subscribers -- we want to be a part of that. Verizon wants to be easy to do business with, as far as ingesting content and facilitating any content to any stream at the consumer's convenience," Hsu says.

While the primary driver for the announcement is the delivery of video, the partnership also has a heavy peer-to-peer (P2P) component.

The Velocix equipment is designed to cache P2P content, and the company is working with the P4P working group -- headed up by Verizon senior technologist Doug Pasko -- to work on network-aware P2P file-distribution technologies. The result is equipment that Pasko says is "future proofed" for future P4P-enabled file distribution.

"Velocix is one of the core P4P players, and one of the few -- if not the only -- company that we could have partnered up that has these capabilities," Pasko says. "This lets us do everything you'd expect from a content distribution perspective, plus peer-to-peer."

The Verizon partnership is a huge deal for Velocix, which in the past few years has shifted from selling P2P caching infrastructure, to offering peer-assisted CDN services, to building hybrid metro CDN services based on partnerships with ISPs to deploy its caching equipment in their networks and deliver localized or national content.

This is the first major U.S. deal for the company, but Velocix has already made some headway in getting ISPs to deploy its gear in the U.K., as part of an initiative to ease the burden of the British Broadcasting Corp. (BBC) 's iPlayer catchup service on broadband networks there.

In a panel at Streaming Media Europe, representatives from The Carphone Warehouse Group plc and Virgin Media Inc. (Nasdaq: VMED) said that they were trialing Velocix caching equipment in edge locations to facilitate the delivery of BBC content to their customers.

In the U.K., the initiative is being led by the BBC, as it tries to make nice with ISPs that are none too happy with the strain that the broadcaster's IP traffic puts on their networks. But the U.S. initiative is being led by Verizon, as a way to build a new revenue stream with content owners delivering broadband video.

With that in mind, Verizon will also announce its premier customer for the content distribution service, Starz Entertainment LLC 's broadband video offering Starz Play. Following up on an agreement that the companies signed in the spring -- making the subscription video service available to Verizon subscribers for $5.99 per month -- Verizon says it will deliver Starz Play video content to its 8.5 million broadband subscribers.