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CDN Pressure Points
Martin Courtney | Analyst
Evidence is mounting that the recent upswell of market activity will soon be followed by a contraction in the number of CDN operators, if not in overall revenues. Price pressure is mounting, and even the CDN behemoths are trying everything they can to drive down the cost of delivery.
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Content Delivery Networks: Economic Challenges Ahead
It’s been nearly a decade since the launch of the first commercial content delivery network (CDN) service. The CDN market has changed dramatically over the past few years, fueled first by the explosive growth of conventional Internet traffic, and then by the arrival of rich media services and applications that now dominate Web traffic volumes.

The proliferation of digital content has led to a corresponding increase in the number of operators providing CDN services. More than 20 CDN operators are now offering commercial services, including CDN specialists, such as industry pioneer Akamai, and major network operators from the telecom world, such as AT&T and Level 3 Communications. In addition to companies that operate their own CDNs and those that offer peer-assisted CDN services, there are a number of peer-to-peer (P2P) CDNs that offer free audio and video streaming/downloads.

As crowded as the CDN space has become, there’s more than a good chance that the market will get even more complicated over the next one to two years. Major distributors of digital content, such as YouTube, MySpace, and Microsoft, are now taking the do-it-yourself approach to CDN – a development that could threaten margins for commercial CDN operators. Despite an anticipated continued growth in Web-based rich media applications and Web 2.0 services, it’s unlikely that demand will grow enough to sustain the current number of commercial CDN operators.

But culling the winners from the losers in this sector is not a clear-cut proposition. One reason is that there’s no single strategy for building and growing CDNs: Networks can be optimized for specific traffic types, such as video, or for applications that appeal to specific vertical enterprise markets. No doubt, the largest CDN operators stand the best chance for success, but well-focused specialists can also find lucrative niches that will yield medium- and even long-term success – including an eventual buyout by a larger rival.

Content Delivery Networks: Economic Challenges Ahead analyzes the CDN ecosystem, focusing on current and projected network deployments, demand drivers, and potential demand inhibitors. It explores the pros and cons of using CDNs from an enterprise perspective, emphasizing the types of applications and services that are best suited to commercial CDN services. The report also identifies and evaluates existing and emerging CDN delivery models, including hybrid peering CDNs. Finally, the report provides a detailed comparative analysis of offerings from the top 20 commercial CDN suppliers.

Sample research data from the report is shown in the excerpts below:
Table of Contents (cpi0408_toc.pdf)
The following table provides a comparative overview of CDNs based on types of services offered, breadth of geographic coverage, and supported formats. Information on pricing is also provided where available, but the reluctance of many CDN operators to disclose pricing arrangements makes any general apples-to-apples price comparisons very difficult.
[click on the image above for the full excerpt]
Companies analyzed in this report include: Akamai Technologies Inc. (Nasdaq: AKAM); AT&T Inc. (NYSE: T); Beijing Blue I.T. Technologies Co. Ltd.; BitGravity LLC; CacheNetworks LLC; CDNetworks Inc.; EdgeCast Networks Inc.; Highwinds Network Group Inc.; Hostway Corp.; Internap Network Services Corp. (Nasdaq: INAP); Level 3 Communications Inc. (Nasdaq: LVLT); Limelight Networks Inc. (Nasdaq: LLNW); Mirror Image Internet Inc., a subsidiary of Xcelera Inc.; NaviSite Inc. (Nasdaq: NAVI); NTT Europe Online, a subsidiary of Nippon Telegraph and Telephone Corp. (NYSE: NTT); Panther Express Inc.; Upstream Networks, a division of ServePath LLC; Velocix; Verisign Inc. (Nasdaq: VRSN); and Voxel Dot Net Inc.
Total pages: 24
ANALYST
Martin Courtney
Martin is a veteran analyst who has covered the digital media and storage sectors for years. He has worked as an IT journalist since 1995, starting by covering technology matters for publications such as...
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Martin Courtney
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AUGUST 2008
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