Akamai has won a reputed battle with AT&T and Juniper over mobile-content-optimizer Cotendo, a company that gets described as a “cloud” player by the media in keeping with the current notion that anything that’s not cloud is not newsworthy. This is interesting, not for the “cloud” aspect but for the fact that it speaks volumes for the dynamic in video.
First, this demonstrates that everyone in the industry realizes that there’s a fundamental tension between OTT delivery and ROI on bandwidth-creating infrastructure. They realize that growth in video is going to generate network congestion unless operators put usage caps and premium overages in place. That will bridle the unbridled expansion of OTT, so nobody really wants it. The use of specialized techniques to optimize video might either reduce the problem through compression or dodge it in some way (the latter, I think, is unlikely). Net-net, we need to use capacity smarter because we’re going to pay for it incrementally eventually.
The second thing this demonstrates is that Akamai and other content networks are under enormous profit pressure on their own. Everyone who wants to be a content player needs to have a CDN component in their story, which makes the current market a breeding ground for Akamai competitors. The network operators are going into CDNs at record pace, at least in terms of launching a record number of CDN projects in 2011. These guys are going to be formidable competitors, particularly because they have a tolerance for low ROIs. Akamai needs secret sauce, and Cotendo might have it.
Finally, this demonstrates that CDNs’ scope is expanding. I recall a meeting I had a couple of years ago with a major competitor of Akamai regarding trends in the space, and I mentioned that the CDN of the future would likely have to run applications. They weren’t impressed. Bet they are now. Operators have been saying that all their content strategies revolve around CDNs but that means traditional CDNs aren’t sufficient. That’s good news for others who might have wanted Cotendo, because even they aren’t truly on content’s leading edge. There’s still room for innovation here, and a LOT of deals to be done. We’ll be talking a bit more about CDN dimensional change in January’s issue of Netwatcher.