CDN Business Models - Not All Cast from the Same MoldRebecca WetzelMost casual observers know of just one business model for contentdistribution networks (CDNs) – Akamai’s. In this model, content providerspay CDNs (who own no transport infrastructure), to have content of theirchoosing replicated in servers located in data centers closer to end-usersthan the origin servers.This model has captured the imagination of Wall Street, and continues todraw the lion’s share of the attention. There are, however, other modelsdesigned to further the interests of a different cast of characters. We setout to identify and examine various CDN business models, delving intoquestions of who distributes which content for whom, why and who payswhom.The Cast of CharactersCDNs burst onto the scene in 1999 to address the fact that the Internetwas not designed to handle large transmissions of Web content over longdistances. Network congestion and traffic bottlenecks, exacerbated byburgeoning payloads of Web traffic, degrade individual Web siteperformance and compromise network performance.CDNs address the problem by storing and serving content from manydistributed locations rather than from a few centralized origin points - thusbypassing network congestion. Using caching technology, CDNs storereplicas of content near users, rather than repeatedly transmittingidentical versions of the content from an origin server. The resultaccelerates and improves the quality of content delivered to end users,
while lowering network congestion and bandwidth costs for ISPs.
The CDN stage is populated by a cast of five characters, each with its
own needs and agenda. The CDN playbill includes:
• Content providers, who need to get their content to end-users.
• Hosting providers, whose Internet-connected data centers house
content providers’ servers.
• Backbone carriers, who provide wide-area transport for ISPs.
• Access ISPs, who connect end users to the Internet.
• End users, who are consumers of content.
These five groups make up a content distribution value chain, the
purpose of which is to connect consumers to purveyors of content. Note
that there is overlap among access ISPs, backbone carriers and hosting
providers. Some backbone carriers offer access and hosting services,
and many access ISPs offer hosting services. But even when one
provider assumes multiple identities, distinctions among the functions
remain valid.
Who Pays Whom for What?
There are two primary CDN business models. The first is a content
provider-centric model driven by the needs of content owners, and the
second is an Internet access provider-centric model driven by the needs
of ISPs. In both models, the payer seeks to please content consumers;
what differs is the choice of content distributed, the way it is distributed
and who pays.
* Content-centric CDNs: In this model (see Figure 1 ), exemplified by
Akamai, Digital Island and Speedera, content providers pay CDNs to
accelerate their content, in order to please the content consumers, and
thus prevent them from defecting to competitors’ sites. Content-centric
CDNs replicate and deliver only content that the owners specify (in the
case of Akamai, this is content that is specially tagged or “akamaized”)
from caching servers throughout the Internet. Content-centric CDNs
employ routing intelligence to guide user requests to local servers.
Content-centric CDN caching servers are co-located by mutual
agreement within data centers belonging to hosting providers, access
ISPs and/or backbone carriers. Sometimes the hosting provider, access
ISP or backbone carrier co-locates the CDN servers for free, but more
commonly, the CDN pays a co-location fee covering space, utilities and
network connectivity. In some cases, hosting providers resell contentcentric CDN services and receive a share of the CDN’s sales revenue.
Hoster
Backbone
Carrier Access
ISP
User
$
Content
Owner
Content-centric CDN
$ ➝ Co-location Fees Reseller Revenue
FIGURE 1 Content-centric CDN Business Model
• Primary Beneficiary - Content Owners Who Pay to Have Content Distributed
• Secondary Beneficiaries - Hosters and Users
Data Flow =
Money Flow =
Data
Data Flow =
Data Data
Data
Access ISPs and backbone carriers do not typically receive a portion of
the revenue generated by a content-centric CDN, even though they carry
the content to the content consumer “eyeballs.” This is, however,
beginning to change, as content-centric CDNs realize that they need to
earn the cooperation of network providers. This especially true for access
ISPs, which connect large numbers of content consumers.
Some content-centric CDNs are therefore moving beyond simply doling
out co-location fees to access ISPs and backbone carriers. Akamai, for
example, pays AOL for access to AOL users, and for information about
content served from AOL’s own caches. Without AOL’s cooperation,
Akamai’s customers would be “cache blind” - that is, all information about
their content that is served from AOL caches would be lost.
Other types of business relationships are also cropping up. Speedera, for
example, enables ISPs and backbone carriers to OEM its services, or to
build and operate private CDNs for them. In a variation on the contentcentric business model, Speedera is developing an enterprise focus, in
which enterprises pay to have content distributed to themselves or to
audiences of their choosing. These services can be used for business
applications like on-demand training, product launches, shareholder
meetings and corporate communications.
* Access-centric CDNs: In this model (see Figure 2) deployed by Edgix,
Orblynx and SkyServ, ISPs pay access-centric CDNs to serve popular
content from caches close to the ISPs’ subscribers. This model is built on
the tenets that storage is cheaper and faster than bandwidth, and that
there is strength in numbers. By caching frequently-accessed content
near users (regardless of who owns the content), access ISPs save
bandwidth, and with upstream bandwidth costs being the single largest
business expense for most access ISPs, this is vital to ISP profitability.
Moreover, by serving popular content faster, access CDNs help keep the
access ISPs’ customers from defecting elsewhere for a better/faster
experience. Again, this has enormous implications for ISP profitability --
the rate at which customers switch access ISPs, the “customer churn,”
currently averages between 4 and 8 percent per month, and acquisition
costs of $400 per customer are not uncommon.
The access-centric model draws strength from numbers, because a large
community requests more objects than a small one. The larger the pool of
users served, the greater the opportunity for common requests, and the
greater the chance that content will be delivered from the cache instead
of the origin server. By pooling the experience of many users across
many ISPs, an access-centric service can dramatically improve the
chance that content will be served locally when requested.
Abhi Chaki, vice president of market development for Edgix, says his
company chose the access-centric model because, “We very quickly saw
that the [content-centric] CDN business model could not solve the
business issues that access providers were battling on a daily basis.
Their needs and requirements with respect to efficient content delivery
were very different than the needs of the content publishers. ISPs were
being plagued with spiraling cost structures along with rising churn. Their
biggest issue was how to scale profitably and increase margins over time.
This was the catalyst behind developing an access-centric model,
because [it] does take the interests of the ISPs into account.”
Hoster
Backbone
Carrier
$ User
Content
Owner
Access-centric CDN
FIGURE 2 Access-centric Business Model
Access
ISP
• Primary Beneficiary - Access ISPs
• Secondary Beneficiaries - Users and Owners of Popular Content
Data
Data
Data
Data
Data Flow =
Money Flow =
The Increasing Importance of Network Infrastructure
The first CDNs, including Akamai, Sandpiper (now part of Digital Island)
and Mirror-Image Internet were “network agnostic” – they relied on an
overlay network of servers, but did not own or even control any network
transport infrastructure. For HTML content, CDNs have successfully
relied on the Internet to distribute content to local servers.
In the case of streaming content, however, infrastructure matters more
because streaming files are big and sensitive to latency. These days, for
quality reasons, CDNs are partnering with broadband backbone carriers
(mostly satellite) to transport large streaming files to local caches. Some
access-centric CDNs are delivering HTML as well as streaming content
over broadband networks to minimize ISPs’ upstream bandwidth costs
(see Table 1 – Comparative Matrix of CDN Service Providers).
TABLE 1 Comparative Matrix Of CDN Service Providers
Service Provider Content- Accesscentric centric Static Streaming Static Streaming Usenet Other
Adero ✔ ✔ ✔
Akamai ✔ ✔ ✔
Web Site Load Balancing
and Dynamic Content
Speedup
AT&T ✔ ✔ ✔
Cidera ✔ ✔ ✔ ✔ ✔
Digital Island ✔ ✔ ✔
Edgix ✔ ✔ ✔ ✔
Epic Realm ✔ ✔
Dynamic Content Speedup
and User/Content
Prioritization
Globix ✔ ✔ ✔
iBeam ✔ ✔
MadgeWeb ✔ ✔ ✔
Mirror Image Internet ✔ ✔ ✔ ✔ ✔
Orblynx ✔ ✔ ✔ ✔
SkyServ ✔ ✔ ✔ ✔
Speedera ✔ ✔ ✔ Web Site Load Balancing
Teleglobe ✔ ✔ ✔ ✔ ✔ ✔ Web Site Load Balancing
Business Model Type
Content-centric Svcs Managed Caching
Services Offered
Additional Services
Concerned about being left out or relegated to a bit part, backbone
carriers like AT&T and Teleglobe are rallying to insert themselves into the
CDN loop by offering content distribution services which capitalize on
their broadband transport to the network edge. Last July, AT&T
announced that it would invest $200 million in an “Ecosystem for Content
Delivery.”
Comparing itself to prime time television, A
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