CDNs and Net Neutrality
Imagine a world in which local municipalities erect blockades on highways to purposely slow down traffic. They then charge drivers and automakers a fee for removing the blockades so that they can use the highways without obstruction. Most people would be outraged if this practice were ever to come to fruition. But wait a minute… it has. We are seeing this exact same practice with the debate on Net Neutrality.
Starting from 2009, telcos have been arguing that content providers and their applications are consuming too much bandwidth on their “pipes” without paying for the content to ride on their infrastructure. Those very same telcos created those pipes to carry their own video and broadband services, thereby monetizing their investments in their respective infrastructure buildouts. However, with the creation of Over-the-Top (OTT) content/service providers and even consumer electronics companies that enable OTT content, telcos are seeking to erect barriers to prevent content providers from consuming their bandwidth. For example, Korea Telecom (KT) decided to cut off access for Samsung’s Smart TVs in Korea (http://gigaom.com/broadband/smart-tvs-cause-a-net-neutrality-debate-in-s-korea). KT’s position is that Smart TVs consume too much bandwidth from their networks and that Samsung should share in the costs for maintaining these networks. Sounds a bit like erecting blockades on a highway to get paid for creating the highway, right?
Let’s take a different approach in addressing this problem. Similar to how tolls or super highways work – instead of erecting blockades and having people paying for removing them – why not charge fees to accelerate content over the pipes, which is exactly what a CDN would do. It has become increasingly critical to have content and applications delivered as quickly as possible. Providing a high quality experience and having applications with minimal delays often translates to incredible revenue growth and millions of dollars. So, the demand is definitely there for services that accelerate content and applications. Further, IP transit costs have plummeted over the last few years, with decreasing or, at best, flat revenues for the telcos. So, the imperative need is there for telcos to find new revenue drivers. It makes sense then that telcos need to create value added services on top of their infrastructure– a TelcoCDN.
Many telcos have already seen the wisdom in creating a TelcoCDN. Instead of attempting to monetize their dumb pipes, they are positioning to monetize the value created for customers who accelerate their content through their infrastructure. They are faced with a variety of choices to enable CDN services – from licensing CDN software to purchasing hardware and other equipment. My intent (for now) is not to say which is best, but to point out that creating a TelcoCDN is the right move for telcos. Creating revenue by blocking the highway, or creating revenue by providing a faster highway? I think the choice is clear.