Last December, at AT&T’s analyst day, their presentation included a few slides about their content delivery build out and capacity planning in 2008 to handle web acceleration, software downloads and streaming based services.
Since December, AT&T has been busy working on the build out and expects to spend between $70-$80 million on infrastructure this year. By the end of 2008, AT&T is aiming to have 400Gbps of capacity online, for all their content delivery services, which would increase their capacity by 4x what they have now. When completed, their content delivery services will be delivered from 32 nodes in 7 countries and they will be Adobe Flash Certified by year’s end and will be supporting live and on-demand delivery for all the major formats.
Currently, some customers of AT&T’s are still having their content delivered via Akamai, who AT&T has been re-selling and using as one of it’s partners for some time. But moving forward, AT&T expects to deliver more content across its own network and rely less on partners for delivery. AT&T has been busy training their direct sales force and re-sellers to sell their CDN services and in the third quarter, AT&T expects to aggressively push into the market.
While AT&T won’t have some of the additional CDN services in the content ecosystem like content management, transcoding, DRM etc… like most CDNs, they will probably partner with others in the industry who provide these services. Their content delivery services already support some additional functionality like authentication, pulling content from customers origin storage and reporting via their customer portal. While AT&T will not say how many customers they have for their CDN services today, or how much revenue they want to generate from CDN services in 2008, they have listed Forbes.com, AccuWeather.com and the U.S. Golf Association (USGA) as current customers.
While many analysts who cover Akamai were worried when AT&T talked about their CDN plans during their analyst day, AT&T still has a lot of work to do in order to become a major player in the content delivery industry. They do have some advantages going for them, most notable of which is that they are not a startup and not relying on content delivery services alone for their revenue. They won’t go out of business in 18 months when the VC money dries up, like some of the other CDNs will, and AT&T has an enormous marketing budget, re-seller channel and plenty of R&D resources. That’s not to say those advantages will guarantee AT&T success, as we saw Qwest, MCI and other telcos in the market fail with these same advantages years ago. But with Level 3 now becoming a major player in the CDN market, AT&T making a bigger push, it’s only a matter of time before the telcos once again try to dominate this market.
Some will say that since AT&T, Level 3 and other telcos own the network, that gives them a competitive advantage over CDNs who’s don’t own the pipe. Others say that owning the pipe is too expensive, requires too much capex and does not allow the telco to deliver traffic from multiple "best of breed" networks. At this stage, the verdict is still out on who is right, but one thing is for sure. The telcos are entering the content delivery market and things are going to get very interesting in 2009 when outsourced CDN services for video alone become a billion dollar market in the U.S.