New CDN Contract Data Shows AT&T and Verizon Not Winning Deals or Disrupting Market

For more than a few years now, many have been proclaiming doom and gloom to CDNs like Akamai with the reasoning that AT&T and Verizon would come in and disrupt the market, forcing pricing down and taking away market share from the industry leaders. While owning the network does have major advantages, just look at what Level 3 has done, owning the network by itself does not make one a player in the content delivery market.

Two weeks ago at my Content Delivery Summit in NYC, the most common question I got asked by media customers and industry executives was why AT&T and Verizon were absent from the show. While we had just about every other CDN vendor presenting, many with their customers, and had numerous telcos and carriers discussing their deployment strategy, no one from AT&T or Verizon presented or spoke in any capacity.

I offered Verizon multiple speaking opportunities, but they declined all requests saying they weren't yet ready to talk about what they are doing with regards to their external digital media offerings. While it's natural for a company not to want to speak if they aren't yet ready to talk about their technology, it's now been 14 months since Verizon first announced some of their Verizon Digital Media Services (VDMS) at NAB. Since that time, the company still hasn't offered any insight into their products, has no technical information on their website, has not done a press release with a single customer and has refused all briefing requests. And a few months ago, the number they had listed on their website for customers to call to get more information about their Verizon Digital Media Services, didn't work and wasn't a valid number.

While I know Verizon is in fact working on their external digital media services, one really has to wonder if they are getting any traction at all. I hear of them having meetings with large media and entertainment companies, including the big boys like Netflix, but to date, I have yet to hear of a single large customer using them. Amongst many in the industry, Verizon is quickly being compared to AT&T, another vendor who to date, hasn't gotten any real traction with their CDN or digital media services. Unlike Verizon, AT&T has put out a lot of releases about their CDN offering and talked a big game, but has little to show for it. From multiple people I have spoken to who have an insight into AT&T's CDN traffic, it looks as if AT&T will do under $20M this year in CDN services. That's not disruption in the market.

During my pricing presentation at the Content Delivery Summit, I gave out details of a recently completed survey I did of 725 customers who use CDNs for the delivery of video. Of the 408 qualified responses from companies who spent more than $100K a year on video delivery, not a single customer was using AT&T or Verizon. Of the 307 qualified responses from companies who spent less than $100K per year, only 6 customers were using AT&T and 7 were using Verizon. Here's a link to the slides from my presentation and the video will be up shortly.

The reason for me highlighting this data is not to make fun of any vendor, but rather to use it as an example to many who are still saying that vendors like AT&T are going to hurt Akamai, Limelight or Level 3's CDN business. Even as recent as last week, I saw a report from a Wall Street analyst saying AT&T and other carriers were putting pressure on Akamai's CDN pricing. While Level 3, EdgeCast and Amazon are being aggressive on pricing, none of the major carriers, outside of Level 3, have yet to impact the CDN market in any way.

For more than five years now, Wall Street analysts have implied that AT&T will be a big threat to Akamai. In 2007 I wrote a post saying "Analysts Covering Akamai Should Not Be Worried About AT&T" and in 2008, followed up with two more posts entitled "AT&T's CDN Offering Not Displacing Akamai or Limelight Anytime Soon" and "Goldman Has It Wrong: Akamai Not Affected By Network Operators." Yet even with all the evidence we have in the market to show what's really taking place, and the data to show it takes a few hundred million dollars to really enter the CDN market and do any substantial revenue, many still think carriers are going to somehow disrupt the CDN market. That notion could not be further from the truth and the biggest new disruptor's in the market will come from the likes of Amazon and Dell, not carriers.

As for Verizon, I'm not counting them out just yet. I think they still have a shot at doing something disruptive, but to date, they have been working on these services for two years now and haven't gotten to scale or signed up many customers. I think they could still do something positive, but they have a lot to prove in the market and their window of opportunity won't be open forever. But in reference to AT&T, I do think it's about time people stop saying they will "disrupt" anything having to do with the content delivery business.

Note: I notified Verizon as soon as I realized they had a non-working sales number listed on their website. Also, this post is in reference to Verizon's external digital media and CDN services, not their internal CDN, which is quite advanced.

  • Dale Ficken

    Dan, I think this article is a bit premature. Once the carrier CDN is in place and the edge is a hop or two from the client, Akamai and the others will be hard pressed to replicate the quality that AT&T and Verizon will have at their disposal. The other factor here is if the carrier owns the caches, and they are scaled throughout the entire network, where will that leave those CDNs that have outside caches, outside meaning caches a layer or two above the core of any of these providers. Netflix is already preparing for this by putting their own caches inside carrier networks. The tone of your article sounds like after so many years you would expect there to be some type of disruption if there was going to be one.. I believe that AT&T and Verizon are just now getting thier traction as you say and it won’t be long before the impact of having carrier class CDNs will impact the entire CDN industry. The people who will win in all this will be the ones who are prepared to change their business model and direction. Commercial media will be captured and delivered through the carrier in short order. Akamai and the likes will be on the outside looking in wondering how it all happened.

  • Hi Dale, people have been saying this about AT&T for more than five years and AT&T has been in the CDN business for more than 10 years if you count their early ICDS product. Where are the results?
    Your argument implies that at some point, AT&T will have their CDN in place. That’s a BIG assumption and to date, after many, many years, data from customers shows AT&T still hasn’t gotten any traction.
    I do agree that carrier and telco related CDN deployments will impact the market, like I have written about in detail before, but too many people assume every telco or carrier will be successfull with a CDN strategy just because they own the network. That by itself is not a guarantee that they understand the business, can build out to scale, will have the performance customers need or have the prouct roadmap to insure they win in the market.
    It takes a lot more than just owning the network to be a real competitor in the content delivery business.