AT&T Finally Gives Up On Their In-House CDN: Will Resell Akamai’s CDN Services

[See my follow up post here: Inside The Akamai and AT&T Deal and Why Akamai May Have Paid Too Much] In August I reported that AT&T was planning to shut down their in-house CDN and re-sell CDN services from Akamai or Limelight Networks and that Akamai would probably win the deal since they were willing to guarantee AT&T more business than Limelight would. This morning, AT&T and Akamai made the deal official with an announcement saying the two companies will work to jointly sell CDN services in North America to start, expanding to outside the U.S. in twelve months. For AT&T, this signals what is almost a thirteen year effort to try to get their CDN business off the ground, dating back to 2000 when they launched their ICDS platform (Intelligent Content Distribution Service).

While today’s announcement is good for Akamai, there’s not a lot of revenue attached to it. AT&T will do less than $20M in total CDN revenue this year and it will take them and Akamai a long time to sell a joint solution in the market, let alone one that can handle content delivery outside the U.S. I don’t expect today’s announcement to affect AT&T’s wholesale CDN services and federation model, so I would expect AT&T would still manage that portion of their CDN business with EdgeCast’s platform. Customers who are currently buying this solution from AT&T purchase it from a wholesale division of the company, not from an enterprise sales team, so the new re-seller deal with Akamai should not impact AT&T’s wholesale CDN business, which continues to grow.

While enterprise customers could also go direct to Akamai, most of AT&T’s large enterprise contracts are for multiple products, including things like co-location, transit and managed services, which are services Akamai does not offer. So AT&T isn’t trying to get CDN only business with a re-seller deal like this, but rather want to use CDN to keep or get them more of the non-CDN business they already have. It will be interesting to watch how both companies manage channel conflicts, since a very large percentage of enterprise customers are already taking services from Akamai, but one would assume that’s something they have already worked out with this deal.

At the time of this post, Akamai’s shares are up $3.20, which makes no sense since the revenue associated with this deal is so small to start. I’ve seen more than a dozen articles taking about the deal and about Akamai’s shares being up, but none of them discuss what the value of this contract could be worth to Akamai, or what AT&T’s current CDN revenue is.

  • MD

    One less competitor, and it shows that even a Telco with the deepest of pockets can’t compete with Akamai.

  • Dan

    Another thing to be noted is that Akamai’s prices are nearly 5x what AT&T charges for the same services. So if AT&T is doing $20M in revenue; if all those customers stick with Akamai, they’ll be getting nearly $100M.

    That being said; I can’t see many of AT&T current customers sticking with Akamai when there are so many competitors out there offering more reasonable rates.