More ISPs Not Letting CDN Place Servers Inside Their Network, Doing It Themselves

I've recently spoken to quite a few ISPs about their practice of letting CDNs place servers inside their network to reduce their costs. With video traffic starting to become a real burden on more ISP's network, many are under the impression that CDNs like Akamai and others can just place their CDN servers in the last mile anywhere they want. While this was an easy and common practice for CDNs over the past few years, this is no longer the case.

Over the past twelve months or so, many of the ISPs I have spoken with said they are denying requests from the CDNs to place servers in their network or are kicking out CDNs who previously had gear in their facilities. Many of the ISPs said they are now focusing on doing it themselves and we have seen examples of this with companies like Verizon deploying video servers on their network for FiOS customers. Over time, nothing would stop Verizon from going to a content owner like Disney and cutting a deal to deliver Disney's content directly to Verizon's customers, essentially cutting out the CDN.

It's also been interesting to hear many ISPs tell me they have allowed some of the biggest CDNs to put gear on their network, only to see much of the gear go unused. I think this is because a CDN server placed inside an ISP network needs to be filled. The cache fill is data from the CDN’s origin (or the CDN’s customer’s origin) and most of the time, this fill will come from outside the ISPs network. The cache fill data plus the cost to house and power the CDN’s server is typically borne by the ISP. But if video is not being served from the CDN servers within the ISP network is there a real benefit to having them there? Many of the ISPs I spoke to said no and didn't see the value in letting the CDN reach their end customer for free.

It is important to remember that the ISP owns the customer, not the CDN. The CDN's customer is the content owner, but if the CDN has not done enough deals to get their servers inside ISPs or does not have enough peering in place, content owners could start dealing directly with the ISPs. Amongst the large ISPs I am talking to, those doing billions of revenue a quarter, this trend of kicking out CDNs is one that seems to be gaining traction and I hear a lot of them purchasing their own gear or working with companies like BandCon.

That said, while this all makes sense on paper, we have to see how many content owners are actually willing to deal directly with ISPs. Any major content owner who wants to bypass or supplement a CDN would have to cut deals with a lot of ISPs since no one ISP accounts for the vast majority of eyeballs. In Europe this would be easier as a few ISPs control nearly all of the consumers, but in the U.S., content owners would have to cut a lot of deals. It would not be hard to do, but one has to wonder how much expertise content owners will have to put this in place. For the major content owners, completely doable, but you'd have to be doing a ton of traffic and have quite a large reach to make it worthwhile.

Content owners may not want to do deals with ISPs until HD video is truly adopted and many ISPs are still building out their own CDN offering, not yet selling the service. So until they make it known to content owners that they can deal directly with the ISP, it's too hard to know what impact this will have in the long run. What impact this could have directly on the CDN industry we don't yet know, but this is clearly a trend, something I am hearing more and more of and something to keep an eye on.

Comments

[Steve Lerner]

Dan, are you reporting that ISPs are kicking out CDNs who are paying for bandwidth via hosting or connects?

Or are you saying that they are kicking out the "free caches" that CDNs have offered the ISPs as a way to "reduce internet traffic across their gateways"?

[Dan Rayburn]

The free caches.

[Rob Powell]

Another issue that will come up if ISPs do this en masse is that there are so many points of failure introduced. If you have a CDN acting as the glue then when there are technical difficulties there is an obvious chain of responsibility. When you have 100 content owners with separate deals with 100 ISPs, each having diverse or even proprietary caching infrastructures, locations, and connectivity requirements - it gets hard to manage. Verizon and a few others can pull this off because it is big, but there's a threshold somewhere.

[Matthew Townend]

One of the issues I have seen while advising ISPs & Carriers is the lack of clarity on what benefit these caches provide the ISP. CDNs do not reinforce to carriers why they should continue to use them, not really providing good reporting, or even regular contact with the carrier to demonstrate the real benefit.

I talk to so many carriers who say "we recieved this box a few years ago and plugged it in as it seemed like a good idea" we never really understood what it does exactly. Also we see it generating odd traffic patterns.

I think CDNS are going to have to start entering carrier relationships as a partnership and demonstrate the clear value, and potentially start paying there way a bit be that by revenue share or hosting costs.

[shaun noll]

seems like if I was a content owner i'd rather do a deal with the CDN, especially if the CDN is large, as i'd get much more bang for my buck, if the content owners could cache their content on an individual basis in each data center the CDN business model would never have and won't work, but i think we've seen it doesn't. plus content owners grouping with ISPs gets tricky, i would be hesitant as a content owner to have alliances with ISPs. although i'm sure we will see the balance of power ebb and shift between content owners ISPs and the CDNs i don't think we'll see huge fundamental shifts in this dynamic.

good post though Dan, i always thought it was surprising that Akamai was able to just put its servers all over for free. but i guess Akamai sees more data and internet traffic than any ISP on the planet.

[damien wetzel]

hello dan,
I believe not a single big ISP give akamai and the others access to its network for free. (only the littles do that) But giving the cost of the IP bandwith ~10$ per Mbps at the max, the result is the same. I don't believe one second that ISP could sell their own solution you have to imagine ISPs as fat mamooths with a little brain. The CDN business needs reactivity, high technical knowledge. The ISPs just understood 10 years after akamai was born that the margin was not in selling transit and pipes but in the services they are unable to deliver that's why they are pityfully running into the cdn buziness. Damien ;)

[ted eom]

Hi Dan. Your blog is so helpful to get the recent info. What does Bandcon do for the ISP's?

[Dan Rayburn]

Bandcon helps ISPs blend traffic amongst multiple CDNs and has enabled some of them to deliver the video themselves, for their last end mile customers only.

[marks]

Hello Dan, PeerApp's view is that it makes sense to cache, especially for those ISPs whose international transit costs are in excess of $20/Mbps/Month. We think that the idea of individual CDNs deploying individual caching servers in ISP operations centers doesn't work/doesn't scale. This is due to the reasons you've pointed out. But we do believe that deployment of a caching system that can cache and accelerate all (popular) large file content like video makes excellent financial and QoE sense.