Tuesday, May 13, 2008

Do The CDN Shuffle

If I was a senior executive at one of the existing major CDNs, I'd be getting worried. Lawsuits notwithstanding, it seems that some of the really big telco players are about to enter the market and seriously undercut existing pricing.

On the back of Level3's much vaunted plans, AT&T has now decided to announce that it is joining the fray. Expect this autumn and winter to see some serious price reductions in the market as the big boys buys into the market.

But is it as easy as that ? Well, not really. Level3 and AT&T may own some backbone and may be able to ameliorate their vast capexes, but the art of getting video to end users is not a simple one, and it is plagued with legal and technical complexities. The larger companies also have no economy of scale at the bottom end of the market, so are unlikely to compete for any client spending under $100k pa on bandwidth (and this may be far higher). What this means is that the market for the large bandwidth users will become cheaper, just as they are facing action from ISPs demanding payment for last mile delivery.

Fundamentally the costs in the internet TV game are about to be shuffled.

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