The Commodity Game

It's telling that Akamai (AKAM)'s growth seems to be slowing just at the very time that the internet TV industry is taking off.

The issue is bandwidth cost. Akamai has invested heavily recently in added value services - they clearly saw the commoditisation of the market coming - but these investments have not kicked in in revenue terms as yet.

Speaking to a couple of very major wholesale telcos this week it's clear that they think they can bundle sophisticated services such as those offered by Narrowstep (NRWS) and still charge cheap as chips rates for bandwidth at high throughput and they're probably right and it's clear that the wholesale players can always do better on price than resellers such as Akamai, Internap and Limelight.

Internap (INAP) seems to have gained at Akamai's expense recently, since it's been showing more impressive growth, but is equally vulnerable IMHO.

CDNs were few and far between, but now the major telco players have wised up and are likely to aggressively target this sector and use their huge sales teams to take on the incumbent CDNs with cheap bandwidth boosted with added value services.

Most vulnerable of all is Limelight (LLNW) whose shares surged on IPO (not surprising if you look at who their advisers were), but have since come off, albeit to above flotation levels.