Over the past two years, more than a dozen telcos and carriers have entered the CDN space, all with the strategy of re-selling or partnering with a pure-play CDN provider like Akamai (AKAM) or Limelight (LLNW). In that time, Level 3 (LVLT) has been the only company with the strategy of wanting to own and operate its own CDN, laying the groundwork today for what will be a big business in the future. This morning, Asia's largest telecom provider Bharti Airtel announced it too would enter the CDN space to serve the Indian market via a partnership with Limelight Networks.
With this announcement, more than 20 telcos and carriers have entered the CDN market and I know of other carriers who plan to make similar partner announcements this year. While Wall Street and others want to continue to speculate that telcos and carriers will one day rule the CDN business, thereby forcing pure-play CDNs out of the market, that won't be happening anytime soon. Yes, carriers who own their own fiber have a distinct advantage over pure-play CDNs who don't operate their own network, but the delivery of bits is only one of the many pieces required for a real CDN offering. Vendors have to be able to do more than just own their own network and deploy a bunch of boxes. If it was that easy, all of these carriers would have done it already and would not be partnering with pure-play CDNs.
Right now, the CDN market for video is too small for most carriers to spend the money to build and deploy their own network. By my estimates, the entire market size for video delivery services globally was only $500M last year, which while a big number, is small in comparison to the other markets that telcos and carriers are in. Until the market size and opportunity is larger, I don't expect we'll see many of these companies who have partnered with pure-play CDNs doing anything on their own and bringing CDN services in-house to their product portfolio.
Disclosure: No positions