In February I blogged about a new group formed inside of Apple (NASDAQ:AAPL) last year tasked with building out their own CDN to deliver Apple software updates, apps and other Apple related content. Since my post, Apple has been very busy with their build out deploying a lot of boxes running Apache Traffic Server and buying a ton of transit, co-location, wavelengths and other infrastructure services. Their CDN is quickly growing, and it won’t be long before we start seeing a portion of their content getting delivered from their new CDN.
As part of their build out, Apple is currently negotiating paid interconnection deals with some of the largest ISPs in the U.S. I’m not going to disclose which ISPs they are talking to and what deals they have already done, but it’s interesting to note that with all the talk lately of net neutrality, peering and interconnect relationships, Apple isn’t out in the market making any complaints. While Netflix (NASDAQ:NFLX) has used the media, consumers and lawmakers to try and argue that CDNs should get as much peering as they want, at no charge, Apple doesn’t seem to agree with that sentiment. If they do, they certainly aren’t complaining in any public forum.
At a time when interconnection deals are getting so much exposure, Apple hasn’t used it as an opportunity to argue about the current business models of how networks connect with one another. Much like Microsoft (NASDAQ:MSFT), Google (GOOG (NASDAQ:GOOGL), Facebook (NASDAQ:FB), Pandora (NYSE:P), eBay (NASDAQ:EBAY) and other content owners that have already built out their own CDNs, Apple appears to see paid interconnect deals as simply part of the costs associated with building out their own CDN network. To date, no other content owner or content syndicator that has built out their own CDN has complained of the current business models or argued about doing mutually beneficial interconnect deals between networks. If interconnect deals are such a problem in the industry, or a threat as many make it out to be, you don’t see the ones who actually have to pay for these deals complaining, other than Netflix.
Some might suggest that the reason for this is that Apple is not as big as Netflix since according to Sandvine data, Apple takes up only 2% of total Internet traffic at peak while Netflix takes up 34%. While that’s true, when Apple releases a new operating system for the iPhone, like they did last year, their iOS 7 and app downloads accounted for nearly 40% of all the traffic inside ISP’s networks, almost overnight. So Apple does push a lot of traffic at times and the more devices they sell, the larger their traffic grows.
What Apple is working on aligns with what all of the other big content syndicators out there have already built, which is a considerable amount of their own distributed origin infrastructure, for both large and small objects. Part of Apple’s reasoning for building their own CDN is because of performance issues with iCloud, with Apple wanting to have more control over the end-user experience. Apple already controls the hardware, the OS and the iTunes/App store platforms. Right now Apple controls the entire customer experience, except for the way content is delivered to their devices, so it’s only natural that a company of their size would build out their own CDN.
For all the talk in the media about how bad paid interconnect deals are for the Internet, this is how the Internet was able to grow over the last twenty years and how services got to the scale and performance that they are today. Without these interconnect deals taking place, the Internet would not operate as well and fewer services would be available in the market. I think we should rely on those who actually have to build out these CDNs and pay the costs associated with doing so to tell us whether or not the current way of doing business need to be changed. But so far, out of those who have built their own CDNs to deliver content including Netflix, Microsoft, Apple, Pandora, Yahoo, eBay, Facebook, Amazon (NASDAQ:AMZN)and others, only Netflix is complaining.
There is only one company that I can think of that could bring even more exposure to the interconnect topic than Netflix, to try to get the current business models changed, and that would be Apple. So far, they haven’t done that, have not complained to the media or to the public and are currently signing and negotiating paid interconnect deals with ISPs. So it’s just another example you have to look at when some make the statement that paid interconnect deals are bad for everyone involved. It seems that other than Netflix, those companies paying and signing these deals don’t seem to have a problem with them.