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Why Would China Telecom Cooperate With ChinaCache On CDN?

|Includes:ChinaCache International (CCIH)

On March 25, the announcement came to my attention that China Telecom and ChinaCache have launched cooperation to jointly operate CDN network.

I believe that, just like me, many people must have felt a bit surprised by this development. Why would such a carrier with its vast network resources even initiate a negotiation with a CDN service provider on strategic cooperation? In fact, the cooperation between the two parties is by no means accidental. With the rapid rise of the mobile Internet, "user experience" is getting more and more into the focus of people's attention. How can a more rapid exchange of user data be ensured? How can data security and stability be ensured? Sooner or later, carriers have to face these issues one by one. As these issues become increasingly prominent, carriers need to introduce data distribution capabilities into the network architecture by adding node servers, so as to allow users to get access to the desired content locally, thus solving the problem of Internet congestion and improving the speed of access to the sites accordingly to enhance user experience. This is in fact the exact capability CDN technology can achieve.

As we know, China Telecom has the largest Internet backbone network with the most extensive coverage, the most stable network performance, the most abundant information resources, and the most advanced networking capabilities in China. In terms of the bandwidth of its domestic and international outlet bandwidth China, Telecom ranks first in China, with its market share of over 50%. China Telecom has a huge number of cable broadband users and mobile users. While providing services like Internet access and mobile communications to the customers, China Telecom feels the urgent need to provide customers with CDN network acceleration service to greatly enhance the customer experience. Therefore, a CDN network construction becomes an inevitable choice of China Telecom.

As shown in the latest data from CNZZ, in February 2014, China Telecom's market share in the domestic network access reached 52.22%, ranking first in China. However, there has been a slight decline month-on-month. In addition to the factors of products and prices, service quality and user experience become the biggest factor. In order to solve these problems, China Telecom hopes to introduce CDN technology to enhance the overall reputation of telecommunication services, strengthen the user experience, and improve its competitiveness.

It has come to my attention that Mr. Xiaochu Wang, Chairman of China Telecom Group, has made such statement many times in the industry development meetings: "We have access to the treasure of the mobile Internet now." Mr. Xiaochu Wang was particularly focusing on the mobile Internet opportunities brought by the popularity of 3G network. He pointed out that facing the opportunities presented to China Telecom, their strategy would be: "based on further transformation and positioning as the ' leader of intelligent pipeline, integrated platform provider, content and application participant ' in promoting their own development, to promote industrial innovation and service innovation, promote the prosperity and growth of the whole industry, to provide development opportunities to partners in equipment, terminals, channels, applications, as well as partners in a broader sense, to provide consumers with better services in a joint effort. " However, in recent years, even though China Telecom have made several attempts to construct CDN network by themselves, due to their limited technical and operational experience, they have yet to achieve the desired business goals. It is really a great pity.

Through this strategic partnership with ChinaCache, China Telecom can fully integrate its own network and channel resources With ChinaCache's CDN network technology and operational experience, so as to provide customers with high-quality optimized network services and greatly enhance the customer experience. Meanwhile, with CDN network Solutions, I believe China Telecom should be able to improve the operating efficiency of its backbone network, provide innovative and simplified means and methods to the complex network management, operation and maintenance, and greatly reduce its OPEX costs. As China's first and largest CDN provider, ChinaCache believes that it has already demonstrated to China Telecom its technical strength and service experience. Its good reputation has made the deal even sweeter. What's more, just like China Telecom, ChinaCache is also a listed company in the U.S stock market. And its strictly regulated management system as a listed company should make China Telecom feel more comfortable in choosing this long-term partner.

China Telecom enjoys its enormous customer resources in the government and enterprise sectors. With the rapid development of Internet and mobile Internet, government and enterprise customers also have a strong demand for CDN network services on top of the basic communication services. Government and enterprise customers currently don't have much access to the CDN market. We believe there will be a huge space for market growth in the future. The cooperation between China Telecom and ChinaCache may provide government and enterprise customers with overall solution services of "basic communication + CDN", change China Telecom's corporate image as a mere " pipeline", quickly occupy the high ground of value-added telecommunication services, improve China Telecom's market share and brand competitiveness in the government and enterprise sectors, and provide strong support to China Telecom as it tries to achieve its strategic objective of " world-class integrated information service provider "

Disclosure: I am long CCIH.

Additional disclosure: I work for ChinaCache

Stocks: CCIH