The first contract-related announcement of the year for Level 3 Communications is an interesting one. Level 3 is providing internet localization services to Telekom Malaysia, which is a product I haven't seen them talk about before and which suggests the next phase of integration of their IP and CDN networks.
The idea is to provide internet connectivity in combination with local caching of the data in question, meaning that TM gets both IP transit and the faster response and download times of a CDN. TM can then take it and cache it even further into its own network. A cost effective method of localizing international content has long been something global regional operators have been looking for to rationalize their cost structure in an age of relentlessly growing data demands. When too much of that data comes from another continent, it just doesn't scale too well.
The arrangement seems to represent a tighter integration of Level 3's IP backbone and its CDN capabilities. While it doesn't say so, it suggests that they aren't just talking about content from Level 3's direct content delivery customers, but that transparent caching is involved as well and on both sides of the interconnection. I know that some at Level 3 and other large backbones have always viewed CDN technologies as something that would eventually be fully absorbed into IP backbones rather than forever exist as an overlay and a separate market.
The fusion suggested by the TM announcement could be seen as a response to the EdgeCast approach of forging alliances with global telecoms at various levels from resale to licensing and federation. Level 3 would clearly like to interconnect other telecoms at the CDN layer in addition to IP transit. In Verizon's hands it is not yet clear how EdgeCast's approach will evolve, but in combination with Verizon's own IP backbone we might see something similar sooner rather than later.