In the wake of Verizon’s announced purchase of Edgecast Networks, Akamai took a beating yesterday due to the extent of its reseller relationship with Verizon. Dan Rayburn does a great job of analyzing the downsides for Akamai, although I’m not really convinced that Verizon is ready for a wide-ranging offensive on the CDN marketplace. They might be of course, but they’re going to have to prove it and years will pass first.
However there’s the other side to this to consider, and it is one that could have more immediate consequences. One analyst said “you never want to see your partner go out and buy your competitor” from the point of view of Akamai, but I think the corollary is also true from the telco side: you never want to see your competitor go out and buy your partner.
While many telcos are regional and can be cooperative, Verizon has always had a global presence and thus it is a direct competitor to several major Edgecast partners like Teliasonera and DT on that front just as Level 3 and its CDN are. Those partners could shift their chips toward Akamai (as AT&T has already been doing), or they could look to follow Verizon’s lead and buy an independent CDN provider.
Some who haven’t dabbled as publicly in the CDN marketplace lately but have been substantially expanding their cloud/managed services footprint, like CenturyLink or NTT for example, might be thinking along the same lines as Verizon right now.
Hence, I think that Limelight Networks will shortly be getting another turn in the consolidation limelight, as it were. Limelight has been shifting its business toward more managed and cloud services, but that too overlaps with many telcos plans. They have both real CDN scale and an easy to swallow price tag.
While there was no feeding frenzy a few years back when it came to telcos buying CDNs, there have been enough now to create a pattern. Tata and BitGravity, KDDI and CDNetworks, Verizon and EdgeCast — they have similar attributes despite the differences in geography and scale.
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