CDN provider Velocix has announced the launch of a new product, called Velocix Metro. (I was first briefed on Metro almost eight months ago, so the official launch has been in the works for quite a while.)
Velocix Metro is essentially a turnkey managed CDN service, deployed at locations of an Internet service provider’s choice, and potentially embedded deep into that ISP’s network. The ISP gets a revenue share based on the traffic delivered via their networks from Velocix, plus the ability to do their own delivery from the deployed CDN nodes in their network. Velocix’s flagship customer for this service is Verizon.
You might recall that Velocix is a partner CDN to MediaMelon, which I discussed in the context of CDN overlays a few weeks ago. I believe that these kinds of federated networks are going to become increasingly common, because carriers are the natural choice to provide commoditized CDN services (due to their low network costs), and broadband service providers need some way to monetize the gargantuan and growing volumes of rich content being delivered to their end-user eyeballs.
The economics of the peering ecosystem make it very hard for broadband providers to raise the price of bandwidth bought by content providers, and intermodal competition (i.e., DSL/FiOS vs. cable) creates pricing competition that makes it hard to charge end-users more. So broadband providers need to find another out, and offering up their own CDNs, and thus faster access to their eyeballs, is certainly a reasonable approach. (That means that over the long term, providers that deploy their own CDNs are probably going to be less friendly about placing gear from other CDNs deep within their networks, especially if it’s for free.)
We are entering the period of the rise of the local CDN — CDNs with deep but strictly regional penetration. For instance, if you’re a broadcaster in Italy, with Italian-language programming, you probably aren’t trying to deliver to the world and you don’t want to pay the prices necessary to do so; you want deep coverage within Italy and other Italian-speaking countries, and that’s it. An overlay or federated approach makes it possible to tie together CDNs owned by incumbent regional carriers, giving you delivery in just the places you care about. And that, in turn, creates a compelling business case for every large network provider to have a CDN of their own. Velocix, along with other vendors who can provide turnkey solutions to providers who want to build their own CDN networks, ought to benefit from that shift.