Summary:

Mediacom, a U.S. cable company, has turned to Qwilt, a three-year-old startup to solve its over-the-top video woes. Qwilt thinks it can cut costs and solve the business problems of delivering online video.

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photo: ollyy

Mediacom, the eight largest cable company in the U.S. has signed a deal to establish what are basically edge caching systems in its network. A startup called Qwilt is supplying those systems, and this not only represents a significant deal for the three-year-old company, but also a possible way to achieve détente in the online video wars that are starting to degrade the consumer online video experience.

Qwilt, which has raised $40 million, has built software that runs on any server located inside the ISP’s network. The software tracks the videos moving over the ISP’s pipes and caches copies of popular content, so a user request doesn’t have to go all the way back over the middle and originating miles of the network. Caching cuts down on costs for operators and can also cut down on costs for the content providers because they no longer need to have as large a contract with the middle-mile companies.

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Qwilt is currently caching about half of Mediacom’s video and is on track to save it a little over $10 million in 2013. Qwilt CEO Alon Maor says that two other top-five cable companies are deploying the product in their networks, as are other ISPs around the world. The goal is to get operators to buy a Qwilt license for a server serving a few thousand homes and then getting it out as close to the edge as possible. However, operators can still cut costs by putting it further back in the network.

So why is this a big deal? The business of online video is huge. Currently over half of the U.S. broadband traffic is comprised of Netflix and YouTube streams. As a result ISPs are fretting over congestion, as well as how to get people to pay for their broadband and pay TV bundles, when so much content is available online.

Throughout the distribution stream from server to the consumer’s set-top box or tablet, conflicts of interest and conflicting business needs are causing the over-the-top video experience to falter for the end consumer. And no one is exactly winning.

Large content providers like Google, Facebook, Amazon and Netflix are proposing their own caching systems at the edge network, but operators look at this and see a slippery slope. They don’t want to keep bringing in other companies’ gear into their networks, and in some cases — such as with Netflix — the goals of the content company compete with the ISP’s own business aims.

Qwilt allows the ISP to bring its own content caching inside the network to caches any content regardless of its originator. Maor stressed that the Qwilt software is transparently caching whatever is popular and not discriminating. It also offered up charts showing that Qwilt cached content is performing better on Mediacom’s network during peak hours.

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If this does indeed make the ISPs and the content companies happy, the only loser might be the content delivery networks and transit providers that might see a drop off in the use of their services. In many cases, transit companies buy access to ports on the ISP network based on future estimates of demand, so if an ISP suddenly deploys Qwilt and demand drops in half, the transit provider is out money.

Maor says Qwilt can allow operators to offer a revenue sharing arrangement with some transit providers or CDNs where they receive 50 percent of the costs the operator saves. Essentially, this helps compensate the transit provider for the loss of the traffic on what might be an already-paid for connection.

Maor is clearly trying to solve the challenge that online video represents for the myriad players in the system. It sounds like a few operators have already bought into the arrangement. We’ll see if others in the online video delivery chain follow.

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