Media attention to the service has focused primarily on the legal dispute between Aereo and TV broadcasters who have tried, and so far failed, to shut it down. The legal controversy is real but also overshadows the implications of the service for TV viewing and the technological wizardry that makes Aereo work. (Aereo founder and CEO Chet Kanojia will be speaking at our paidContent Live event in April.)

To get a better idea of just how Aereo is serving up TV, we went to the company’s plant in Brooklyn to get some up-close photos. Here’s our tour:

From the Empire State Building to your iPhone

Aereo transmits from the top floor of a nondescript government building on Vanderbilt Avenue on the edge of downtown Brooklyn. You can see it on the right: 

Aereo chose this location for a reason. The floor on which it operates has a direct line of sight to the city’s biggest transmission tower. Here’s a picture of the tower and the view from Aereo’s window:

These direct sight lines make it easy for Aereo to pick up the powerful signals emitted from over-the-air broadcast services like ABC, NBC, CBS, Fox and local community stations. Aereo’s technology then transcodes and relays those signals to its customers who can watch TV, change channels and record shows with their phones or iPads:

Tiny antennas for everyone in the city

Aereo works by letting every subscriber rent a pair of tiny antennas. Customers get two antennas so that they can watch live TV while also recording a show or, alternately, to watch live TV on two different devices at the same time. While Aereo created the personal antenna system as a way to comply with copyright rules (you can read about the legal issues here), the antennas themselves are remarkable in that they give Aereo the capacity to serve 1 million New York City customers from the single floor in Brooklyn and an adjoining rooftop.

Here’s a close up look of the dime-sized antennas in action:

Aereo CEO Chet Kanojia explained that the device is a simple copper antenna but that, rather than picking up the entire TV spectrum like a typical cable antenna, it picks up only the 6 megahertz block of spectrum that a viewer wants to see at a given time. He describes it as a “switched antenna” that’s beautiful in its simplicity. The ingenuity, Kanojia said, is that Aereo’s 1.5 inch antenna changes its electrical and magnetic characteristics in order to replicate the tasks of a standard 35 inch UFH or three foot VHF antenna.

The size of the antenna allows Aereo to cram many of them into a small space which is one reason Aereo is able to relay TV to so many people at the same time. Another reason is that the antennas are “multitenant” which means that, when one Aereo subscriber is not using an antenna at a given time, it is available to all other subscribers.

Cheap storage and high-performance fiber

Aereo relies on the antenna system to offer a cheap TV services that subscribers can easily add or drop at any time. But the antenna is only part of the equation. To make the service economically viable, Aereo is also capitalizing on major advances in transcoding technology and cloud storage. It is these advances that now make it affordable for Aereo to translate the over-the-air TV signals into iPhone video streams and to let people store hours of television on remote servers.

According to Kanojia, commercial transcoding costs per stream would have been $8,000 per customer two years ago but now the company can do it for under $20 (these figures relate to capital expenditures, not monthly costs). He also notes that a terabyte of storage, which once cost over $1 million, can now be had for under $100. The new efficiency, he said, is not just in raw storage capacity but better spindle speeds on hard drives that improve transmission times.

Here is a look at Kanojia standing in front of Aereo’s proprietary transcoding devices and a close-up of the servers which act as a private cloud service and on which Aereo customers store thousands of hours of TV to watch later:

To connect the antenna system with the transcoding and recording devices, Aereo relies on multiple 10 gigabit fiber links that look like this:

Aereo also relies on leased fiber networks in different spots around New York City to deliver TV content to its subscribers. This system means it doesn’t have to rely on content delivery networks or other middlemen.

“What’s the point of long-hauling something when you’re already 80 percent there?. There’s no CDN’s. It’s a local to local product,” said Kanojia.

Next: the man who would break the cable industry

Aereo wants to overturn the current TV business model in which viewers shell a hundred dollars for a bundle of channels, many of which they don’t want to watch. Aereo’s challenge comes by way of its technology but also in the form of Kanojia himself, who is picking a fight that many have lost before (iCravetv, ivi, etc) — and is so far holding his own. You can now read our follow-up account of Kanojia’s vision for the future of television.

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We’ve covered the slowdown in broadband subscribers in the U.S., although there is an untapped market of roughly 19 million Americans who don’t have broadband — it appears most of them can’t afford it or just don’t want it. As for CDNs they are carrying ever more content and caching it at the edge, so fewer bits have to traverse the long haul networks. This saves the ISPs money and network investment costs.

Which means that instead of doubling (or more), Internet capacity around the world increased by 40 percent between 2011 and 2012. Happily for all of the ISPs complaining about not being able to meet demand, it appears that the growth of traffic is also slowing internationally at peak times. Telegeography says average international internet traffic grew 35 percent in 2012, down from 39 percent in 2011, and peak traffic grew 33 percent, which is far less than the 57 percent increase recorded in 2011.

But traffic, and thus demand for capacity, is still on the rise, which means no one thinks ISPs will have to stop investing in their networks, and long-haul cable companies should probably still be planning their upgrades. From the release:

Nevertheless, the underlying drivers of bandwidth demand remain strong. Broadband penetration rates in developing markets remain modest, leaving substantial room for new subscriber growth. In more mature markets, where the pace of broadband subscriber growth has slowed, faster broadband speeds and the growing adoption of bandwidth-intensive applications, most notably online video, are spurring higher traffic volumes per user.

Which does mean that ISPs will continue to invest and continue to complain about that investment. What’s not in this analysis is how much it costs to add new capacity to the network on a per bit basis. Telegeography has reported that long haul bandwidth costs are dropping, and part of that is because the equipment costs less, and it’s cheaper to add new capacity to the existing networks. It also costs different amounts to upgrade different parts of the network, making the price of adding another million bits an even more difficult number to find. Adding capacity at the edge may involve a new router or it may involve laying new fiber.

Regardless, those investments must continue to be made, but greater transparency on the cost of making them would benefit policymakers and even consumers trying to understand what their love of broadband costs.

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As Amazon Web Services adds more features to its cloud platform, the anxiety among competitors — as well as partners — grows.  Can anybody, including the evolving OpenStack crowd, Microsoft Windows Azure, or other potential rivals, hope to compete?

The latest news that Amazon will let Eucalyptus use the AWS API to connect Eucalyptus-based private clouds with Amazon’s public cloud gives AWS a better story for companies that prefer a hybrid cloud solution for security and other reasons.  And, it gives Eucalyptus, which faces an uphill battle against OpenStack, some credibility. But perhaps most important, it establishes that AWS — and its API — is the de facto standard defining cloud computing.

As Simon Munro, a software architect who writes on cloud issues, wrote in his blog: 

… what is really interesting about the Eucalyptus announcement is that it lends credibility to AWS as the definition of cloud computing (not just the market leader or early adopter). Using AWS as the definition and getting rid of all of the IaaS/PaaS crap makes it pretty easy for AWS to talk to the enterprise – far more than talking on-prem [on premises] does.

Because of that API support, developers working on Eucalyptus-based private clouds can use the same AWS tools — their Amazon Machine Images (AMIs) and scripts — to manage both the Amazon public cloud and their private, on-premises clouds.

Amazon and its AWS API rule the roost in cloud with hardly a No. 2 player in sight. That is something the OpenStacks and Windows Azures of the world must face going forward.

Continued forays up the stack raise eyebrows

But there are still more developments that worry third-party partners. This week Amazon beefed up its CloudFront content delivery network (CDN) capabilities so that it will be more applicable for quickly changing, as opposed to static, content.  CDNs speed up web performance by putting content closer to its likely users to speed page views and downloads. This is “a pretty clear shot at the CDN players” out there, said one Amazon watcher.

Amazon uses third-party CDNs but has also offered its own CloudFront service for some time.  CDN companies are keeping an eye on this, although they say — privately — that what AWS offers is fairly rudimentary.  ”Is this a sign that Amazon will get more into CDNs for dynamic content delivery? Probably,” said one executive with a CDN player.

This week AWS also announced enhancements to its Elastic Beanstalk platform-as-a-service, which now supports the popular PHP programming language and Git version control system.

An Amazon spokeswoman said that the new services are offered to meet customer demand. “CloudFront is a fast growing CDN and one that provides an option for customers who don’t want to negotiate standard CDN contracts.  We listen to our customers and customers have asked us to build this type of functionality into the service so that’s what we’ve done,” she said via email.

AWS problem: Partners are customers too

As for Elastic Beanstalk enhancements, the spokeswoman said the company always said pledged support for multiple development stacks and languages.

As Amazon CTO Werner Vogel Vogels blogged earlier this week:

One of the most important AWS principles is flexibility. Flexibility is in the choice of software and languages running on AWS, in the tools and interfaces available to manipulate resources and applications, and in the ability to leverage services from other providers.

Vogels also promised to work closely with current and future platform partners and use their feedback to develop new featuers and services that will help them. Indeed, startup companies trying to build new services often consult with Amazon to make sure what they’re doing will not conflict with planned AWS services.

This partner concern is not new. As I’ve reported before, it crops up repeatedly as Amazon adds new services. While it’s natural for AWS to expand offerings to customers, some of those customers happen to be PaaS providers that provide the very sort of services that Amazon wants to add. In many ways AWS now is much like the Microsoft of 10 or 20 years ago — as it added capabilities to Windows and Office, it displaced third-party software companies that had filled those gaps. Microsoft built its own prodigious presence by doing so, but also thinned out its own ecosystem. AWS appears to be on the same track.

Photo courtesy of Flickr user Will Merydith

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Akamai CEO Paul Sagan at GigaOM Structure

Akamai’s latest product launch lets network operators take over their own content delivery networks, using Akamai’s software but not its boxes. The Aura network solutions business is a huge change in Akamai’s business, given that it has spent more than a decade pushing its proprietary boxes located inside carrier networks. The shift, and the reason for it, offers a lot of clues about the evolution and domestication of the worldwide web.

Akamai, which was founded in 1998, was created with the radical business plan that by caching web content close to the end user, it could deliver movies, videos and websites faster for its customers. Part of the idea was that the content wouldn’t have as far to travel once a user requested it, but another benefit was that by caching content at the edge, content providers and ISPs won because fat files didn’t travel repeatedly across the network. Akamai has tens of thousands of servers at operators around the world and generated sales of $1.16 billion in 2011. The model worked.

A changing web and more competition

But two things happened that have led to Akamai’s shift in strategy. The content sent over the network started changing. Websites turned to downloaded video and then downloads turned to streaming video. And with the advent of apps and widgets, websites became more dynamic, forcing content delivery networks to update their caches faster and from a variety of sources. And still sites bogged down.

Akamai has been on a buying spree, trying to address these issues and the spread of content that blossomed on the web unrelated to delivering video and fat web pages, such as social commenting tools or dynamic ads. It has ventured into mobile advertising, transactional optimization and security.

At the core, though, was Akamai’s EdgePlatform of more than 100,000 servers. But operators, concerned about their bottom lines and the growth of traffic coming from video and monetized by companies that were earning a premium on their pipes, began experimenting with their own CDNs. In both wireline and wireless, ISPs were trying to push Akamai out so they could control their own destiny. (Seriously, I’ve had an executive at an ISP explain its CDN efforts that way.)

With today’s Aura product launch, which offers operators a chance to license Akamai’s software or lets them buy blade servers from network equipment vendor Ericsson that will run Akamai’s software, Akamai has given in to operators’ concerns and the reality of the web. Sure, it was once a huge advantage to have a network of servers at the edge, but plenty of CDNs work very differently now, from Akamai’s rival LimeLight to newer companies such as EdgeCast, which already licenses its software.

Plus, Akamai spends a lot of money on servers, which adds to its bottom line in a business where the price of the base service is decreasing.

Did Akamai just take sides in the taming of the web?

I also see this as an admission that in order to deliver content at a large scale, you’re going to have to get in bed with the carriers. That could be bad news for the likes of Netflix (and the Internet at large). This move takes what used to be a third-party content delivery system and gives carriers the option to control it. Frank Childs, a director of product marketing for the networks business at Akamai, explained that this isn’t necessarily a bad thing.

Hypothetically speaking, he explained that Netflix might benefit under this sort of arrangement because it could work with particular ISPs to ensure its content arrives using the most efficient route for the ISPs, giving Netflix users a better experience and perhaps saving Netflix some bandwidth costs. Childs also suggested the ISP would benefit because it could route the traffic most efficiently for it and possibly monetize traffic it previously hadn’t been able to earn money from.

But Childs also acknowledged that in some cases the product will cause channel conflict for some customers. For example, if you are Disney, do you work with Akamai as your CDN or with carriers? What if you negotiate CDN rates along with the retransmission fees you are already discussing with the pay TV side of the house at many ISPs?

At the same time, if you are Netflix, do you want to work with two or three CDNs, or do you want to negotiate with dozens of carriers in the markets where you want to deliver content? Consider also that those CDNs are willing to fight some pretty public battles with ISPs to protect your and their business.

As for Akamai’s product, it will be followed up with more announcements from Akamai throughout this year as the company seeks to continue adapting its business to the needs of the web. Call it realpolitik, or maybe just business.

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Cambridge, Mass.-based Akamai is the great-granddaddy of CDNs, while Cotendo, of Sunnyvale, Calif., was seen as a leaner, younger competitor that leveraged outside data centers so it could concentrate on building and delivering web content acceleration services. Akamai fields 95,000 servers worldwide and delivers between 15 percent and 30 percent of all Internet traffic. But the CDN landscape is changing as more players — including some of the world’s largest telcos — enter the arena.

The news wasn’t totally shocking — there had been rumors that Cotendo was in play with Akamai on a list of several possible suitors that also included Juniper Networks and AT&T  – two of Cotendo’s partners.

In the statement announcing the deal, Akamai CEO Paul Sagan said:

As we look to accelerate growth across the dynamic landscapes of cloud and mobile optimization, we are excited to be joining forces with Cotendo. Cotendo’s technology, partnerships and people are a strong complement to Akamai. Together, we believe there is tremendous opportunity for our combined technologies as enterprises embrace the move to the cloud and seek solutions for an increasingly mobile world.

The world of CDN is definitely changing with the proliferation of connected devices and sensors.

Feature photo courtesy of Flickr user 401K

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What companies like Appcelerator, Cotendo and Urban Airship–which all work with web developers to speed delivery of content to consumers–really worry about is the growing fragmentation of the software stack they work with as well as potentially hobbling patent litigation.

“Fragmentation is occurring at every layer for the stack–at the tools level, at the clouds themselves, the carriers and everything in between,” said Jeff Haynie, CEO of Appcelerator, speaking at the Mobilize 2011 conference on Monday.

Another, related issue, is the rise in IP litigation which makes nearly everyone nervous, said Scott Kveton, CEO of Urban Airship. ”The lawyers are killing it, and it’s a bummer because it’s stifling innovation.”

Patent battles are raging around the industry with Oracle’s ongoing litigation against Google for its use of Java in Android, as a high-profile example.

Perhaps more mundane a problem is the age-old issue of latency.

As more people demand richer and more dynamic content, there’s a technology challenge, said Shlomi Gian, GM mobile services for Cotendo. “As content gets more dynamic and less cacheable, we still want it fast. We want it as fast as our desktop. today it takes 10 to 12 seconds to load a page. That gap is an opportunity,” Gian said.

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