Now, CDN.net can’t quite rival the likes of Akamai, Limelight or Level3 in terms of points of presence (PoPs): OnApp’s federation includes just over 150 PoPs, whereas Akamai, for example, has around 1,200 (also, CDN.net itself has launched with just 30 PoPs, although it says more can be added according to demand). However, its services are flexible and available on a pay-per-use basis, allowing it to target smaller businesses rather than blue-chip customers.

And now London-based OnApp is taking on the big CDN players by gunning for their resellers.

Business-in-a-box

It’s doing so by essentially giving those resellers a CDN business-in-a-box. OnApp has “open-sourced” the tools used to build CDN.net, so now service providers – whether or not they are currently in OnApp’s federation, such as PEER1 and UK2 are – can roll out their own rival. The package contains a customer portal, configuration and reporting tools and billing functionality, and it will be available to providers for a usage-derived monthly fee with no long-term contract and no minimum bandwidth commitments.

According to OnApp Federation managing director Stuart Simms, flexibility is again the key here, as service providers can use the ready-made storefront to sell specialized CDN services. What’s more, he promised, OnApp is promising greater profitability than the Akamais and Level3s of this world can offer:

“The OnApp federation is a diverse community of service providers, and now there’s an easy way to tap into that rich resource, and create unique CDN services based on whatever attributes are important to you and your customers — location, speed, quality and more. You can build CDNs across a handful of locations, or across the world; offer more attractive pricing for end users; and still get more margin than you would from legacy vendors, who have to recoup the cost of the entire network.”

Remember that CDN is only part of OnApp’s strategy: storage is another big piece, and compute capacity is coming up too. So this “instant CDN” package, as OnApp calls it, is a model for other virtual service provider packages that will come out later this year.

New entrants

The key here is that these packages are no longer restricted to those service providers who were already offering up their data center resources to be sliced and diced in OnApp’s federation. Now those resources can be exploited by entirely virtual service providers who have no physical infrastructure of their own to offer, but who are willing to pay those fees to OnApp and, in turn, the real infrastructure owners who are making this all possible.

Back to Simms:

“Opening up the federation is the next phase in its growth. It’s great news for our customers, because it’ll drive more traffic for the companies supplying the federation. It’s great news for other service providers, who can take advantage of our CDN service alongside their existing services.

“We’ll see other companies using the network too — technology companies who have struggled with the capital expense of building their own network, who can now focus on innovation. We’ve created a launch pad and channel for business applications, games, social media apps, app stores and all kinds of innovative new services that need global performance and reach, out of the box.”

OnApp said this week that it has almost 600 service provider customers in 68 countries, who are all running clouds based on the company’s orchestration software (which was how OnApp first created its federation). The firm claims this makes it “the most widely used public cloud platform on the market today”.

Of course, this scale doesn’t translate directly into PoPs, and those contemplating reselling OnApp’s CDN are still going to get more reach from Akamai, Limelight et al. However, for a lot of providers – both real and wannabe virtual – OnApp’s terms may prove mightily tempting.

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Level 3 is alleging that Comcast is trying to do away with the open Internet by demanding Level 3 pay it for transit. Comcast, on the other hand, is taking the stance that this is just business as usual. Even without taking sides, one has to wonder: Why is Comcast always the one that’s getting in trouble?

The answer, in short: Comcast has become the quintessential broadband bully — an image that is part outside perception, part self-fulfilling prophecy. Here’s the list of missteps and allegations that shaped Comcast’s image:

Sabotaging P2P. Comcast’s first major brush with net neutrality advocates happened when the company decided to block its customers’ P2P file transfers in the summer of 2007. The company eventually changed its network management practices under pressure from the FCC, which nonetheless proceeded to impose restrictions on Comcast’s handling of P2P traffic. The proceedings included memorable moments like an FCC hearing that was packed with people paid by Comcast to “save seats.”

Killing net neutrality and neutering the FCC. Comcast went to court to fight the FCC order even though it had already implemented much of it before the commission had issued its demands — and won. The court ruling effectively crippled the FCC by restricting its authority over the Internet, and efforts to implement strong net neutrality protection in the U.S. haven’t been successful since.

Spying on its customers. It may have been just one of those ideas that would never see the light of day, but Comcast’s plans to use cameras to figure out who was watching TV at any given time didn’t exactly help the company’s image.

Capping customers’ bandwidth. Comcast was one of the first ISPs to institute a bandwidth cap in the summer of 2008, threatening customers who repeatedly use more than 250GB a month with account terminations. The step was followed by a public uproar. Guess what happened when Charter (chtr) introduced even lower caps half a year later? That’s right: Nothing.

Blocking Hulu. Wait, did they really do that? No, they didn’t. Hulu itself recently did, acting on behalf of Fox, as part of its retransmission fee dispute with Cablevision. In fact, the incident, which briefly prevented Cablevision customers from accessing videos on Hulu, didn’t have anything to do with Comcast. Except maybe for the fact that a merged Comcast-NBC would be able to have Hulu institute similar measures at any time. Which kind of makes you wonder: Was Fox really just out to get more money from Cablevision, or did it try to influence the regulatory merger review of one of its biggest competitors?

Peddling cable modems. Lost in the uproar about Level 3′s allegations was another FCC complaint filed against Comcast yesterday: Cable modem maker Zoom is alleging that Comcast is trying to force its customers to lease or buy Comcast-provided cable modems by shutting out competing products though unnecessary tests and standards. From Zoom’s press release:

“These new standards, among other things, address a modem’s weight, labeling, and packaging as well as its physical appearance following the application of various substances, such as waxes. They also require a cable modem to suffer no degradation in performance at temperatures far in excess of those generally found in the United States and well above the requirement for electronics equipment such as an iPad or a personal computer.”

Merging with NBC. No one really doubts at this point that the merger of Comcast and NBC Universal will go through. Still up in the air, though, is the question of whether Comcast will have to agree to any stipulations regarding its online offerings. These could range from requirements to license NBC content to competitors to a forced divestiture from Hulu, of which NBC currently owns 32 percent.

The current conflict with Level 3 is only adding to the pressure, especially since Level 3 is busy using this to pit Comcast’s Xfinity online offering against Netflix, stating that “the fundamental issue is whether Comcast… has the right to unilaterally set a ‘price’ for access that effectively discriminates against competitors of Comcast’s cable and Xfinity content.”

It’s unclear what exactly the fall-out of the Level 3 dispute will look like — but it’s becoming more and more clear that Comcast’s ability to evoke strong emotions and influence consumers and regulators to action is phenomenal.

Image of the Comcast tower courtesy (CC-BY-SA) of Flickr user Kevin Burkett.

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Netflix has been busy ramping up its online video offering. The company has signed billion-dollar licensing agreements, and most recently introduced a streaming-only subscription tier for U.S. customers. That bet has been paying off; not only are two-thirds of the company’s subscribers now streaming content, but Netflix is also streaming more hours of content than it’s delivering via its DVD rentals. The network management solutions provider Sandvine said in October that Netflix now accounts for more than 20 percent of U.S. Internet traffic during evening hours.

CEO Reed Hastings and his team must have known that this could one day lead to a backlash from ISPs, and the company has been busy advocating for solid net neutrality rules to make sure your Netflix streams don’t get blocked. Netflix filed comments with the FCC in January in support of net neutrality regulation, and the company’s representatives have been back in Washington for a number of high-level meetings with the FCC throughout the year. Netflix filed some further comments as late as a month ago, but none of these interventions anticipated a scenario like the one playing out now.

In fact, a review of the Netflix comments available through the FCC’s website reveal the company has been most concerned about two issues: the possibility of managed services and their impact on the general Internet as well as the threat to competition posed by network operators that are also active in the content business. In its January filing, Netflix writes:

“There is substantial discrimination and consumer harm if a network operator uses its ownership affiliation with a program content provider, or even its bulk buying leverage with a video content provider, to deny attractive programming to a competing online video service. The concern that network operators will use their gatekeeper control over broadband access services to discriminate against unaffiliated content in a variety of ways is central to the Commission’s proposed open Internet policies, and a wide variety of discriminatory conduct that stems from such gatekeeper control should be cognizable under the net neutrality rules.”

Managed services were at the center of Netflix’ most recent comment filed in October:

“(T)he Commission should ensure that specialized services do not unreasonably erode capacity devoted to broadband Internet access services. Requiring service providers to offer some level of guaranteed capacity for broadband Internet services, at reasonable rates to consumers, will ensure that all comers — from today’s Netflix to the “next Netflix”— are able to reach consumers without obtaining the permission of network operators.”

However, nowhere in its filings does Netflix say anything about the possibility of a straight-up toll booth that forces the company to pay more for delivering video traffic based on the CDN or backbone provider it’s working with. The company simply didn’t see this coming, and it’s unclear yet whether it’s willing to take sides in the current conflict.

A spokesperson told me yesterday that there will be no statement from Netflix about the issue. Let’s see if the company changes its mind in case the FCC looks into the current conflict.

Image courtesy of Flickr user Scott Feldstein.

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You’d think the need for copious amounts of bandwidth would drive up prices for wholesale connectivity. But thankfully (for consumers) the price of Internet bandwidth continues to fall. Of course, you and I don’t see it , mostly because our monthly broadband bill stays pretty much the same. The price of declining bandwidth is felt at the wholesale level, and affects companies such as Level 3 Communications.

Prices for wholesale Internet bandwidth — the kind that is sold to content providers such as Google, Yahoo, Facebook, Netflix and Internet Service Providers — are declining at a steady clip. The service provided is known as IP transit. Data released by research firm Telegeography shows that prices for IP transit are declining even as international traffic volumes are growing at more than 60 percent annually.

Although prices are declining throughout the world, both prices and the rate of decline vary sharply depending on the locale. The median GigE port price in New York City has fallen at a compounded annual rate of 22 percent between the second quarter of 2005 and the second quarter of 2010, to under $8 per Mbps – less than one-third the price of a comparable port in Hong Kong, where it has fallen only 15 percent in past five years, to $28 per Mbps.

A lot of the falling prices have to do with location and competition. In the U.S., the competition is pretty healthy, and that’s why the prices are declining. In Asia, the number of Internet bandwidth providers (and the network capacity) is limited for now, and you can see that reflected in the prices.

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Advanced infrastructures are required to deliver those contents efficiently. The Internet has been built on a best-effort model, but is under increasing pressure as traffic skyrockets. To speed delivery times, web pages and video content are being served through content delivery network (CDN) technologies, which optimize the network usage through different techniques, including primarily caching servers and, increasingly, P2P technologies for hybrid approaches. Software is delivered through cloud computing and its infrastructure offered as a service (IaaS).

In the cases of both CDN and IaaS, end-users benefit from third-party providers’ infrastructure investments, which are shared among the providers’ clients. End-users, therefore, can operate more rapidly and transform most of their capital expenditures into more variable operating expenditures. They can also be more flexible and are able to scale more readily in the case of traffic spikes or rapid growth.

The objectives and benefits of CDN and IaaS solutions are therefore very similar, even though they address generally very different types of services and applications. CDN and IaaS have therefore many common points, both on technology and business aspects, and could converge at some point as they have developed expertise on some complementary elements of the infrastructure. The overall architecture is very similar, as well, with both operations relying on similar building blocks, such as distributed data centers. However, CDN focuses mostly on network aspects to ensure efficient delivery, while IaaS is primarily about virtualization and software abstraction of the hardware layer. But both assets may become useful for providers (telcos, etc, …) and in the context of rising Internet traffic that could bring some congestion and impede the quality of service, they are likely to converge.

This report looks at the different business cases for both technologies and identifies areas of opportunity. The report also provides a look at key players, a market forecast, and recommendations for CDN players, Internet giants, technology service providers, hosters and telcos.

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In an email to its customers today, Amazon said that the service will be available later this year and will utilize the company’s points of presence in North America, Europe and Asia.

This new service will provide you a high-performance method of distributing content to end users, giving your customers low latency and high data transfer rates when they access your objects. The initial release will help developers and businesses who need to deliver popular, publicly readable content over HTTP connections.

Ironically, Amazon was beaten to the CDN punch by New York-based Voxel, which started offering CDN services based on Amazon’s S3 service. ”We are announcing this right now because we want to give a heads up to our customers,” said Adam Selipsky, VPr of product management and developer relations for AWS. It’s more like putting their competition on notice, but Adam was too polite to say that. “It is a more horizontal and broad offering.” In other words, while it is not going to replace Akamai tomorrow, it is going to make CDNs affordable even for the tiniest startup, without major cash outlays.

Why is this service disruptive? Amazon is going to bring a level of transparency to a business that has a sales model much like a brokerage firm in the 1980s. Amazon wants to make buying CDN services as simple as buying a book. Amazon executives told me that company is going to be charging its customers on usage instead of the long-term contracts current players foist on their clients.

In addition, the company will publish its prices on the web — most importantly it is going to be inexpensive. And that will make the service even more attractive to hundreds of small companies who are already using Amazon Web Services for their web operations, who don’t want to sign long contracts with CDN operators. When I asked Tal Saraf, general manager of the AWS Content Delivery Service, if the company expected the video-delivery to be one of the most used service, he said the company expected to delivery all sorts of content, including web objects (images, JavaScripts etc.)

You’ll start by storing the original version of your objects in Amazon S3, making sure they are publicly readable. Then, you’ll make a simple API call to register your bucket with the new content delivery service. This API call will return a new domain name for you to include in your web pages or application. When clients request an object using this domain name, they will be automatically routed to the nearest edge location for high performance delivery of your content. It’s that simple.

Amazon executives declined to talk about the pricing. “We will talk about the pricing when we launch the service,” Selipsky said. He declined to comment on the impact the pricing will have on their competitors -– nearly two dozen content delivery networks –- and how much their business is going to suffer. Dow Jones Venture Source estimates that from 2005 through the second quarter of 2008, almost $980 million was invested in content delivery companies.

If Amazon delivers what it is promising -– a simple, API-based CDN – then it would put then not only ahead of all CDN players, but also force rivals to meet the rules (and pricing) set by Amazon. There is a good chance that it’s going to drive weaker players right out of the game.

My final take on this news: Akamai is less likely to be impacted in the near term, but it further commoditizes the CDN business and forces a big shakeout in the industry, taking down the small and the weak. Akamai has been focusing on value-add services, as a way to stay ahead of the commoditization of the basic CDN services.

Read Amazon CTO Werner Vogels take on the news on his blog.

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Not everybody seems to be happy about these developments: Some articles this week suggested that the BBC is switching from its current content delivery network Akamai to Level3, causing much pain for smaller ISPs that don’t have the right peering agreements in place. A commenter on Thinkbroadband.com even mused that “the BBC web-site and IPlayer will slow to a crawl and possible stop loading altogether” soon. Here’s the good news: The sky isn’t falling — and the new changes actually hint at bigger things to come.

The BBC has started to offer the new, H.246-based streams alongside its current offering in recent days, with the lower bit-rates still being the default option. The Beeb’s Anthony Rose explained last week that the iPlayer will eventually auto-detect the bandwidth of its users and serve the higher-quality streams if possible. Lower-quality streams will still be available for users without the most recent version of Adobe’s Flash player, which includes all those Wii users who access the iPlayer through their gaming console.

The notion of a gradual expansion was lost on a few writers who focused on ISP-related issues of the switch this week. Rose had mentioned that the iPlayer’s H.246 streams will be served by Level3. The iPlayer has been exclusively powered by Akamai so far, which is the preferred CDN of some smaller ISPs. A few articles made it look like the BBC switched from Akamai to Level3 over night, potentially putting many smaller ISPs out of business — the always watchful Dan Rayburn called these stories “shoddy reporting,” because Akamai will continue to deliver non-H.246 content.

The core of the issue is that Akamai has its caching servers directly on many of the affected ISP’s networks, whereas Level3 traffic comes from outside of an ISP’s network and as such could be more expensive, as Telecomramblings.com explained quite eloquently. How much more expensive remains to be seen, but it’s clear that demand for the iPlayer is continuing to grow strong. UK ISP Plusnet saw its iPlayer traffic numbers double during the opening ceremonies of the Olympics and triple during select competitions.

We can expect these numbers to continue to grow as the BBC is working on bringing the iPlayer onto new platforms. The player is starting to become available on set-top boxes in addition to PCs, iPhones and Wiis. And to me, the real story of the introduction of higher-bandwidth streams seems to be the BBC aiming at an on-demand experience in the living room. Sure, a crisp full-screen stream looks great on your PC, but it’s even more of a requirement if you want to play video on devices connected to a big plasma TV.

Anthony Rose even hinted at those plans in his blog post when he mentioned that the new video codec will go hand in hand with better audio quality, adding: “The bass is deeper, the treble tighter, the overall effect is a noticeably better listening experience, particularly if you listen with headphones or hook up your computer to your TV or home sound system.”

All signs point to a new generation of devices offering Internet experiences alongside video content on your flat screen. The BBC clearly wants to be ready for this — even if some ISPs might not be.

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