Apple's CDN Now Live: Has Paid Deals With ISPs, Massive Capacity In Place
Since last year, Apple's been hard at work building out their own CDN and now those efforts are paying off. Recently, Apple's CDN has gone live in the U.S. and Europe and the company is now delivering some of their own content, directly to consumers.
Context & Ripple Effects
This is the payoff of an arc StreamingMediaBlog has tracked all year: the February report that Apple was building out its own CDN to deliver content to consumers, followed by May's disclosure that Apple was negotiating paid interconnect deals with ISPs for that network. Both have now landed — the CDN is live in the U.S. and Europe, delivering Apple content directly, with ISP deals confirmed rather than merely negotiated.
The move puts Apple on the opposite path from AT&T, which in December 2012 abandoned its in-house CDN entirely and chose to resell Akamai's CDN services instead. The pickup here is unusually broad — Gigaom, Ars Technica, Engadget, VentureBeat, MacRumors, Macworld, AppleInsider and iMore all ran the story the same day — reflecting how much rides on whether a company at Apple's scale can make self-delivery work where carriers could not.
First-order effects
- Apple stops routing its own media traffic through third-party CDNs in the U.S. and Europe, converting delivery from a recurring vendor expense into owned infrastructure whose marginal cost falls as utilization rises.
- The confirmed paid interconnect deals give Apple guaranteed capacity into consumer ISPs, insulating its streaming quality from congestion and from the pricing of intermediary CDN contracts.
Second-order effects
- ISPs gain a direct-paying large customer for interconnect capacity, establishing paid peering as a revenue line beyond transit — a template other big content owners will be pressed to follow.
- Commercial CDN providers lose one of the largest single sources of delivery volume they could ever serve, sharpening their dependence on mid-tier customers and pushing them toward differentiated services over raw bandwidth.
Third-order effects
- If Apple's model holds, delivery infrastructure splits into two tiers: hyperscale content owners that self-provision and pay ISPs directly, and everyone else buying from commercial CDNs — with AT&T's retreat from in-house delivery marking where the second tier's economics stop working.
- Paid interconnect becoming standard for major content owners strengthens the argument that last-mile access, not backbone transport, is the scarce asset — raising the stakes in the net-neutrality and peering debates already running in 2014.
The trend: Content owners at hyperscale are vertically integrating content delivery — building their own CDNs and paying ISPs directly for interconnect — while the commercial CDN market consolidates around customers too small to do the same.