Commoditization and the Future of Content Delivery Networks: Part Two

In Part One of this article—posted last week— we dealt with how CDNs are working to differentiate themselves in the face of the commoditization of bandwidth. Here in Part Two, we’ll look at the issues surrounding how commoditized bandwidth may shape the future development of CDNs.

Embracing the Commodity
The realities of a commodity-type market are such that there’s little wiggle room when it comes to trying to turn a profit in a low-margin business. As such, companies looking to thrive in this type of space must continuously look for new ways of driving efficiency, both in their technology as well as their business practices. "Bandwidth is about as commoditized as it can be," says John Cahill, VP of sales for Invisible Hand Networks. "It can’t support a large sales and marketing overhead. The price of bandwidth isn’t going to jump, but it’s still going to have to make a profit. The best way to do that is to automate the least efficient part of the business process: the selling of bandwidth."

Invisible Hand’s Merkato technology enables real-time pricing and allocation of bandwidth through the use of automated agents. To learn more about how this technology works and what its benefits are, please refer to the StreamingMedia.com article Merkato Enables Dynamic, Real-Time Bandwidth Marketplace.

But despite the promise held by a dynamic, real-time bandwidth marketplace, Merkato’s customer base has been limited primarily to clients who maintain and manage their own servers; it has not caught on among the major CDNs as a way to provide flexibility to their bandwidth-buying customers. "The primary roadblock right now is buying power," says Cahill. "We have never set out to be an actual operator of services. As a result, we still don’t have the purchasing clout."

Cahill and his cohorts at Invisible Hand have approached most, if not all, of the major CDNs about incorporating their Merkato technology directly into their respective networks, but that has proved to be a daunting challenge. "The ability to tie into their networks is outrageously complex," Cahill laments. "It’s too complex at this point to efficiently integrate an automated agent system such as ours and then control the multiple points."

While there are varying definitions of what exactly a CDN is, the traditional CDN consists of multiple content access points (CAP) spread across a geographic area. For Merkato to work effectively with a CDN, the technology would have to be installed at all of these points. In the case of a CDN like Mirror Image, that would mean managing upwards of 20 CAPs; for Akamai, that number increases a hundredfold. "To work with Akamai, there’d have to be some way to speak to all 2,000 of these content delivery nodes. It’s a nightmarish proposition at this point in time," Cahill concludes.

Ultimately, Cahill envisions a future where there could be a "something that looks like a CDN with our Merkato technology at the core, which is the next step beyond what we do today," he says. "Basically a CDN powered by Merkato is what we’d like to see."