The State of the Stack
Ultimately, the ability to operate a CDN application, be it centralised or distributed, is now a telecommunications skill that operates outside the telco. The telcos' own historic pricing model has given rise to a strange situation where it is now cheaper for a telco to buy its own bandwidth, bundled with a CDN/OVP session/presentation/applications layer service offering from a CDN, and sell that (often "white labelled") to their clients as its own CDN service than it is for that same telco to buy its own bandwidth internally and build its own service offering and sell that to its clients.
Equally, despite this incongruity, it demonstrates good stack strategy, with each staying close to its own layer where its real skills are. Telcos are always in a strong selling position: I foresee continued gradual growth in the media and entertainment telecoms sectors in Europe as telcos try to become IP CDNs and extend the existing portfolio of broadcast telecoms (ATM/Frame/MPLS/FacilityLine/etc.) to include IP and streaming delivery. These they can offer to their large and established broadcast clients, which are now moving to become IP focussed.
Meanwhile, the traditional CDNs will also grow, selling on the advantage that they have access to many telcos (therefore offering a higher SLA than just one telco can offer, since it always has multiple options).
So the CDNs and the telcos are creeping outside their natural layers on the stack!
Storm on the Horizon?
There is also a new category of service offering emerging quickly: clouds. In some ways, the traditional CDN could be viewed as a PaaS (platform as a service) offering platforms for content distribution and hosting in the same way that Amazon's CloudFront offers web or database hosting.
IaaS (infrastructure as a service) providers such as Amazon's EC2 give you the flexibility to completely define your own platform and pay for exactly what you use.
For example, Amazon EC2 allows me, for 60 cents/hour plus 15 cents/GB data transfer, to run a simple four-server live CDN with a distribution server located locally to East and West Coast U.S. users, European users, and, more recently, Asia-Pacific users. This simple setup potentially offers enough capacity for many thousands of viewers. By contrast, the CDN I built 10 years ago and closed at the start of this year (Global-MIX) cost many hundreds of thousands of dollars to implement and many tens of thousands of dollars a year to operate.
Is EC2 therefore a challenge to the traditional CDN? Certainly, where the elasticity of the pricing matches the elasticity of the use, clouds are more and more being considered as a way to rapidly and temporarily get "scale" for large webcasts.
On the other hand, for 24/7, steady-flow VOD traffic, better pricing deals can be obtained from CDNs without a doubt.
However, for the odd small live event, the option to use a server in EC2 saves an endless rigmarole of getting enough of your own servers online with sufficient connectivity (as a direct comparison); also, many CDNs don't find custom provisioning easy. IaaS offers complete freedom and a pay-as-you-go basis.
So to recap, I am focussing on CDNs that can offer live video among their services and infrastructures that can be used as CDNs, such as telcos (firmly in the lower stack layers up to IP), and clouds.
It's worth mentioning that, while Amazon doesn't extend itself to being a telco, Google has been playing with the idea (http://nextbigfuture .com/2010/02/google-plans-gigabit-fiber-internet-for.html). So perhaps "stack creep" is not just an upward phenomenon to capture more market share, but also a downward phenomenon to control costs and the supply chain.
Companies and Suppliers Mentioned