Akamai is joining forces with AT&T to help the telecom carrier better deliver Web and entertainment content to mobile consumers.
The two will team up over the next year, with AT&T folding much of Akamai’s content delivery platform into its IP network. The system will be jointly marketed, managed and supported by the duo.
The consolidation will allow AT&T to offer improved content delivery network services to its business customers. Ultimately, consumers will see speedier and higher-quality delivery of digital content, video and apps, the companies said.
The deal calls for Akamai to place servers at the edge of AT&T’s IP network and in other U.S. locations. AT&T will switch its current CDN services over to Akamai’s platform next year. The global strategic alliance kicks off first in North America at first and will expand worldwide within the next 12 months.
One investor concern about Akamai is that telecom companies will develop content delivery networks on their own, encroaching on Akamai’s long-term place in the industry. Those fears seemed to be momentarily appeased Thursday, with Akamai’s stock rising 8.5 percent on the news to close Thursday at $39.06 per share. AT&T remained relatively steady around $33.45 per share.
Neither company respond to our request for further details.
Looking to Consolidate
The rising popularity of smartphones and tablets is forcing carriers to find the best and fastest ways to deliver content, in addition to providing simple calling and message services.
Rather than let networks begin to develop those platforms on their own, Akamai is hoping it can capitalize on that demand. In addition to its deal with AT&T, the company forged a similar partnership last month with French telecom provider Orange. It also launched a service called Aura Networks Solutions that allows carriers to deliver licensed content to mobile devices.
“Akamai has had relationships with network operators since the beginning,” Frank Childs, director of product marketing and carrier products at Akamai, told the E-Commerce Times. “Now, with AT&T, we have a strong network relationship where we can put our technology deeper in the network to resell capacity to their enterprise customers. This is a part of a broad strategy of making CDN available to operators. It’s a good market not only to sell technology but to expand channel presence.”
That kind of consolidation is only likely to continue, said Rob Enderle, principal analyst at Enderle Group.
“I think telecom is coming to the conclusion that they need some connection to content, now that the content owners are starting to look at ways to get to the user directly,” Enderle told the E-Commerce Times.
Bigger Not Always Better
While Akamai and AT&T claim the move will directly benefit the consumer, sometimes the relationship between two interests within the same industry doesn’t always work out, Enderle pointed out. That could be especially true given AT&T’s issues with services and bandwidth.
“Telecom doesn’t really know how to manage content, and content companies are pretty much clueless about telecom. Some of these combinations are going to be ugly,” he observed. “The goal is to provide better services to the AT&T customer, but AT&T is a network that is over capacity at the moment.”
Akamai says it can help AT&T on that end, as well, however.
“One of the value propositions that Akamai brings is its mechanism to address bandwidth issues,” Childs said. “Operators always have to expand bandwidth. By putting in sources of where the content comes from deeper in the network, we have a more efficient way to deliver Internet services. That tends to be part of a broader bandwidth expansion strategy for many operators.”