AT&T, Level 3 round out top 5 CDNs

AT&T (NYSE: T) and Level 3 Communications (NASDAQ: LVLT) scored well in a recent assessment of content delivery network (CDN) providers conducted by the Yankee Group, taking fourth and fifth place, respectively, in the crowded market.

Ranked by a long list of criteria including “innovation,” “openness” and “usability,” the two carriers were categorized as “contenders,” surpassing pure-play CDNs such as Highwinds and BitGravity and trailing only three market leaders: Akamai, Limelight and EdgeCast.

AT&T’s still-growing CDN offering now reaches 33 points of presence, mostly inside its domestic footprint. But the carrier’s real strong suit, according to Yankee, is the services it adds to its CDN — digital rights and asset management, advertising, transcoding and other services – through a mix of internal development and partnerships with the likes of ExtendMedia, Move Networks, Qumu and Stratacache.

“AT&T still has a long way to go in building out the offering, sales organization, CDN nodes and content management and workflow capabilities to provide a solution that can stand on its own two feet against the likes of Akamai,” David Vorhaus, Yankee Group’s senior analyst, wrote in the report. “Given the capital resources at its disposal, though, and the strong early traction of the offering, we expect AT&T to move down this path rapidly, with an acquisition of a dedicated CDN a strong possibility in the near future.”

Level 3 Communications’ home-grown CDN strategy is a mixed picture of internal problems and market success, Vorhaus said. “On one hand, there have been internal conflicts around account placement and struggles with realizing the vision of a bundled content delivery solution with Level 3’s traditional wholesale products. Moreover, Yankee Group believes that Level 3’s position of not focusing on internally developed ancillary services in digital media distribution is somewhat misaligned with what many customers are asking for. On the other hand, the company has been remarkably successful in ramping the business up from almost nothing and getting its foot in the door on some of the largest RFPs in the market, due in large part to competitive pricing and strong streaming services.”

Level 3’s analytics suite offers an “unmatched” level of reporting detail that is also highly customizable, Vorhaus said. And the carrier recently restructured its operations to address its internal problems.

Not all service providers did well in relation to standalone CDNs, however. Internap’s hardships in the CDN space are well-documented, its $217-million acquisition of VitalStream in 2006 resulting in a $100-million writedown in 2008. But Vorhaus said the company is taking postitive steps to improve: installing a new chief executive officer with video delivery experience, revamping its core CDN product and reporting suite and partnering with asset management specialist The FeedRoom.

“The challenge now is not one of technology or vision, where Internap can go toe-to-toe with anyone in the market, but rather one of overcoming the preconceived notions that longtime CDN customers have of Internap,” Vorhaus wrote.

Of the 10 CDNs reviewed in the report, only CDNetworks — which actually has the third largest share of the CDN market in terms of revenue, buoyed by its strong incumbent presence in Asia — earned a lower score than Internap.

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