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Rob Powell from Telecom Ramblings writes about DT entering the CD game through a partnership with Edgecast:
The international wholesale division of Deutsche Telecom (DT: chart, news) entered the content delivery (CDN) business today, announcing a partnership with Edgecast. They are the sixth carrier to enter the CDN marketplace in any substantial way, and the first based in Europe. One wonders why they didn’t just buy Edgecast, which is about a hundredth or even a thousandth of their size.
Acquiring a company that has or should have external customers as well is not that easy if there are existing contracts. Second, besides passing with all the Seed, Series A, and Series B investors, it will have to pass DT’s board, which might become overall a more lengthy discussion. Third, if Edgecast stays a somewhat independent company after being acquired the direct parentship with the buyer will most likely lower internal billing and charging rates – the kind of stuff that happens when you deal with your own internal division – and thus lower the value of Edgecast. On the other hand, the buyer could increase the internal billing rates to increase his acquisition’s value, but with exploding need for having a CDN in countries where you don’t have sufficiently build-out infrastructure or co-location space that might become very very expensive for the mother company :) Which brings me to the next point:
The three non-US based carriers – Reliance Globalcom, Tata Communications, and Deutsche Telecom – have all chosen to enter via partnerships and resale agreements. They are leveraging their networks of course, but mainly outside of the US. The reason, quite simply, is that as powerful as they are they just don’t have the US based assets to compete more directly, and the US remains the revenue center of the CDN world for now.
I’m not sure what Rob means here: If DT wants to resell its content it would need the required content licenses. That could work for fat-tail offerings in German and European programming, but certainly not for US programs – these would compete with local content agreements. I think that mainly content from the US is going to be transported to Europe.
So I rather suspect that DT might want to have a delivery platform towards European countries where they don’t have a strong local presence in terms of network connectivity, network agreements, intra-connect agreements (which I think they actually well do), or co-location space or infrastructure for a CDN. It’s interesting to connect the dots if your read recent European press releases of Edgecast and compare it with DT’s CDN / infrastructure footprint.
On another note, they could of course leverage Edgecast for distributing T-Mobile US (DT’s mobile carrier in the US) content to (Home) femto cells or other digital home equipment…
But you might have noticed by now that Edgecast’s press release doesn’t really state what the partnership is about, other than their CDS product is going to be sold through the wholesale division of Deutsche Telekom operations. And if you look at Deutsche Telekom ICSS Network Map, it becomes clear why this is a win-win situation that does not really justify an acquisition, but is perfect for a partnership. For now.
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