[opendtv] Apple Quietly Builds New Networks

From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
Date: Tue, 4 Feb 2014 07:31:17 -0500

Some interesting info in this WSJ article. As Bert suggests, larger operators
like Netflix and Apple are building out the infrastructure to improve OTT
delivery of content.

Regards
Craig

http://online.wsj.com/news/articles/SB10001424052702304851104579361201655365302?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304851104579361201655365302.html

Apple Quietly Builds New Networks

Apple Inc. AAPL +0.19% is stitching together a network of Internet
infrastructure capable of delivering large amounts of content to customers,
giving the company more control over the distribution of its online offerings
while laying the groundwork for more traffic if it decides to move deeper into
television.

Apple's online delivery needs have grown in the last few years, driven by its
iCloud service for storing users' data and rising sales of music, videos and
games from iTunes and the App Store. But the iPhone maker is reported to have
broader ambitions for television that could involve expanding its Apple TV
product or building its own television set.

Snapping up Internet infrastructure supports all those pursuits at once. Apple
is signing long-term deals to lock up bandwidth and hiring more networking
experts, steps that companies like Google Inc. GOOG -4.03% and Facebook Inc.
have already taken to gain more control over the vast content they distribute.

Bill Norton, chief strategy officer for International Internet Exchange, which
helps companies line up Internet traffic agreements, estimates that Apple has
in a short time bought enough bandwidth from Web carriers to move hundreds of
gigabits of data each second.

"That's the starting point for a very, very big network," Mr. Norton said.

Apple's hardware business is increasingly tied into services delivered over the
Internet. In 2011, it rolled out the iCloud service, which stores and syncs
emails, documents, photos, music and video so users can access them from
various Apple devices. In addition, it is delivering more content from its
iTunes and App Store—which brought in $16 billion in revenue in the year that
ended in September—while pushing out regular, data-laden updates of its mobile
and PC operating systems.

The company's need for bandwidth and supporting infrastructure will grow if it
moves further into television. Apple Chief Executive Tim Cook has said
improving the TV viewing experience is an area of interest for the company and
that it has a "great vision" for television. On a conference call last week to
discuss its latest earnings with analysts, Mr. Cook said Apple is on track to
break into new product categories this year, fueling speculation about a new
television or revamped video service.

Apple ramped up its infrastructure expertise in September when it hired Lauren
Provo, a well-known executive who at Comcast Corp. was responsible for hooking
up the cable company's Internet service with other networks.

It also hired Jean-François Mulé, former vice president of technology
development at a TV research and development consortium called CableLabs,
according to his LinkedIn profile. Mr. Mulé wrote on his profile that his title
at Apple is engineering director.

An Apple spokesman declined to make Ms. Provo or Mr. Mulé available for an
interview.

The hires signal Apple's desire to bolster its ability to link its data centers
with the large networks that can carry its content to users around the world.
Ms. Provo was in charge of relationships with companies that shared Internet
traffic with Comcast. She gained extensive experience managing disputes with
large Web companies when she worked for the cable company, which is the biggest
supplier of Internet service to U.S. subscribers, according to Leichtman
Research Group, a media consultancy.

Direct connections between Apple's data centers and the networks that connect
to customers would give the company more control over quality. An iPhone user
who subscribes to Sprint Corp., for instance, might download a song more
quickly if Sprint's network links directly to the Apple data center storing
that song, rather than channeling the file through a series of middlemen.

Apple is also hiring experts with years of experience building so-called
content delivery networks. The idea is to store frequently accessed content
like streamed movies or music closer to their users, cutting down wait times.

The company's first steps in the networking sector look familiar to network
engineers who have watched other big Internet companies wean themselves off
third-party providers. Netflix Inc. NFLX -1.21% used to outsource practically
all of its video delivery work to Akamai Technologies Inc. AKAM -3.50% In 2012,
the streaming-video company cut its costs by creating its own delivery network,
called Open Connect, and sprinkling the computers that store its video library
around the world. Netflix's own data caches now deliver about 70% of that kind
of distributed content in the U.S., according to network researcher DeepField
Inc.

A Netflix spokesman declined to comment.

DeepField says Apple distributes most of its Internet content through Akamai's
network of servers. Akamai executives recently said they are renegotiating a
multiyear contract with their top customer, a process that typically results in
lower fees for the company.

A spokesman for Akamai, which is expected to report financial results on
Wednesday, declined to comment.

Several analysts, however, doubted that Apple could bring all that business
in-house overnight.

"It's a natural progression for a company like Apple," said Aaron Blazar, vice
president at telecom consultancy Atlantic-ACM. "It can take several years."

Write to Drew FitzGerald at andrew.fitzgerald@xxxxxxx and Daisuke Wakabayashi
atDaisuke.Wakabayashi@xxxxxxx

[opendtv] Apple Quietly Builds New Networks

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