Telkomsel launches CDN on Ericsson, Akamai platform

Indonesian mobile operator Telkomsel has launched Asia-Pacific’s first content delivery network (CDN) solution over a mobile network. Using Akamai and Ericsson’s Mobile Cloud Accelerator platform and Telkomsel’s mobile network, Thomson Reuters is asking its customers in the finance community to pay extra to get its content delivered faster.

 

We believe that this platform has its pros and cons. On the positive side, mobile operators can reduce international data transport costs, ease network traffic, and potentially open up a lucrative new revenue stream as clients, such as Thomson Reuters, see the benefit of providing a high-quality video service proposition for their customers.

 

However, on the negative side, content providers will need to convince their customers that they are actually getting a better service, especially when there are so many variables that can affect quality of service (QoS) on a mobile network. In addition, operators could face risks from net neutrality regulations when deploying these platforms.

 

In February 2011, Ericsson and Akamai announced the launch of the Mobile Cloud Accelerator, which provides CDN and caching capabilities using Ericsson’s SmartEdge Border Network Gateway and Mobile Packet Gateway.

 

Out of a handful of trial customers, Ericsson announced that Telkomsel would launch the first commercial service in February 2012. Telkomsel’s CDN offering reduces the download time of content by up to 70% compared to downloads from the same content sources without acceleration.

 

While CDNs are widely deployed in the fixed broadband market, they are yet to be widely used by mobile operators. However, Asia-Pacific operators such as Telstra, KT, SK Telecom, and KDDI are trialing CDNs for their mobile networks.

 

CDNs are important for mobile operators as they can lead to significant international data transport savings. In emerging markets, international data transport costs can make or break the data business case. There is also a growing desire among operators in developed Asia-Pacific markets to reduce international data transport costs. As a result, Akamai and Ericsson’s platform could provide a considerable cost-saving opportunity for telcos.

 

However, mobile CDNs are more than just a defensive mechanism to reduce costs. They can also help to alleviate traffic congestion and provide a new revenue stream for operators. The Telkomsel deal is a case in point. Under this deal, Telkomsel receives a share of the service revenues collected by Thomson Reuters for the delivery of real-time and time-sensitive content. While Telkomsel does not sell its mobile CDN proposition directly to customers, other operators will prefer to directly interact with end users.

 

These customers could include large customer-centric companies (such as concert ticketing firms) that want to improve their rich-media website experience on handsets. The other key target segment is enterprises, which may want to provide a high-quality video service for their employees located around the world. A mobile operator with a strong mobile CDN strategy could potentially reduce churn and gain new subscribers based on its reputation for providing a superior QoS.

 

 

 

We believe that the Ericsson-Akamai platform will face net neutrality concerns in some markets. CDNs don’t prioritize traffic, but instead improve QoS by having the content stored closer to the network edge. However, offering a better QoS for traffic that only comes from the CDN through a network gateway does effectively prioritize that traffic.

 

While the Indonesian regulators have not questioned Telkomsel’s approach, we doubt that regulators in other countries will be as lenient. Thomson Reuters has agreed to sell the service in Indonesia rather than Telkomsel, which is an attempt to overcome any net neutrality issues, as content providers have traditionally been allowed to charge for premium content. However, as Thomson Reuters has partnered with an operator, the net neutrality argument could swing back towards telco involvement.

 

Pricing models that offer prioritization in the mobile space have previously failed miserably. The main marketing problem for telcos is that there are so many variables around mobile network performance that it is impossible to “guarantee” performance. This leads to the question of how does the customer paying for prioritization (be it an end user or content provider such as Thomson Reuters) prove that they have “better” performance?

 

As there are so many variables in network performance, application- or user-prioritized performance can only be measured relative to other apps or users. As a result, customers can still have a poor experience at certain times or in certain locations, but one that is not as poor as that faced by other apps or users. That is hardly a compelling proposition, especially for the discerning mobile enterprise market.

 

In the past, we have said that if application QoS is to work, operators must have access to real-time data from the network, and a way of presenting that data to the customer so that they have a meaningful way of assessing if they are getting value for money. Ericsson claims to provide such a service, which is a significant step forward for the market. However, it is still early days, and proving the viability of the model to end users will still take at least another two years. The Telkomsel deal shows that vendors are working on the platforms to provide content QoS, but convincing customers to pay more for something intangible will still be a difficult proposition.