[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.



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 

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 

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 

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 

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