Apple Inc. (NASDAQ:AAPL) is reportedly negotiating with large Internet service providers in the United States for paid interconnection deals to deliver its content to consumers. That’s according to Dan Rayburn, principal analyst at Streaming.com and at Frost and Sullivan.
Last February, Rayburn wrote that Apple Inc. (NASDAQ:AAPL) created a new team responsible for building its own content delivery network (CDN) for the deployment of software updates, apps and other content. According to him, the tech giant has been very busy with the project, and it is deploying numerous boxes running Apache Traffic Server and buying many transit, co-location, wavelengths, and other infrastructure services.
Rayburn noted that the iPhone maker’s CDN is rapidly growing. He expects Apple Inc. (NASDAQ:AAPL) to deliver content from its new CDN soon. According to him, Apple’s negotiation with the ISPs is part of the new CDN network build-out. He opined that it appears that the iPhone maker sees “paid interconnect deals as simply part of the costs” associated with building out its own CDN network.
Apple silent on net neutrality, peering and interconnection deals
Rayburn noted the silence of Apple Inc. (NASDAQ:AAPL) on net neutrality, peering and interconnection relationships issues. According to him, “Apple isn’t out in the market making any complaints. While Netflix has used the media, consumers and lawmakers to try to argue that CDNs should get as much peering as they want, at no charge, Apple doesn’t seem to agree with that sentiment. If they do, they certainly aren’t complaining in any public forum.”
According to Rayburn, one of the possible reasons why Apple Inc. (NASDAQ:AAPL) is not complaining about interconnection deals is the fact that its Internet traffic is smaller compared with Netflix, Inc. (NASDAQ:NFLX). The iPhone maker only accounts for 2% of total Internet traffic, compared with Netflix’s 34%, according to data from Sandvine.
Netflix seemed the only complainer
Netflix, Inc. (NASDAQ:NFLX) also built its own CDN in order to deliver its own content to subscribers. The online video streaming company managed to negotiate unpaid interconnection deals with some ISPs but was unsuccessful with others. It agreed to pay interconnection fees to Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK) and Verizon Communications Inc. (NYSE:VZ) to deliver better streaming video experiences to its customers.
Rayburn also noted that other technology companies that have their own CDNs are paying ISPs interconnection fees. That list includes eBay Inc (NASDAQ:EBAY), Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT) and Pandora Media Inc (NYSE:P), among others.
He pointed out that Netflix, Inc. (NASDAQ:NFLX) seemed to be the only one complaining about interconnection fees. He said, “To date, no other content owner or content syndicator that has built out their own CDN has complained of the current business models or argued about doing mutually beneficial interconnect deals between networks. If interconnect deals are such a problem in the industry, or a threat as many make it out to be, you don’t see the ones who actually have to pay for these deals complaining, other than Netflix.”