Here’s Why Apple Launched a Massive New Content Delivery Network

Source: Thinkstock

Source: Thinkstock

In February of this year, Dan Rayburn of industry news site StreamingMedia.com was the first to report that Apple (NASDAQ:AAPL) was building out its own content delivery network (CDN). Now the CDN expert is reporting that the Cupertino-based company has finally activated its in-house CDN. Content delivery network operators such as Akamai (NASDAQ:AKAM)and Level 3 (NYSE:LVLT) are typically paid by content providers such as Apple for delivering content to end users via a vast distributed system of servers stationed in various data centers. However, based on trace routes of OS X Yosemite downloads, Rayburn has confirmed that Apple is delivering OS X downloads directly to consumers from its own network in the U.S. and Europe. Rayburn also noted that Apple has made interconnection deals with several ISPs, including Comcast (NASDAQ:CMCSA), in order to gain direct access to their networks.

So what does this mean for Apple users? Excluding the upcoming releases of OS X Yosemite and iOS 8, the activation of Apple’s in-house CDN will not likely have much of an initial impact on the end user experience. According to Rayburn, it is not likely that Apple will ever completely ditch third-party CDNs and the company’s iTunes downloads and iTunes Radio streaming are currently still handled by Akamai and Level 3, respectively. However, the services handled by Apple’s CDN will grow over time and should eventually impact performance, especially when it comes to the iCloud.

Several iCloud outages over the past year have highlighted Apple users’ increasing dependence on cloud-based services. Apple is known for focusing on the quality of the end user experience and the company’s move to extend its control over the way content is delivered to its customers fits with its overall philosophy. As noted by Rayburn, “While Apple doesn’t own the last mile, paying to connect directly to it (in some places) and delivering content from their own servers allows them much more control over the user experience, especially for cloud based services. Over time, this is something that will make the experience and performance for consumers even better — and Apple’s only just getting started.”

It should also be noted that most other content providers of Apple’s size, including Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Netflix (NASDAQ:NFLX), Twitter (NYSE:TWTR), and Yahoo (NASDAQ:YHOO), have already established their own CDNs. While Apple may just be getting its CDN build out started, it has started in a big way. According to Rayburn’s calculations and contacts with ISPs, Apple has already invested over $100 million to have “multiple terabits per second of capacity” in place, more than ten times what it is currently using.

Besides eventually improving the end user experience, Apple’s CDN will also have an impact on CDN operators, although whether it is a positive or a negative effect depends on which operator. According to Rayburn, Level 3 will actually benefit from Apple’s CDN activation since it will make more money selling “wavelengths, IP transit, fiber and other infrastructure services” to Apple than it made from the iPhone maker when it was using its commercial CDN platform. On the other hand, Akamai will likely see a negative impact since nearly 10 percent of its revenue comes from Apple and the company cannot make up this lost revenue by selling Apple other network-related products like Level 3 can.

Finally, the massive size of Apple’s CDN has led some commentators to speculate about other plans the company may have up its sleeve. As noted by Gigaom, a recent report from The Information indicated that Apple is still pursuing its plans for an Internet-based television service that offers both live and on-demand programming. Although The Information’s sources noted that the creation of this television service has been delayed due to negotiation difficulties with content providers, it is also possible that Apple is planning on using its CDN to ensure the quality of the video stream for this rumored service.

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