SM: You are saying that the middle does not have a business model supporting it. The first mile and last mile have business models, but the middle does not.
TL: Right. The middle mile is where you get into a lot of problems with the Internet. It is because there is no money flowing in there. You have the little ISPs paying big ISPs for transit. The big ISPs get into fights whether or not they should be paying each other. You see the incidents where level 3 ISPs will fight over deep peering. Because they are arguing over who should pay whom and what should be paid. They are all under financial pressure, and the result is that those connections are not upgraded as fast.
A little ISP, in order to save money, is willing to be congested for an hour a day during peak traffic. You have this bottleneck which is sort of the big middle mile, the long haul, going from network to network and through peering points which are congested, and the Internet routing protocols ignore congestions. There is not an ability to route around congestion areas using normal protocols.
That is why Akamai places its servers in the last mile. That gets us beyond the bottleneck. All of our competitors place their servers in a few core data centers. It is a lot easier to think of managing 20 locations, but it does not work nearly as well and inherently that will limit the scalability and it limits the performance. That is why Akamai is so much faster and has so much better quality in the delivery of content like video to end users.
SM: That is a good transition into the question about what the impact of video is on the Internet. It is a different type of traffic which has really ballooned in the last few years. What does that do to Akamai, what does it do to the Internet, and what are we going to see?
TL: Video increases our traffic which is good for our business. It increases the burden on the Internet which is bad for the internet. The good news and the bad news is that we are just at the tip of the iceberg on video.
Downloading a video is about 1000 times the traffic of an iTunes song. If we really get TV over IP into the home, or DVD or HD quality video into the home over IP, that is going to explode the traffic on the internet. We have not even seen the beginning of the impact on the Internet of that yet.
We are supporting HD video with our product, but it is small scale relatively speaking to audio or static objects. The Internet is going to be put under a lot of stress. The content delivery network and services which are organized at the core and the data centers are going to hit a wall. They will buy bigger and bigger pipes at the data centers, but the peering points will remains congested.
Akamai is in a great position there. As we think about growing our capacity over the next few years we were thinking on the order of a couple hundred terabytes per second to support a large audience for TV or better quality of video. The only way you can do that is to be serving that content locally. You are never going to get that capacity out of data centers.