Level 3 has been gradually morphing itself from being an Internet backbone play to being a CDN play. Backbone revenue per bit is almost at the vanishing point, and that was the driver for the CDN role. Now the CDN role at Level 3 is changing into a broader role of content monetization support.
With network operators all targeting content monetization, you might think Level 3 is getting ready to be their partner. That would be a bad move for the operators in our view. Content monetization is a low-margin business, and you can’t afford to be sharing the wealth there. It’s also true that content monetization and overall service personalization are converging, which means that operators would need to share more and more of their other service data with a monetization partner to stay up with the market.
What’s likely to be happening here is simply a Level 3 reaction to an onrush of operator interest in “full monetization,” which would threaten Level 3’s CDN business if it didn’t augment its own features to match those of the operators. So we’re seeing a competitive move to validate our thesis that content monetization is not only coming, it’s rushing.