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The business of open caching

Jan 5, 2022 | By Jane Allan

Recently, the topic of Open Caching has been receiving a lot of attention from content providers, CDNs, and Internet Service Providers (ISPs) around the globe. What is Open Caching and what is driving the market interest in this new technology? We’ll speak with Jim Brickmeier, Velocix’s Chief Product and Marketing Officer, to get a rundown on what it’s all about and why it’s important.

Can we start with a brief explanation of what Open Caching is?

To put it simply, Open Caching is a set of interface standards for content delivery networks (CDN). Open Caching standards are designed to facilitate the large-scale deployment of internet-based video services across all components of the end-to-end delivery ecosystem. The related standards are published by the Streaming Video Alliance, a consortium of companies that includes media companies, studios, broadcasters, internet service providers, global CDN services, and streaming technology companies like Velocix. Open Caching standards are intended to foster interoperability between Content Providers, CDN’s, ISP’s and technology providers involved in the delivery of content over the internet and through ISP’s private data networks to reach consumers.

Open Caching defines a set of interfaces for things like service provisioning, request routing, logging, performance measurement, footprint, capacity, configuration, metadata and content management that enable video content to be delivered across multiple networks in the most efficient way possible and with the highest stream quality. The goal is to deliver video streams that look better and perform better on consumer viewing screens, but Open Caching also offers several business advantages for the various stakeholders involved in delivering content.

Let’s dig further into that. Can you explain what kind of advantages Open Caching offers various stakeholders?

For content providers that operate over-the-top (OTT) streaming services, Open Caching offers a way to improve the quality and reliability of their video streams. This is done by taking advantage of open-caching compliant servers located deep at the edge of ISP networks. Using a set of standardised interfaces, these servers can source OTT content from upstream CDN’s, cache locally and stream it directly from the edge of the network, rather than having to pull it from servers located much farther away and transiting the data across multiple network hops. With Open Caching, popular OTT content can be hosted much, much closer to consumers, which means streams can be delivered with less latency, little to no rebuffering, and since the last mile bandwidth is managed (versus unmanaged internet bandwidth), the resulting stream quality is a whole lot better. That represents a clear advantage to OTT streaming companies and is highly valuable to consumers. Additionally, since the most popular content is delivered directly from open caches rather than global CDN caches that carry fees, content providers can save a substantial amount of money on stream delivery costs.

But what about the ISP? What’s in it for them?

Network operators can create an entirely new revenue stream with Open Caching. Today, almost all internet stream traffic is delivered over the top of ISP networks, but ISPs don’t participate in the value chain associated with OTT content delivery. If you are an OTT streaming company, you typically pay global CDN services like Akamai or Limelight to distribute your content around the world. But these CDN services terminate inside of ISP head-ends. Data then traverses over the top of ISP’s private data networks the final step of the way to reach the consumer. While global CDN companies get paid for every gigabyte of traffic delivered to the ISP, ISPs make nothing on that traffic. The ISP generates revenue by charging consumers a subscription fee to access the internet over their broadband data network, but they have no relationship with the OTT streaming providers – at least in the context of content delivery. Open Caching provides a way for ISPs to stream content “through-the-middle” of their network, rather than over-the-top, and to add value by improving the overall quality of the consumers’ streaming experience. It also provides the basis for establishing a commercial relationship between OTT streaming companies and ISPs that cements their place in the value chain as the owner of the all-important last-mile network.

Why is the last mile network so important?

The private networks that are owned and operated by ISPs are the final link in the supply chain for streaming video. They also tend to be the highest quality and most reliable networks over which streaming content travels because network bandwidth is carefully managed by network operators. For OTT streaming companies, finding a way to deliver content from deep within the last mile network, as close as possible to customers, represents the best way to ensure consumers have a high-quality streaming experience. That’s why Open Caching is such an interesting prospect for ISPs. They are already carrying the traffic today, but they aren’t directly involved in the value chain related to that traffic. By improving stream quality, reducing start-up latency, and perhaps even inserting local ad content in the future, they can play a critical role in the value chain associated with content delivery.

Velocix-Open-Caching

Can you talk about what OTT streaming companies have shown interest in Open Caching?  

It is difficult for me to speak for content companies, but I can relay what has been stated publicly. Disney, for example, has spoken publicly about Open Caching and its place in their overall strategy for scaling out services like Disney+. Beyond that, you can get a sense of the momentum behind Open Caching by looking at the SVA membership. It suffices to say that with big industry players behind Open Caching, there is a great opportunity here for both OTT streaming companies and ISPs.

How does this work from a commercial standpoint?

From a commercial standpoint, there are several options, and each ISP will need to determine what works best for them. In some cases, ISPs prefer to establish direct commercial relationships with OTT streaming companies and negotiate their own payment terms. Not all companies support this model, but at Velocix we do. In this scenario, Velocix is more of a facilitator and a technology supplier. We can help establish the first point of connection and provide some guidance based on our experience in the space. Then we step back and let the two parties talk. Once they work out a deal, we provide the technology that connects everything together using Open Caching standards. Alternatively, some ISPs don’t want the burden of establishing and managing a direct connection with multiple OTT streaming companies. In this case, Velocix maintains the relationships with the streaming companies, and we negotiate a commercial agreement that benefits all parties involved. There are also hybrid pricing models that we can support, but it suffices to say that if Open Caching is of interest, there are several ways to make this an intriguing business proposition for ISPs.

So, how do you get started with Open Caching?

I would start with your existing CDN provider if you have one. Open Caching capabilities can often be layered on top of an existing set of CDN caches, especially if traffic volumes are modest in the early stages. For example, many Velocix customers have a private CDN already installed to stream video content to pay-TV customers. With a software upgrade, the same network and caching servers can be used to deliver content related to OTT streaming services. Since CDNs often have some unused infrastructure capacity available, hardware costs are negligible and the only costs to operators are the software licenses. Alternatively, if you don’t have a CDN, give Velocix a call. We can come up with a model that fits your budget, whether you want a licensing model, a rev-share agreement, or something in between. Let us know your needs and we’ll do our best to work something out.

What kind of revenue should an ISP expect to see from Open Caching?

It varies depending on the location of the ISP, OTT service traffic volumes, and the going rates for public CDN delivery in that region, as well as the value of any extra services the ISP may be able to provide. OTT streaming providers are always looking for ways to save cost and boost quality, so ISPs can generate incremental value by delivering on these points. One obvious way to do that is for ISPs to cut out the middleman, namely global CDN service companies. ISPs can capture wallet share from OTT streaming companies by using Open Caching to offload global CDNs and then negotiate for a portion of the savings. That’s a great place to start the conversation. Additionally, OTT streaming companies know that Open Caching delivers superior quality versus what can be obtained through an internet CDN. It’s measurable and easy to prove, so there are opportunities to negotiate higher fees for better performance. The key is to model it out carefully and Velocix can absolutely help with this.

This sounds like a no-brainer for ISPs, especially if they already have a CDN, no?

We believe Open Caching holds a lot of promise, especially for operators that already own a Velocix CDN. It really is a “win-win” for both OTT streaming companies and ISPs, which is why we think it has the potential to grow. If you are an ISP and you are not thinking about it already, it’s worth investing in some cycles to see whether it is a good fit for your business.


Click for more related content

Product page: Open Caching - tap into the OTT streaming value chain
Datasheet: Velocix Open Caching
Webinar: What's next in content delivery

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