Enrons brief venture into content distribution should serve as a warning to other network-based carriers considering wading into the untested waters of this new business model.
"A lot of these guys built out haphazardly, and tried to keep up with competition by anticipating the demand that no one had the tools to forecast," says Greg Howard, HTRC Groups principal analyst, who just completed a study of edge-based services such as content distribution networks (CDNs). Its not wrong for carriers to rely on new technologies, he says, but funding shaky business plans is.
Enron Broadband Services — which was quietly rolled back into the energy giants wholesale services division earlier this month — dropped CDN deals as quickly as they were struck, and shut down its CDN unit at the end of the second quarter.
When the venture launched two years ago, Enron Broadband expected to concentrate on streaming, while the two big names in CDN at the time — Akamai Technologies and Sandpiper Networks — were focused on moving static objects.
"Their services are acceptable for some content that isnt mission-critical, and we have that same model and we do that for mission-critical content," Enron Broadbands then-President and CEO Joe Hirko told Interactive Week in October 1999.
Enron planned to move streams partway over its backbone, and then deliver content, via pipes reserved on other networks through its bandwidth exchange, to servers colocated on partner networks. Partners included Electric Lightwave, Epoch Internet, FlashNet Communications, GTE Internetworking, Internap Network Services, NetRail, NorthPoint Communications, RCN and Verio.
But these plans crashed like a house of cards once Enron Broadband began recruiting media and entertainment customers. Tellingly, the unit launched services with only one customer of record: a streaming media dot-com called CountryCool.
Enron quickly redirected its efforts, and in August 2000, it struck an agreement with Blockbuster to develop an on-demand service, making arrangements with Covad Communications, Qwest Communications International, ReFlex Communications, SBC Communications, Telus in Canada and Verizon Communications to deliver streamed content to home television sets over DSL.
In March, Enron Broadband and Blockbuster walked away from the partnership. By then, Enron Broadband had begun to off-load customers. CDN competitors — including Speedera Networks — say they were asked early this year to buy some clients.
An Enron spokeswoman confirms the CDN unit was shut down by the end of the second quarter.
Vendors supporting Enrons CDN and streaming push could do nothing but watch from the sidelines.
"The customer is always right," says Kevin Brown, Inktomis vice president of marketing. Inktomi supplies CDN software to most carrier-class customers, and powers most big CDNs, except Akamai, which runs on proprietary technology.
Still, Brown says, plenty of carriers are entering the CDN business. Williams Communications recently rolled out the largest deployment of Inktomi software in the world, and plans to add streaming to the services it sells media and entertainment customers through its Vyvx Broadband Media unit.
Williams clout is such that networks entrust Super Bowl coverage to its fiber. Thats understandable, given that Vyvx has been grooming for more than a decade the very clientele that Enron had hoped to attract.
Next week, Cable & Wireless plans to launch a number of initiatives using the CDN technology it acquired along with Digital Island, which owns Akamai archcompetitor Sandpiper.
Meanwhile, Enron competitors such as Level 3 Communications and Global Crossing have inked large deals with the likes of CNBC and Sony by offering good old-fashioned fiber distribution.