Tata Communications, a large Indian telecom carrier, has tapped Silicon Valley company BitGravity to provide content delivery network (CDN) services. Tata, of Mumbai, has also invested $11.5 million in covertible debt in the company.
BitGravity is an upstart challenging large companies like Akamai and Limelight, which deliver much of the Internet’s information. The partnership is important because Tata owns one of the world’s largest tier 1 (meaning it’s connected worldwide) networks on the planet.
BitGravity CEO Perry Wu says that a $2.5 million investment taken last month was all BitGravity needed to reach profitability. However, he also suggested in an interview that new entrants to the CDN market will have trouble going it alone as BitGravity did in its early days (it was started in 2006).
“There has been a lot more pricing pressure [lately], which has caused new startups to be pushed out of the market completely,” Wu said, also noting that peer to peer sharing (sending information between user’s computers, rather than from a central server) has taken a weaker position in the delivery market.
Partnerships like the one with Tata are necessary to give startups the scale to compete in a market that survives off thin profit margins and high volume, according to Wu, especially now that high-definition video is becoming the norm. Like most newer CDNs, BitGravity is going after the video market, in the belief that video will come to represent most of the data flowing across the Internet in the future.
But the economics are plainly changing. In earlier years, high-def video came at a premium, giving some smaller companies enough of a profit to survive. That’s not as true now, so new entrants like Conviva, which says it has an innovative platform for video delivery, could face significant challenges — no matter how good their technology is.