Why BitGravity Attracted Tata

The Silicon Valley startup's "content-delivery network" will help speed media traffic on the Indian telecom's digital highway

By Peter Burrows

As one of the world's largest telecommunications carriers, India's Tata Communications already moves a massive share of voice and data across its global fiber-optic network. Now, the company is stepping up efforts to handle all that network traffic—particularly a fast-rising tide of bandwidth-hogging video data—more efficiently.

On Sept. 8, Tata's telecom unit said it will begin offering a so-called content-delivery network, or CDN, developed by a small Silicon Valley startup called BitGravity. Tata is also making an $11.5 million investment in BitGravity.

Tata joins a growing number of communications providers in seizing on CDN. Until last year, market leader Akamai Technologies (AKAM) had scant competition, except from rival Limelight Networks (LLNW). But then Level 3 Communications (LVLT) joined the fray in 2007, followed by AT&T (T) in June of this year. A month later, Reliance Globalcom, another big Indian carrier, cut a deal to tap the CDN operated by Atlanta-based Internap Network Services. On the heels of the Tata BitGravity hookup, analysts say, are British Telecom (BT) and Verizon Communications (VZ).

Sharing the Load

As the number of people using online video surges, carriers are scrambling for new ways to handle the load. This is especially true as video morphs from grainy user-generated clips that last a few seconds, to full-length high-definition downloadable flicks. By some estimates, 500,000 people get on the Internet for the first time each day. The number could rise with the expected introduction in coming years of wireless technologies that make it easier to get online anywhere. And one click on an HD movie consumes as much bandwidth as tens of thousands of plain Jane Web sites. "It's a different world we're moving into," says Srinivasa Addepalli, Tata's senior vice-president of strategy. "Just putting more cables in the street won't solve the problem."

CDNs help companies and carriers reduce the amount of bandwidth required to distribute each file, song, or movie by storing it in such a way that it takes the most direct path to the consumer. Akamai, for instance, caches the more popular content close to the people who want it. The Cambridge (Mass.)-based company has well over 50% of the market and more than 30,000 servers in locations around the world to handle everything from iTunes downloads for Apple (AAPL) to NCAA hoops tourney clips for CBS (CBS).

Akamai wannabes such as BitGravity take a different, more centralized approach. Rather than focusing on the actual miles traveled by data, these companies employ heavy-duty gear and sophisticated software to ensure content takes the most efficient path, however distant its destination.