Content delivery networks (CDN) such as Akamai Technologies Inc. (Nasdaq: AKAM) and Limelight Networks Inc. (Nasdaq: LLNW) generate billions of dollars in revenue for accelerating content delivery and improving the end user's quality of experience (QoE).

But CDNs don't own the last mile – service providers do. Service providers can cache content closer to the end user, and thereby offer a better QoE. They can also use network management tools to better manage traffic and even guarantee quality of service. They also own the billing relationship and can create new tiered services, or target advertising for additional revenue.

These advantages should allow service providers to create a "SuperCDN" capable of adjusting faster and more effectively to network traffic, avoiding upstream congestion by serving video from the telecom edge and being more innovative with pricing models.

Some service providers have also discussed the idea of wholesaling CDNs. In this scenario, the operator-owned and -managed caches would be leased to traditional CDNs. This would allow for open access to the operator's network by other service providers, content owners and perhaps existing CDNs, but enable operators to share in the revenue generated by over-the-top content delivery.

Several Tier 1 operators are running their own CDNs today, but they don't offer the unique differentiators mentioned above. The factors holding up the SuperCDN include:

With video traffic forecast to grow steadily, caching and content delivery will be an important issue for operators in the future – not just to alleviate OTT traffic costs, but also to explore new revenue-generating services. Despite relatively few announcements, trials and tests have been conducted by several of the largest service providers in the U.S. and Europe. We anticipate this will be a key area for service providers as they try to cope with the flood of video on their networks and look for ways to generate incremental revenue from it.

— Aditya Kishore, Senior Analyst, Heavy Reading