AT&T (News - Alert), the largest provider both of mobile telephony and fixed telephony in the United States providing broadband subscription television services, has agreed to partner with Akamai (News - Alert) Technologies.

Instead of competing with Akamai, which has one of the largest distributed-computing platforms, AT&T has joined forces with it in content delivery network (CDN) services.

A content delivery network, CDN is a large distributed system of servers that are deployed in multiple data centers in the Internet to avoid Internet congestion. A CDN thus delivers content faster to end-users with high availability and high performance.

As a part of the agreement with Akamai, AT&T will be transferring all of its existing CDN operations, services and customers to Akamai’s platform by 2013.

According to Richard Fetyoko, an analyst with Janney Montgomery Scott, the agreement between AT&T and Akamai has changed the dynamics as the agreement is of far more importance to Akamai as AT&T is not its competitor now and it has brought Akamai new business.

"It's an admission by one of the largest telcos that the CDN business is not an easy business to manage," said Fetyoko.

Investors of Akamai had been concerned about the prospect of competition from big operators like AT&T, he informed. "It shows investors that telcos are not likely to be competing with Akamai any time soon," he said, adding that Level 3 Communications (News - Alert) was now the only telephone company in the said market.

The alliance had repercussions in the market. Shares of Akamai’s rival Limelight Network fell to about 2 percent as the news percolated about the agreement of partnership between AT&T and Akamai.

AT&T and Akamai will be initially focusing on North America, and then the plan is to expand globally within next 12 months. Akamai’s CDN services will be connected to AT&T’s network and resources such as technical support and marketing will be shared.

Shares of Akamai were up $3.56, or 10 percent at $39.06 in morning trade on NASDAQ. Akamai has apparently strengthened its position, reflected in the market sentiment. On New York Stock Exchange, AT&T shares were down 11 cents at about $33.80.

Limelight Network was at about $2.03 on NASDAQ – down 4 cents.

Founded in 1998, Akamai Technologies, Inc. is an Internet content delivery network headquartered in Cambridge, Massachusetts. Akamai's network in the U.S. is one of the world's largest distributed-computing platforms. 

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