FYI - one aspect of ECI

Interactive Week 11/1/99

Wall Street enthusiasm and a growing list of brand-name clients have
legitimized content distribution as a business, putting two
companies that started it all - Akamai Technologies and Sandpiper Networks -
into the spotlight.

Digital Island's $630 million acquisition of Sandpiper last week and
Akamai's $2.2 billion pre-initial public offering valuation are likely
to make merger and acquisition artists wonder how much their company would
be worth with the inclusion of a Sandpiper or
Akamai. Akamai, which priced it shares at $26, saw its stock hit $125.50 in
midday trading Oct. 29.

Digital Island, the San Francisco-based Web hosting shop that was worth $1.2
billion on Oct. 25 when it announced the Sandpiper
acquisition, saw its market capitalization gain $1 billion in the course of
four days.

Why are the services of Akamai and Sandpiper so valuable all of a sudden?
The Internet can't deliver Web - much less broadband -
content fast enough, and network backbone companies are taking too long to
solve the bottleneck puzzle, industry experts said.

"We looked at content sites A through Z, and 52 percent of them are planning
to buy content delivery services next year," said Greg
Howard, principal analyst and owner of the HTRC Group, a market research
company.

With customers that eager to show service providers the money, many are
scrambling to deliver.

In a space where a year ago Sandpiper was a lone evangelist and Akamai a
rocket from nowhere, new content distributors are
popping up like mushrooms.

Adero, Edgix and Mirror Image are three companies that are gaining mindshare
in the market. Since at the core of a content
distribution system lies a massive task managing hundreds and eventually
thousands of caches operated as one network, such
companies as iBeam Broadcasting and SkyCache are also gaining credibility in
the market.

And then there are a few sudden entrants. Enron Communications and Exodus
Communications are trying to amend existing
business models to take advantage of the new opportunity.

How big is the opportunity? The content distribution market, Howard said,
will grow from $62 million this year to $306 million next
year, and to about $2.3 billion in 2002.

Acquisition as an exit strategy is certainly something new content
distributors are thinking about.

"I think it's hard to say what will happen in this industry next. All
business models are very different," said Rangu Salgame, president
and chief executive of Edgix. "I think we will stand independent - for a
while."

Potential buyers include any given content provider - from CNN Interactive
to Pets.com - that writes three checks every month: one
for bandwidth, one for Web hosting and, lately, one for content
distribution. These groups have the most to gain from content
delivery services, executives said.

"There are a couple of likely players in this space. One, there are new
start-ups like Adero and specialized content distributors like
Intervu; two, there are colocation providers like Exodus; and three, there
are traditional telcos like MCI WorldCom, who are
standing on the sidelines right now, but have a lot of edges for content to
reside on," said Leo Spiegel, president and CEO of
Sandpiper, soon to be Digital Island.

What would happen if any given company were to buy all three components?

"This would mean running content distribution through a single network and
maintaining a global footprint," Howard said. "It is hard,
but doable."

There are reasons why the network-content distributor combination could
backfire. Akamai executives declined interviews for this
story due to the Securities and Exchange Commission-imposed quiet period.
But in the past, they have been vocal about a single
network scenario being untenable for content distribution because their
business model is predicated on carrier neutrality. This is why
Internet service providers and telephone companies are open to content
distributors colocating servers within their networks.

Another possible exit strategy for content distributors is to sell out to
large media companies such as America Online, Disney and
Time Warner. These companies could maintain the content distributors'
"Switzerland" status and still use the service as a competitive
advantage by speeding up content delivery, industry watchers said.

Scott Bolton
Government and Regulatory Affairs
Enron Communications, Inc
210 SW Morrison, Suite 400
Portland, OR 97204
503.464.8611
503.464.3636 fax