Behind the scenes, there's a big change happening on internet. It's something that's mostly hidden from web surfers, but it's becoming critical to big internet companies such as Google and Netflix.

They're moving servers – usually free of charge – next to the service providers' networking gear so that people trying to watch a popular YouTube video don't have to send traffic across the network to servers back to the website's data center. It can save companies like Google and Comcast lots of money, and it speeds things up for consumers.

According to Craig Labovitz, founder of network analysis company Deepfield Networks, it's also changing the way that internet companies work. "The business they're in isn't delivering bits anymore. It's delivering content," he says. And while not everyone agrees, Labovitz says there's a bit of a land rush going on as more companies move to get their content closer to consumers.

The prime real estate here is in nondescript box-like structures all over the world, which serve as a link between internet service providers, websites, and consumers connecting to the web. In the late 1990s, companies like Akamai and SAAVIS invented a business for themselves by setting up servers with ISPs and then caching popular webpages locally (SAAVIS later sold this business to Level 3). ISPs liked it because they had to carry less traffic on their networks. Websites liked it because it made their pages load faster.

But the internet is now in its very own age of video, and there's simply so much traffic moving on the network that websites are striking deals with the ISPs themselves and installing their own gear in nondescript buildings all over the world.

Netflix's data flows before and after it built its own delivery network. Image: Deepfield Networks

Apple, Microsoft, Facebook, and others are doing this, says Dan Rayburn, an editor with StreamingMedia.com who follows this space. But Rayburn doesn't call it a land rush. "There are a handful of companies that are large enough," he says. "But you have to be a certain sized company doing enough traffic."

Many of these deals are secret, but Deepfield Networks knows of about 40 companies that are setting up their own content delivery networks with service providers, according to Craig Labovitz. But he's bound by non-disclosure agreements, and can't name names.

"All of this is a real inflection point not only in the way the networks are built but also the way they are monetized," Labovitz says. This could help companies like Netflix get high definition video to consumers, and it could possibly bring down subscription rates for high speed internet, subsidized by the content providers. He thinks there are easily another 100 companies that are big enough to do some co-locating with service providers. "There's lots of money flowing around that wasn't here before," he says.

Google has been doing its own content delivery network for years. And earlier this week, Netflix announced that it has followed suit, setting up something it calls its Netflix Open Connect Content Delivery Network.

Netflix says it's still in the early stages of the project, with about 5 percent of its data now being served this way. But according to Labovitz, about 70 percent of Netflix traffic is now flowing through servers it set up at the ISPs he monitors. Back in January, all that traffic was going through Content Delivery Network companies such as Level 3, Akamai, and Limelight.

This week, Wall Street initially thought Netflix's move would hurt companies like Akamai, but Rayburn says that only a small number of companies have the amount of traffic and the technical expertise to partner with service providers with these CDN setups.

Andy Ellis, chief security officer with Akamai, agrees. Yes, companies have been moving to cache their content locally with ISPs, but there are still plenty of services – security and analytics, for example – that Akamai can sell them. "I don't think we're yet seeing a land rush into the ISPs," he says. "I think you have to be really really big to be interesting enough to the ISPs."

Of course, five years ago, did anyone really think that Netflix would be responsible for 20 percent of U.S. Internet traffic? Back then, they were just the guys who mailed you CDs.

Update:

This story was updated on June 11 to include Netflix content delivery network data and to clarify how Level 3 got into the CDN business