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Sunday, October 26, 2014

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  • Netflix-Comcast Interconnection Agreement Seems Fair, So Why All the Fuss?

    There's lots of ink being spilled about yesterday's Netflix-Comcast interconnection agreement with some saying this is basically just "business as usual," while others are proclaiming that this is the "end of the Internet as we know it" and "evidence that net neutrality is required."

    I'm not a network engineer, but since I've worked in the space long enough, I know enough to be dangerous. And from my vantage point, it seems like this is an appropriate, market-driven solution to a problem that is somewhat unique to Netflix, which now drives around 30% of the Internet's traffic during primetime hours.

    Netflix has been using multiple methods of delivering its bits to broadband ISPs, including third-party content delivery networks (CDNs), its own CDN and something it calls "Open Connect" in which Netflix places its own caching servers in the broadband ISPs' network. Netflix has been strongly pushing the latter, but to little avail in the U.S. reportedly because ISPs are wary of setting this type of precedent for others down the road.

    But as Netflix's traffic has surged, ISPs haven't been able to handle all the incoming traffic with their current capacity, so the Netflix user experience for some was degrading. Since Comcast is the biggest broadband ISP, this is where the biggest impact was felt. Netflix could have paid more to 3rd party CDNs (who themselves would need to invest more to pass Netflix's higher traffic to Comcast) or it could cut a deal with Comcast to connect directly. It chose to do the latter, almost certainly because this option cost it less, and likely provided better guaranteed quality.

    As I understand it, this is something other big traffic generators have done in the past and there isn't anything suspect about it. The Internet works by having many different parties make decisions about how much to invest to please their customers. Netflix was at a point where its larger size required a larger investment. It was a business decision for Netflix, pure and simple.  

    Regardless, the environment in which Comcast, Netflix and all others in the online video / pay-TV ecosystem now operate has become incredibly charged. There are lots of good reasons for people to be paying close attention, starting with the fact that broadband is now central to our economy. A free-flowing, unbiased Internet is essential to freedom of speech. And a level-playing field is critical to avoid any player from becoming so big that it can abuse its power. For some observers, Comcast's decision to acquire Time Warner Cable heightens all of these concerns.

    In this case however, it seems inappropriate to somehow view the Netflix-Comcast interconnection agreement as a new source of concern, particularly since Netflix itself isn't expressing any worry (which you can be sure it would if it felt abused). Rather, the new deal just seems like the normal course of business for Netflix, which needs to have the proper delivery infrastructure to match its newfound size. Regardless of the alarmist headlines you may be seeing, it's worth keeping this in mind.

     
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