22-03-2014, 12:09 #1
[EN] How The Comcast & Netflix Deal Is Structured, With Data & NumbersThere’s been a lot of speculation involving the business and technical details surrounding the recent deal between Comcast and Netflix and plenty of wrong numbers and information being used. I thought it would be helpful to detail what’s really taking place behind the scenes, highlight some important publicly available data in the market, talk about the deal size, and debunk quite a few myths that people are spouting as facts. It’s time we cut through a lot of the misconceptions of the deal, from both a business and technical level, and focus on what’s really happening. This is a long post, but if you really want to know what’s happening, I’ve tried to make it really detailed. [My first post on the deal can be found here: Inside The Netflix/Comcast Deal and What The Media Is Getting Very Wrong]
From a technical level, Netflix has their own servers that are sitting inside third-party colocation facilities in multiple locations. To connect Netflix’s servers to ISPs, Netflix buys transit from multiple providers, which then connect their networks to the ISPs. Netflix pays the transit providers for those connections and with that, gets a certain level of capacity from the transit provider. While Cogent is one of the companies Netflix is buying transit from, they are not the only one. Netflix buys transit from multiple companies, including Cogent, Level 3, Tata, XO, Telia, and NTT, with Cogent and Level 3 being the primary providers. Transit providers like Cogent then connect their networks to ISPs like Comcast in what’s called peering. This is where a lot of the confusion starts as many are under the impression that ISPs like Comcast are suppose to allow any transit provider to push an unlimited amount of traffic into their network without any compensation. This isn’t a Comcast specific policy, but rather one that is standard for all ISPs.
ISPs have something called a peering policy (comcast.com/peering), which are rules that govern how networks connect with one another and exchange traffic. ISPs like Comcast will allow transit providers like Cogent to connect to their network, for free, in what’s called settlement-free peering. However, once the transit provider sends more traffic to the ISP then they are allowed to, per the ISPs peering policy, the transit provider pays the ISP for more capacity to get additional traffic into their network. Remember, Netflix is the one paying Cogent and Cogent is selling Netflix on the principle that it can get all of Netflix’s traffic into an ISP like Comcast. As a result, Cogent has to take all the necessary business steps to make sure Cogent has enough capacity to pass Netflix’s traffic on from Cogent’s network to Comcast. But Cogent isn’t doing that.
The reason for the poor quality streaming is that Cogent refuses to pay Comcast to add more capacity, even though Cogent is taking Netflix’s money for the service. Cogent is charging Netflix for a service it can’t deliver. Some are arguing that Comcast should be the one to pay to upgrade that connection with Cogent since Comcast charges consumers to get access to the Internet and is double dipping by charging both the consumer and the content owner. In reality, they aren’t. Netflix does not need to go direct to Comcast and pay them anything, they chose to because they could not get the level of service they were paying Cogent for directly. Netflix has also decided it makes more business sense for them to build their own CDN instead of relying 100% on third party CDNs (cdnlist.com) like they used to.
You will notice that when Netflix was using third party CDN providers Akamai, Level 3 and Limelight for 100% of their video delivery, there were no quality issues. Just look at their speed ratings from 2012. The reason for this is that those CDNs already have their servers connected to ISPs like Comcast and have put in place all the necessary links, both free and paid, to guarantee, via an SLA, that they can deliver Netflix’s video. So for all the people who say that Comcast forced Netflix into paying or is strong arming them, that is not true. Netflix has multiple options in the market for delivering good quality video, but Netflix chose to build their own CDN and change their delivery strategy because they want to have more control over it and save money. Netflix’s streaming quality is based on business decisions, that’s it.
In a little known, but public fact, anyone who is on Comcast and using Apple TV to stream Netflix wasn’t having quality problems. The reason for this is that Netflix is using Level 3 and Limelight to stream their content specifically to the Apple TV device. What this shows is that Netflix is the one that decides and controls how they get their content to each device and whether they do it via their own servers or a third party. Netflix decides which third party CDNs to use and when Netflix uses their own CDN, they decide whom to buy transit from, with what capacity, in what locations and how many connections they buy, from the transit provider. Netflix is the one in control of this, not Comcast or any ISP.
As a result, this also shoots down all the arguments where people are saying that this deal is bad because streaming services that aren’t as big as Netflix won’t be able to cut the same direct deal with Comcast. Why would they? They don’t need to connect directly to Comcast as they don’t have enough traffic for it to make sense and haven’t built out their own CDN. All they have to do is use a third party CDN provider to be able to get their content to the ISP with excellent quality, guaranteed with an SLA by the CDN. Nearly every single content owner today outside of Netflix, Google, Microsoft, Yahoo, AOL, Amazon and a few others all use third party CDNs for video delivery. Pick any major broadcaster, sports league, Hulu etc. they all use third party CDNs as they are cheap and back up their service with a guarantee. It works really well.
Now that Netflix has a deal direct with Comcast, here’s how it will work. Netflix’s servers that are sitting in third party data centers connect to Comcast’s network, which is also in the building, via a cross connect that Netflix buys from the co-lo facility provider. While I have heard people say that Netflix will need thousands of physical interconnects into Comcast’s network, that’s not accurate. Comcast has a total of 18 national locations (public info) and Netflix and Comcast will initially connect in about 10 of those locations to start. Out of those 10 locations, Netflix will need 300+ 10GigE ports. Netflix gets a guaranteed level of service from Comcast but as the two companies have announced, Netflix does not get any prioritization in the last mile. This is also where many are getting confused. Some are saying that Netflix is now getting “guaranteed delivery through the last mile”, but that’s not true. That would be paid prioritization, which Comcast cannot do and does not offer.
22-03-2014, 12:09 #2Moving on to the deal size, I’ve seen all kinds of crazy numbers put out there, with many saying Netflix will spend $25M-$50M a year with Comcast. Some even reported that Comcast was asking Netflix to pay $400M, based on a report put out by Wedbush Securities, which I will get to in a moment. While I do have a lot of sources and are privy to a lot of details others aren’t, there is plenty of public and easily accessible data that allows you to get a good estimate on the size of this deal and debunk the numbers being reported. For starters, no one has reported how much traffic Netflix is actually sending into Comcast’s network and you need to know that before you can discuss the size of the deal. Without doing that math first, any dollar signs attached to this deal are pure guesses.
In 2012, Comcast said they were carrying 4 Tbps of traffic and with the current Internet growth rates, one could easily extrapolate that Comcast’s network is now at 8 Tbps. Based on Sandvine’s data that says Netflix account for 1/3 of traffic, Netflix would need about 3 Tbps of capacity from Comcast today, with that number growing. The way these deals are priced is on a per Mbps sustained model, also known as 95/5 or 95th percentile. Wedbush Securities put out a report that ran numbers based on a per GB delivered model, not per Mbps sustained, saying “Comcast likely sought as much as $0.01/GB transmitted”.
They then estimated that each of Netflix’s 33M U.S. subscribers consume 100 GB of data per month and came up with a total of 3.3B GB of data delivery per month, saying “Netflix would be required to pay approximately $400M per year.” While Wedbush’s numbers are wrong and aren’t using the per Mbps sustained model, the number they gave out was for all of Netflix’s delivery, across all ISPs, not just Comcast’s. However, the media didn’t read it right and went with the idea that Comcast was asking Netflix for $400M, which is sloppy reporting. Once one media outlet said it, many never second guessed the number and started re-quoting it. In the end, Wedbush said they “estimate that Comcast will charge Netflix between $25M-$50M annually”, which still isn’t right and they provide no methodology of how they came up with that range. I provide methodology below to show it’s not accurate.
What no one seems to have noticed is that Comcast has previously stated that less than .1% of their total revenue came from these kind of commercial interconnect relationships in 2013. That means that for all of last year, Comcast got paid between $30M-$60M, which included all of the similar deals they have with Google, AOL and others. So the idea that Netflix would be larger than all of those deals combined, makes no sense. If you want to get a sense, not an exact number, but an idea of what Netflix is paying use transit pricing.
I laugh when I see all of these “save the internet” people saying these deals are bad as they are clouded in secrecy and no when knows what’s really taking place. When we know how much traffic Netflix has and we know the average going rate of transit, both public numbers, you can estimate what Netflix’s cost is. That said, keep in mind a few things. Transit pricing is higher than what Netflix pays Comcast as wholesale is cheaper than transit. Also, Netflix is not the “average” customer and their contract clearly has to have a lot of variables in it, with lots of sliding scale pricing, and different ways to measure it, since the volume of their traffic increases so quickly.
So with those caveats, some of the lowest transit pricing I have seen, which I have previously published here, is around $.50 per Mbps. If Netflix needs 3 Tbps of capacity from Comcast to start, that would cost Netflix $1.5M per month. But, and this is a big one, Netflix isn’t the average customer. Their price will be special and they have a multi-year contract and a lot of variables. So to get a “rough estimate” of what this deal costs Netflix, simply pick whatever per Mbps price you want and multiply it times 3 Tbps. Some will pick a higher number, some lower. If you pick a number a bit lower than $0.50, this deal would cost Netflix about $12M per year. But run the numbers yourself using whatever variable you want, now that I have outlined how much capacity Netflix needs.
I have seen people suggest that Comcast will pull a bait-and-switch on Netflix and raise rates or not deliver good quality video now that they have them locked in a contract. That’s a lame argument as Netflix isn’t a bunch of dummies, they are anything but. It’s the whole reason why Netflix signed a multi-year deal and, this is really important to note, Netflix is getting an install SLA, packet loss SLA and latency SLA from Comcast, which guarantees quality. This is very different from what Netflix was getting from Cogent because Comcast is providing fully dedicated capacity, unlike sending it through someone like Cogent where those connections are potentially over-subscribed if a transit provider over-sells their capacity, which Cogent has a history of doing.
To date, Cogent has had peering disputes with AOL, Teleglobe, France Telecom, Level 3, TeliaSonera, Sprint-Nextel and Verizon. I find it interesting no one in the press mentioned how Cogent always seems to be the one major transit provider who continues to have disputes with so many other network providers, year after year.
A few weeks ago there were all these viral Internet reports of Comcast throttling Netflix content, supposedly backed-up by experiments where somebody would stream Netflix at home on Comcast and get a lower bitrate. Then they’d run that same stream through a VPN (which connects to a different ISP) and get a different and better bit-rate and stream quality. It was the smoking gun gotcha for a lot of folks and 100% sure-fire proof of throttling to some, even though Netflix’s own CEO publicly denied ISPs were throttling. What was happening in the VPN experiment backs-up my earlier points that Netflix was making these networking and performance decisions based on ISP and other factors.
Also, let’s play out what might have happened if Comcast gave Cogent all the capacity it wanted for free. Does that mean Netflix would work well into perpetuity and everyone would be happy? No. Netflix switches providers quite frequently. What if Netflix then moved traffic to NTT and Telia, we’d be back where we started, as those providers would then need all the capacity they wanted on Comcast. What if Netflix started making other traffic shifts to extract greater concessions from ISPs and transit vendors? Fortunately we’re now past that with this Netflix and Comcast deal, but instead of seeing the benefit here to Netflix’s customers, the picture is clouded with far-fetched negatives. The winner in the whole deal is you and me, the consumer. We get better quality video and Netflix gets a cheaper cost over time to deliver the stream to us, which keeps them from having to raise the price of our subscription to give us better quality.
Now all of this aside, I get that many people don’t think the proposed Comcast and TWC cable merger is good for consumers, that cable TV providers raise their rates every year and that Net Neutrality is something that needs to be watched. Those are all valid concerns to debate. However, don’t use the deal between Netflix and Comcast as ammunition in those arguments as it’s not relevant. If you have further questions about the deal, put them in the comments section and I will try to answer them if I can. I know this is a touchy subject for many, but be professional. Lively debates are welcomed but comments that use foul language will be removed. Also for those that have asked, I do not have Comcast as my ISP, I have Verizon FiOS as I live in the NYC area.
22-03-2014, 14:02 #3
Inside The Netflix/Comcast Deal and What The Media Is Getting Very WrongComcast and Netflix announced a commercial interconnect relationship between the two companies, which is in the very early stages of implementation, and as a result, many who clearly don’t understand how the Internet works are writing about the news.
Those who don’t cover network infrastructure for a living should not be trying to explain the technical details behind today’s announcement. Articles from mainstream outlets like TechCrunch, WSJ, NPR, Time and many others aren’t even getting the basics right. Words like transit, peering, speed, bandwidth, capacity, etc. are being used interchangeably without any understanding of what they mean.
Naturally, many of these same people are also implying that because Netflix has to pay Comcast, consumers will foot the bill for this as Netflix will have to charge more for their service.
This could not be further from the truth. Those stating this have no clue how Netflix delivers their content today or what costs they already incur. If they did, they would know this is not a new cost to Netflix, it’s simply paying a different provider, and it should be at a lower cost. It should actually be cheaper for Netflix to buy direct from Comcast, and they also get an SLA, which also improves quality and that’s a good thing. Given that Netflix has many options to buy transit from many different transit providers, why would they pay more? They wouldn’t.
Some are mad at this deal as they say this will start a trend where content owners will need to pay multiple ISPs to have good video quality, which isn’t true. The problem with that idea is that the vast majority of all content owners use third party content delivery networks to get the content to ISPs and are NOT trying to build their own CDN like Netflix has. Only Netflix, Microsoft, Yahoo, Apple, Google and a handful of others have built or are building out their own CDNs. Every other content owner out there including MLB, CBS, FOX, Disney, Viacom, NFL, etc. all use third party CDNs. So this has no impact on any of them as they aren’t trying to place servers inside last mile networks and use companies like Akamai, Level 3, Limelight and EdgeCast for content delivery.
Even worse, some want to imply that today’s announcement has to do with Net Neutrality and Tech Crunch went as far to say that the deal “may be legally outside of the traditional net neutrality rules.” May be? Are they serious? Commercial interconnect relationships, also referred to as paid peering agreements, have been around since the Internet started, and it’s how the Internet works. Commercial interconnect deals have NOTHING TO DO WITH NET NEUTRALITY. Implying otherwise shows a complete lack of regard in understanding how traffic is and has been exchanged across networks for the past twenty years. The media as a whole should stop trying to insinuate or imply that everything that happens between two networks comes down to Net Neutrality. It doesn’t.
Let’s clear up a lot of the confusion many in the media have created.
The first one is that consumers need more “speed” from Comcast or Verizon to get better quality video streaming from Netflix. This is not the case. Netflix’s videos are encoded at a certain level of quality, which requires the consumer to have a specific level of throughput, to get that quality. It has nothing to do with “speed”. If you want to stream a 2Mbps video or a 4Mbps video from Netflix, you don’t need more “speed”, you need more throughput. Speed is the rate at which packets get from one location to another. Throughput is the average rate of successful message delivery over a communication channel. SPEED AND THROUGHPUT ARE NOT THE SAME THING.Next up are articles where it says that transit allows two networks to exchange “bandwidth”, which is not accurate. Transit allows providers to exchange traffic, but bandwidth and traffic are not the same things.
Another statement I have seen people write about is saying that the deal focuses on the “two company’s pipes”. Netflix is not a network operator, they don’t have any “pipes”, they buy capacity from other network providers who have the pipes. So while this deal is about the interconnection between Comcast and Netflix, Comcast is the only one who actually owns the pipes. Netflix is simply leasing capacity from other network providers.
In addition, Netflix does not own an “Open Connect Network”. Open Connect is a program, it’s not a network that Netflix “owns” as the servers caching and delivering Netflix’s content are sitting inside the ISP networks, which isn’t owned or operated by Netflix. Open Connect is just another CDN. It is most similar to Akamai, except Open Connect doesn’t have SLAs with their customers.
Lately, many have been writing about transit with no real idea of just how many types of transit one can buy or how transit deals work. You can buy full transit, partial transit, select routes, on-net routes, etc. and ISPs will create a service and price around the customer request. Transit deals vary greatly, in size, type, price and host of other factors and are not a one-size-fits-all model. So when people write about “transit” without any definition, they are being too generic in its description. Many transit deals are alike, but transit relationships also vary greatly based on the region of the world you are buying transit in. CDNs like Netflix typically connect with many transit suppliers. This helps them route around problems and helps them avoid becoming a traffic problem by overloading any one path.
One thing not mentioned in all of these stories is all the different ways in which Netflix is currently streaming video. To date, a large percentage of Netflix’s traffic, by my guess 50% or more in the U.S., hasn’t been moved away from third-party CDNs and into the last mile. There are three different ways Netflix currently streams their videos. Via ISPs that are in their Open Connect Program, through third-party CDNs Level 3 and Limelight Networks and via Netflix’s own CDN where they lease network services and run their own servers. So most writing about Netflix don’t even know the basics of how their content is delivered today or how CDN and transit providers are involved.
Today’s news is very simple to understand. Netflix decided it made sense to pay Comcast for every port they use to connect to Comcast’s network, like many other content owners and network providers have done. This is how the Internet works, and it’s not about providing better access for one content owner over another, it simply comes down to Netflix making a business decision that it makes sense for them to deliver their content directly to Comcast, instead of through a third party. Tied into Netflix’s decision is the fact that Comcast guarantees a certain level of quality to Netflix, via their SLA, which could be much better than Netflix was getting from a transit provider. Many are quick to want to argue that Netflix should not have to pay Comcast anything, but they are missing the point that Netflix is already paying someone who connects with Comcast. It’s not a new cost to them.
This how the Internet has grown since its inception. Senders and receivers of content have funded access, services, backbone and growth costs across the Internet. Each may pay different costs per Mbps based on volume, competition, location and many other factors. This is where being big and powerful helps negotiate a more favorable deal based on efficiencies you may be able to drive. If you get into picking and choosing that a really big CDN player gets bandwidth free because they are powerful, but a small CDN or content owner has to buy transit, that’s not fair either. That is why companies have settlement-free interconnect policies, which are based on balanced and shared network investment. Commercial deals around interconnect help alleviate the bright lines between settlement-free interconnect (or peering) and a customer buying a retail product. Wholesale commercial deals take into account efficiencies and many other factors to drive a much lower unit cost.
There are no major “peering wars”, as the media likes to portray, disagreements yes, but they are based off of business decisions, like any other contract for services. Many options exist in the market for exchanging traffic and what is taking place between Netflix and ISPs is not new. These types of commercial arrangements between carriers, ISPs, content owners and transit providers happen every day. This time its simply high profile because it involves Netflix and the media picks up on it and implies or assumes things that simply aren’t accurate.
Outside of authors who cover networking for a living, I wonder if any member of the media even knows how to do a traceroute. You’ll notice that this whole Comcast/Netflix story broke early as a networking person who isn’t a member of the media, published what he saw in a traceroute. If you write about content delivery, LEARN HOW TO DO A TRACE ROUTE and see how content is being delivered how you get to the source of where the content is being delivered from. If you are too lazy to learn, then you should really stop writing about the subject. I’m no networking engineer, so even for my piece I made sure to speak to those who design, build and connect networks for a living. Bottom line is this is good for Netflix, Comcast and for consumers and it has absolutely nothing to do with Net Neutrality.
22-03-2014, 14:12 #4
How Transit Works, What It Costs & Why It’s So ImportantOne infrastructure service that’s gotten a lot of coverage in the media lately is transit, with many using the term incorrectly or defining it as something it’s not. I thought it might be helpful to explain what transit it, the different types of transit services sold, a list of providers who sell it, what it costs and why it is so important to the Internet. There are a lot of pieces that make up the Internet including products like wholesale, transit, wavelengths, backhaul and others which all share the same underlying optical transport infrastructure, which is the foundation for all Internet and IP services. Many of these terms are used interchangeably, but they shouldn’t be as they all provide a very different function in the market.
In its simplest definition, transit is a “network that passes traffic between networks in addition to carrying traffic for its own hosts”. The Internet is made up of a collection of networks, and in order to get traffic from one end user to another, all service providers, hosting providers and ISP networks need to have an interconnection mechanism. These interconnections, which allow the sharing of traffic, can be either direct between two networks or indirect via one or more other networks that agree to take the traffic. Many of these network connections are indirect as most providers don’t have a global network footprint and as a result, the traffic will be sent through several different interconnections to reach the end user.
The commercial interconnect relationships that allow networks to directly and indirectly connect are referred to as peering and transit relationships. While both those terms are often used interchangeably, they aren’t the same thing and they are many flavors of each. Peering is when two or more networks interconnect directly with each other to exchange traffic. While many think peering is “free” to both networks, that’s almost never the case. Like transit, there are many types of peering both public and private, and paid and settlement free. Peering is between two networks whereas transit allows you to connect to multiple networks.
Transit is where one network agrees to carry traffic that flows between another network and all other networks connected to it. No single provider in the market connects directly to all the other networks on the Internet, so any network that provides transit will deliver part of their traffic indirectly through multiple other transit networks. Transit providers’ routers lets other networks carry traffic to the network that has bought the transit and get a fee for that service. It sounds complicated, but really all the transit provider is doing is allowing multiple networks to exchange traffic with one another.
Some have written that transit allows two networks to exchange “bandwidth”, but that’s not accurate. Transit allows providers to exchange traffic, but bandwidth and traffic are not the same things. When it comes to how transit is sold, companies can buy full transit, partial transit, select routes, on-net routes, etc. and ISPs will create the service and pricing around the customer request. Transit deals vary greatly, in size, type, price and performance and are not a one-size-fits-all model. Many transit deals are alike, but transit relationships also vary greatly based on the region of the world you are buying transit it.
There are a lot of transit providers in the market, but many get confused as some companies just sell transit, while others sell a wider portfolio of products. For example, one of Cogent’s core products is selling transit, while others like Level 3 sell transit, but also VPN, CDN, WAN optimization and a host of other managed services. Many transit providers also only sell access in specific regions of the world, while others sell in multiple continents. Combined, there are lots of transit providers all over the world, of all sizes. While not a complete list, some of the more well known transit providers are:
- Hurricane Electric
- Level 3
- NTT Communications
- Tata Communications
- XO Communications
A lot of mainstream outlets talk about transit, but never seem to mention what it costs. While transit prices are all over the map based on location and quality of what is being bought, today, most transit in the U.S. costs less than $1 per Mbps, for large volume deals. In Australia, I’ve seen it as high as $150 per Mbps. Japan can easily be $25 per Mbps, but it all depends on the volume being bought. Most companies who buy transit, including Netflix, buy from multiple providers, at different price points and most important, with different SLAs. So many of those who buy transit from multiple providers distribute traffic, across multiple transit providers, in real-time, based on performance metrics. I’ve compiled some of the most common prices I have seen in the market, from those I speak to who buy transit. Again, there are many variables that determine the price, but here are the most common monthly rates I see in the U.S., with commits:
1500Mbps – 1.5Gbps $0.65
3000Mbps – 3Gbps $0.50
While there has been a lot of talk about Netflix delivering content inside the last mile, via Open Connect or commercial interconnect relationships, it’s important to remember that 18 months ago, CDNs were still accounting for 40% of the overall traffic volume flowing into ISP networks. I’d have to check what that number is today, but it’s still going to be high as most content owners today use third-party CDN service providers, they don’t try to build out their own CDN as Netflix and a few others have done. This is where transit comes in and allows all of these CDNs to connect to all the different ISPs, so that video gets to end-users.
Transit is so important because without it, the Internet would not work. We’d have a bunch of closed networks that don’t connect with one another and traffic would not make it to end users. From a business standpoint, there are many backbone and transit providers to choose from in a highly competitive market, which all CDNs and some larger content owners work with and gain price reductions every year. Transit pricing has and continues to get cheaper every quarter, and it is expected it will decline in price once again this year.
23-03-2014, 14:03 #5
Are Netflix users ripping off the rest of us?NEW YORK (CNNMoney)
Netflix CEO Reed Hastings is hopping mad at the country's biggest Internet service providers. But they've got a bone to pick with him as well.
Hastings sounded off Thursday on the likes of Verizon, Comcast and others, accusing them of "sacrific[ing] the interests of their own customers" in demanding fees to ensure quick delivery of content from Netflix and other data-intensive services.
The dispute flared up earlier this year following news that Netflix streaming speeds for customers of major ISPs were slowing, as these firms attempted to extract a fee from Netflix in exchange for connecting directly to their networks and resolving the issue.
Netflix announced an agreement with Comcast last month under which it will indeed pay for a connection, and has been in talks with Verizon as well.
Hastings said his company was engaging in these talks "reluctantly." He accused the ISPs of abusing their market power and short-changing customers.
Related: New chapter begins in net neutrality fight
But the ISPs tell a very different story. They point to the fact that Netflix generates a massive amount of data consumption -- around a third of traffic online during peak hours -- while sticking them with the ever-increasing delivery costs.
The National Cable and Telecommunications Association says just one percent of broadband subscribers -- primarily heavy streaming-video users -- consume nearly 40% of bandwidth going into homes.
Other big tech companies, including Microsoft, Google and Facebook, already have paid-connection deals with big ISPs.
Comcast vice president David Cohen said in response to Hastings that these arrangements "have been an essential part of the growth of the Internet for two decades."
Dan Rayburn, an industry analyst at Frost & Sullivan, says it's not clear that the ISPs are to blame for customers' lagging Netflix speeds. In a blog post Friday, he noted that Netflix has the option of rerouting the traffic it sends to ISPs when congestion occurs at one connection point.
The heart of the problem is that high-speed Internet networks are extremely expensive to deploy. There aren't many companies with the resources to do it, and there isn't enough competition in most regions to push ISPs to quickly upgrade their infrastructure.
Paid-connection deals like the one between Comcast and Netflix are part of the way the broadband industry wants to address this issue. But Hastings says this cost-sharing doesn't make sense if the ISPs aren't also willing to share subscription revenue.
"When an ISP sells a consumer a 10 or 50 megabits-per-second Internet package, the consumer should get that rate, no matter where the data is coming from," Hastings wrote in his blog post.
ISPs have accused Netflix of "dumping" data onto their networks, a characterization that Hastings rejected.
"Netflix isn't 'dumping' data; it's satisfying requests made by ISP customers who pay a lot of money for high speed Internet," Hastings wrote. "If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future."
Going forward, broadband providers would like to move to a tiered pricing structure for customers depending on how much data they consume, similar to those offered by mobile carriers.
"It's unfair to ask lighter users to subsidize super-user activity," the NCTA says.
But part of that formula will likely involve letting content providers subsidize consumer data consumption that goes toward their services. AT&T announced this kind of "sponsored data" program earlier this year for the mobile Web. The worry with this system is that it favors established companies that can pay up for speedy delivery of their content, putting smaller firms at a disadvantage and potentially stifling innovation.
"On a tiered Internet controlled by the phone and cable companies, only their own content and services -- or those offered by corporate partners that pony up enough 'protection money' -- will enjoy life in the fast lane," the advocacy group Free Press says.
24-03-2014, 10:56 #6
[EN] WSJ: Apple in Talks With Comcast About Streaming-TV ServiceApple Inc. is in talks with Comcast Corp. about teaming up for a streaming-television service that would use an Apple set-top box and get special treatment on Comcast's cables to ensure it bypasses congestion on the Web, people familiar with the matter say.
The discussions between the world's most valuable company and the nation's largest cable provider are still in early stages and many hurdles remain. But the deal, if sealed, would mark a new level of cooperation and integration between a technology company and a cable provider to modernize TV viewing.
Apple's intention is to allow users to stream live and on-demand TV programming and digital-video recordings stored in the "cloud," effectively taking the place of a traditional cable set-top box.
Apple would benefit from a cable-company partner because it wants the new TV service's traffic to be separated from public Internet traffic over the "last mile"—the portion of a cable operator's pipes that connect to customers' homes, the people familiar with the matter say. That stretch of the Internet tends to get clogged when too many users in a region try to access too much bandwidth at the same time.
Apple's goal would be to ensure users don't see hiccups in the service or buffering that can take place while streaming Web video, making its video the same quality as Comcast's TV transmissions to normal set-top boxes.
While devices such as Microsoft Corp.'s Xbox gaming console and Roku Inc.'s set-top box have made some inroads in the TV industry, none offer the kind of fully formed TV service, with the guarantee of network quality, that Apple desires.
Apple has spent several years exploring various avenues to enter TV, but it has been unable thus far to find business models that media companies and cable providers find appealing.
Getting the support of Comcast would give Apple's plans a big boost. The companies share a common goal: advancing set-top box technology so that TV more closely resembles the easy-to-use apps and streaming-video services to which consumers are growing accustomed. Innovation is becoming a high priority for content-owners and operators amid pay-TV subscriber losses and fears that a younger generation of consumers will forgo paying for TV altogether.
Apple and Comcast aren't close to an agreement, said one person familiar with the talks. Delivering the service quality Apple envisions would require Comcast to make significant investments in network equipment and other back-office technology, according to people familiar with Comcast's thinking.
The companies also differ on how deep a relationship Apple should have with Comcast's customers. Apple has proposed that users would sign on to the new device using Apple login IDs, and it is interested in controlling customer data, the people familiar with the matter said. Apple also has asked for a cut of the monthly subscription fees paid by customers, these people said.
Comcast wants to retain significant control over the relationship with customers and the data.
Furthermore, Apple must acquire significant TV programming rights from media companies, one of the people said. Comcast would want to ensure that the price Apple has to pay to acquire rights wouldn't cause the service to be priced higher than traditional pay-TV service, this person said.
Apple has had discussions since at least mid-2012 with Time Warner Cable Inc., the No. 2 operator, people familiar with the matter said. Those talks, known internally at Time Warner Cable as "Project Jupiter," came to a standstill when the cable operator became a takeover target, the people said. Comcast in February agreed to acquire Time Warner Cable for $45 billion, a deal regulators are reviewing that would give Comcast a total of 30 million U.S. customers, after proposed divestitures.
Under the plan Apple proposed to Comcast, Apple's video streams would be treated as a "managed service" traveling in Internet protocol format—similar to cable video-on-demand or phone service. Those services travel on a special portion of the cable pipe that is separate from the more congested portion reserved for public Internet access.
People familiar with the matter said that while Apple would like a separate "flow" for its video traffic, it isn't asking for its traffic to be prioritized over other Internet-based services.
Those distinctions are important because of merger conditions Comcast agreed to as part of its 2011 acquisition of NBCUniversal. Those "net-neutrality" restrictions, which will be in place through 2018, say Comcast cannot "unreasonably discriminate" in how it transmits network traffic.
The Federal Communications Commission is in the process of drafting net-neutrality rules for the broadband industry after the U.S. Court of Appeals for the District of Columbia in January tossed out an earlier set of regulations the agency had in place.
The FCC has signaled that its new rules will prevent Internet service providers from blocking or slowing down access to Web content providers that don't pay a toll. It isn't clear what approach the FCC will take to a situation in which a provider such as Apple wants enhanced treatment for a cloud-based service in partnership with an operator.
The FCC also could consider net-neutrality proposals as part of its review of the Comcast-Time Warner Cable deal.
Under the FCC rules the court struck down, broadband providers were allowed to treat managed services differently from public Internet traffic. The agency noted the potential risks, however, if broadband providers invest too much in specialized last-mile services but "constrict or fail to continue expanding network capacity" for the public Internet.
Comcast could see value forming a partnership with Apple to add and retain customers. In addition, the Apple device likely would be sold at retail to customers rather than leased through the cable operator like a traditional set-top box—something that could reduce Comcast's capital expenditures over time, said one person familiar with the talks.
At the same time, though, Comcast has been aggressively investing in and deploying its own Internet-connected set-top box and guide—dubbed "X1"— that far eclipses capabilities of its old boxes. To date, Comcast has limited the managed-video services it offers only to its own cable TV services.
Apple's interest in separating its streaming-TV service from ordinary Web traffic highlights growing concerns in the media industry about the Internet's ability to handle the increasing consumer demand for online video.
Netflix Inc. recently agreed to pay Comcast to directly connect to the cable provider's network to improve the quality of its streaming-video service. That "interconnection" deal was different from Apple's proposed approach in that it didn't address how Netflix's traffic would be treated over the "last mile" to households.
The arrangement Apple is seeking could give it a leg up over other new entrants vying to offer online versions of pay-television service, such as Sony Corp., whose traffic would travel over the public Internet.
Anticipation built about a breakthrough TV offering from Apple after founder Steve Jobs told biographer Walter Isaacson three years ago that he "finally cracked" a way to revamp the television. But Apple's only television product since then has been Apple TV, which offers users access to iTunes movies on the larger screen of a television as well as streaming video from Netflix, Hulu and other online services.
There is some precedent to the kind of deal Apple is seeking with Comcast. The cable operator has a years-old relationship with TiVo Inc., the DVR pioneer, which allows subscribers to receive Comcast TV service through TiVo boxes they buy at retail stores and, in some markets, with certain newer boxes access Comcast's on-demand library.
Apple's proposal is different than TiVo's in that it has sought a share of customer fees and a deeper relationship with customers and content owners.
24-03-2014, 20:04 #7
WSJ’s Apple/Comcast Story Not AccurateDan Rayburn | Monday March 24, 2014
I wasn’t planning to write anything about the WSJ’s news story about Apple and Comcast being in discussions to work together, but since I have gotten so many inquiries from others asking me to comment on the post and seeing that Netflix’s stock is now down $30 a share as of 2pm ET, I felt compelled to get something up.
From sources I have spoken to, no such deal between Apple and Comcast is being considered today, the way the WSJ describes it. Apple routinely has discussions with all the major content owners but Apple is not working on any special streaming service that will be delivered via Comcast. While one could always speculate that such a service might, could or should come to the market in the future, anything is possible, but not the way the WSJ details it.
For starters, the WSJ post says that Apple would get “special treatment on Comcast’s cables to ensure it bypasses congestion on the Web”. Not only would Comcast not offer that, legally they aren’t allowed to. The post goes on to say that Apple “wants the new TV service’s traffic to be separated from public Internet traffic over the last mile”. This makes no sense. Once the content is already inside the last mile, it’s no longer “public Internet traffic”, so the WSJ authors simply doesn’t understand, from a basic technical level, how content is delivered.
The post also says that the last mile “tends to get clogged when too many users in a region try to access too much bandwidth at the same time.” As we know from the Netflix and Comcast story, the congestion takes place at interconnect points and generally not inside the “last mile”. Does the WSJ have any data to show us that congestion is taking place inside the last mile at Comcast? Also, users aren’t accessing too much “bandwidth”. I get what they are saying, but they are using the wrong term. Bandwidth is simply the amount of data that can be carried from one point to another in a given time period. Users don’t access “bandwidth”, they are accessing content.
How anyone can take the WSJ’s post seriously is beyond me when they use so many vague terms, and it’s clear that the authors don’t understand this subject from a basic technical level. They say Apple wants a separate “flow” for its video traffic. What does that mean? Define “flow”. Earlier in the post they said that Apple would “get special treatment on Comcast’s cables”, but later on say “it isn’t asking for its traffic to be prioritized over other Internet-based services.” Well, which one is it? It can’t be both.
Their “technical” description of how this would work makes no sense at all. They say “Apple’s video streams would be treated as a “managed service” traveling in Internet protocol format—similar to cable video-on-demand or phone service. Those services travel on a special portion of the cable pipe that is separate from the more congested portion reserved for public Internet access.” That’s a lot of vague, generic words thrown together that mean nothing without defining them. “Special portion”? “Managed service”? Are they suggesting a private peering connection? Maybe, but then that’s not inside the last mile. And why do they say it will be delivered using the “Internet protocol format”? Is there any other format to use? Of course it’s in IP format, it’s going over IP-based networks!
I was just going to leave this article alone and not say anything as I’m not trying to police the web. But Wall Street thinks this is big news and has sent Netflix’s stock down $30 a share as of 2pm ET, which is crazy. The WSJ’s post does not have enough facts in it, and far too many errors, to use it as the reason to justify a sell off in Netflix. Just because something is published in the WSJ or any other major publication does not guarantee they have the story right. It does not take much to see that the way the story is written, the authors don’t understand the basics of how content gets delivered on the Internet. They don’t use the right terminology, and the post is filled with so many vague and nondescript terms that no one should be making any decisions on buying or selling stocks based on what this WSJ post says.
Added 4:02pm – While Netflix’s stock could be down for reasons other than the WSJ’s post, nearly all Internet stocks are down today including Google, Akamai, Facebook, Twitter, Yahoo and others. The two stocks that are up are Apple and Comcast. So you can draw your own conclusions if you think the WSJ article had any impact on Netflix’s stock today.
Disclaimer: I have never bought, sold or traded a single share of stock in any public company ever. I have no vested interested in Netflix, Apple, Comcast or any other company mentioned in this post.
24-03-2014, 20:32 #8
Dan Rayburn queimou os dedinhos (e a reputação) nesse artigo. Não entendeu o espirito da coisa e ainda acusou os autores da matéria do WSJ de não terem entendido.
Última edição por 5ms; 24-03-2014 às 20:34.
26-03-2014, 18:35 #9
Analysts: Comcast-Apple ‘No big deal’
By Colin Mann
Following reports that Apple is in talks with Comcast about teaming up for a set-top box service that would allow users to stream live and on demand TV from the cloud, analysts at Barclays Capital have suggested that while streaming of live TV is inevitable over time, given the move to IP-based platforms, they consider any such resultant development is likely to have a marginal impact, if any.
Asking the question: ‘Is Comcast enabling Apple or is Apple enabling Comcast?’ Kannan Venkateshwar and Ben A. Reitzes suggest that any relationship between Apple or for that matter other companies looking to get into the TV market (Amazon, Google etc.) and a cable company depends on what content rights either party has.
“In this respect, MVPDs enable a revenue stream more than $100 billion to content owners through affiliate and retrans fees and advertising and bring a 100 million subscriber base to the mix. Apple today does not own the rights to linear TV which enables this revenue stream nor does it bring a subscriber base for any linear service. Also, Apple’s key product offering for content (iTunes) is a non linear product offering without advertising for the most part.”
They say that as a result, in order to offer any credible product, Apple with either have to (1) rely on an MVPD’s linear content rights or (2) pay for these rights on its own. “In this respect, as we noted in our recent note (please see ‘DISH-Disney deal: What does it imply?’ Mar 5, 2014), the DISH-DIS deal sets up a potential framework for non-traditional players to get into the linear TV ecosystem. However, the latter is likely to be a lot more expensive for the likes of Apple as they do not have any subscribers as of today (vs ~million for Comcast). Consequently, in our opinion, any deal between Apple and an MVPD like Comcast is likely to be in a form where the MVPD’s app appears on Apple TV along with other non linear offerings like Netflix. Such an arrangement would imply that any subscriber to such a service will have to be a Comcast subscriber who happens to have Apple hardware rather than an Apple customer who becomes a Comcast subscriber.”
Similarly, as to ‘What does Apple have to offer Comcast?’, they note that when Apple entered the smart phone market, it enabled a much higher pace of mobile data consumption which also benefited the service providers. “Therefore, a valid question to ask is what Apple offers MVPDs, especially those who already have an advanced cloud based TV offering. While the widespread availability of tablets and smart phones as well as Apple’s expertise on simplifying the user experience could be value adds, we note that most cable companies have already integrated the TV viewing experience with mobile devices and are now taking this to the next level with WiFi.”
They admit that while they consider the news not to be of much significance, it does highlight one important aspect of what they have been speaking about for a while now. “Over time, we believe the Internet is likely to fragment into multiple managed services with those having the ability to pay (like Apple) seeking preferential access to the last mile. In other words, some of the content from the Internet is likely to seek an alternative, off line path to the home,” they suggest.
“While this is likely to raise questions on net neutrality, in our view, this is likely to be a completely different commercial service offered by cable companies to companies like Apple who want to have an off network presence apart from a presence on the Internet. In fact, this is likely to flip the whole net neutrality debate on its head as large internet companies like Apple and Google, who have been supposedly the victims of the net neutrality debate thus far, are likely to actively seek an alternative path outside the Internet for higher quality of service, especially when it comes to video. Therefore, instead of the entire focus of net neutrality being on the distribution leg, we believe increasing focus is also likely to be paid to the edge providers, if services similar to what the WSJ article seems to imply become more widespread,” they conclude.
Última edição por 5ms; 26-03-2014 às 18:39.
26-03-2014, 20:21 #10
Verizon, AT&T are exploring interconnection deals with NetflixVerizon Communications and AT&T may be the next major telecommunications and broadband providers to strike interconnection agreements with Netflix similar to the one the streaming video service recently agreed to with Comcast.
According to CNET, Verizon Communications CEO Lowell McAdam said on a conference call with investors that that it makes sense for those consuming lots of Internet bandwidth to help companies like Verizon invest in keeping networks open by defraying the cost of network upgrades.
"We are pleased to see Netflix and Comcast agree on an arrangement," he said during the call. "And we have had discussions with Netflix ourselves."
McAdam expanded on his views on the matter interview on CNBCs "Squawk on the Street" program, and said that Verizon and Netflix have been discussing a deal for the past year. He did not say when a deal might be reached but he said that he thought there was a "good opportunity here" for both companies.
AT&T also acknowledged similar discussions with Netflix. "We're in discussions with Netflix to establish a more direct connection between our networks, similar to agreements we have with others, so that AT&T broadband customers who use Netflix can enjoy an even better video experience," an AT&T spokesperson said in a statement.
It's unclear if the agreements would be for wired or wireless networks—or both. Verizon just took full control of Verizon Wireless.
Netflix has stepped up pressure on broadband providers to join its OpenConnect content delivery network, which requires Netflix video caching servers to be placed on an operator's network. Broadband providers that are OpenConnect members have moved to the top of its monthly rankings, including Cablevision, Cox Comunications and Suddenlink Communications. However, other providers like Verizon, which hasn't joined OpenConnect, have seen their rankings slip in the monthly reports.
Recently, some of Netflix's existing Internet connections to broadband providers like Comcast and Verizon have been slowed. One such choke point has been Cogent Communications, which Netflix was using as a "primary" to route content into Comcast, according to a recent Wall Street Journal report, which cited an unnamed person familiar with the matter.
As the Journal noted, according to data Netflix recently published, the average speeds of the company's primetime streams to Comcast subscribers fell 27 percent from October to January and Netflix's streams to Verizon customers also have slowed in recent months.