Netflix Battles Bandwidth Caps

Netflix taps encoding startup EYE IO to boost bandwidth efficiency by up to 50% and keep consumption caps and broadband meters in check

Jeff Baumgartner, Senior Editor

February 1, 2012

2 Min Read
Netflix Battles Bandwidth Caps

Netflix Inc. (Nasdaq: NFLX) has tapped a startup to help the over-the-top video provider take on one of its biggest enemies: ISP consumption caps and metered broadband policies.

Netflix emerged as the marquee customer of EYE IO LLC , an encoding firm founded in December 2010 that claims its H.264-compliant technology will help reduce Netflix's bandwidth consumption by 20 percent to 50 percent without sacrificing video quality.

EYE IO didn't detail how Netflix is deploying its encoding systems, but Netflix, which streamed more than 2 billion hours of TV shows and movies in the fourth quarter, is EYE IO's first announced licensee. NewTeeVee estimates that standard-definition Netflix streams currently eat up about 2.2Mbit/s, with 720p HD requiring about 3.8Mbit/s, and 1080p HD streams chowing down up to 4.8Mbit/s.

EYE IO CEO and CTO Rodolfo Vargas, a former Microsoft Corp. (Nasdaq: MSFT) exec, says the company optimizes streaming using software-based core encoding, but confirmed that it does not employ an adaptive bit rate scheme that would fluctuate video quality based on available bandwidth.

Why this matters
ISP bandwidth caps and metered broadband tiers are as much an enemy to Netflix's business as a rival OTT video service. It doesn't own the access network, so strict caps and meters can do damage to Netflix's value proposition.

Netflix especially grapples with this in Canada, where broadband meters and caps are rampant, and it could be in for another dose as Netflix sets its sights on more international markets. More U.S. ISPs are also expected to adopt similar bandwidth policies that could spell trouble for OTT companies. Netflix is popular on mobile devices, too, so the problem there is amplified in the face of even more limited cellular data plans.

More efficient encoding could help Netflix reduce its exposure to that risk. Netflix has also tried to combat caps by letting users adjust streams to lower bit rates, which reduces picture quality. (See Netflix Canada Cuts Video Streaming Quality.)

Netflix is obviously a big win for a young startup like EYE IO. Chairman of the Board Charles Steinberg wouldn't say how much seed money the company, which employs five full-timers, has raised, but noted EYE IO is not looking to raise any more cash at this point.

For more
Read more about broadband meters and bandwidth caps.

  • Netflix Fears by-the-Byte Tiers

  • O, Canada! Netflix Streaming Gets a Reprieve

  • Suddenlink to Fit Broadband Caps, Overage Fees

  • Netflix Shames ISPs

  • Will Cable Follow AT&T's Lead on Usage Fees?

  • Comcast Draws the Line at 250GB

  • Charter's Internet Cap to Bare Its Fangs

— Jeff Baumgartner, Site Editor, Light Reading Cable

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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