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Netflix Battles Bandwidth Caps

Jeff Baumgartner
2/1/2012

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.



— Jeff Baumgartner, Site Editor, Light Reading Cable



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Duh!
Duh!
12/5/2012 | 5:43:34 PM
re: Netflix Battles Bandwidth Caps


Actually, if you've been following this for a while, you'll know that the compensation issue is really between Netflix CDN supplier Level 3 and the access providers.  Or, more precisely, that the long-standing Internet internetwork compensation model is not transparent and could be argued to be inequitable. 


In an ideal world, Congress would tell the the FCC to step in, conduct an unbiased and transparent rulemaking proceeding, and establish compensation rules that everybody could live with and that would maximize consumer benefit.   Between those who think the gummint should keep its cotton pickin' hands offa the Free Market, and the machinations of lobbyists on all sides, I'm afraid that isn't going to happen.

Cooper10
Cooper10
12/5/2012 | 5:43:34 PM
re: Netflix Battles Bandwidth Caps


Agree, the compensation may very well be between carriers vs. the end-users.  But the point is that an unlimited usage model has to evolve when usage is so disproportionate across users, and growing by double digit %'s.  And while a base service cost of 0 is a nice idea, take a look at your electric bill - there is undoubtedly a "base fee" of some sort that is charged for simply being on the grid.  Would expect a similar model for bandwidth consumption.

craigleddy
craigleddy
12/5/2012 | 5:43:34 PM
re: Netflix Battles Bandwidth Caps


"If every Internet start-up had to pay to access consumers there'd be a lot fewer of them and a lot less innovation."


I agree totally. But service providers would pose the question: what happens when an Internet player like Netflix becomes well established and uses a disproportionate share of bandwidth so that the SP is forced to spend more on CapX (broadband equipment) and OpX (electric power etc) to support that player? The Internet player isn't paying the SP anything but is making them incur more costs.


Oh no! Are we getting into a net neutrality debate?? LOL






 


 

paolo.franzoi
paolo.franzoi
12/5/2012 | 5:43:35 PM
re: Netflix Battles Bandwidth Caps


Ummm...if you have ever bought bandwidth from a carrier - yes you get usage basage.  You buy a port of size X and a committed capacity of size Y.  The bigger X or Y is the more you pay.


I would be happy with metered usage if the base service cost was 0.  Then I as a consumer (who is using the bandwidth) pays for the bandwidth that I use.  Netflix pays their supplier for the bandwidth they use already.


I don't know why Netflix would pay a carrier that does not provide them bandwidth.  In the phone world, inequities like this are settled between carriers - NOT the end users.


seven


 

Cooper10
Cooper10
12/5/2012 | 5:43:37 PM
re: Netflix Battles Bandwidth Caps


Yes, Netflix pays their bandwidth suppliers - but do they pay proportionate to the bandwidth consumed by Netflix?  When (not if, in my opinion) metered usage becomes a reality on wireline services, then Netflix's costs will reflect their relative usage.  The more you use, the more you pay. 

paolo.franzoi
paolo.franzoi
12/5/2012 | 5:43:41 PM
re: Netflix Battles Bandwidth Caps


And Netflix pays their bandwidth suppliers.  So, everybody is paid along the path.


seven


 

Survivorman
Survivorman
12/5/2012 | 5:43:42 PM
re: Netflix Battles Bandwidth Caps


..as a consumer I buy access to/from Netflix servers.  So I don't buy the comment about Netflix gettng a free ride - they're getting the haulage I paid for and hopefully are keeping their pricing more competitive through this.  However I don't object to them paying part of the haulage for better delivery and offering me a higher definition service.  If every Internet start-up had to pay to access consumers there's be a lot fewer of them and a lot less innovation.

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:43:43 PM
re: Netflix Battles Bandwidth Caps


EYE IO execs didn't get into their trade secrets at all, but the exec summary lists two current products:


 -A "production-level" H.264 video encoder


-A H.264 "last pass" re-encoder that reduced bandwidth and storage of video streams already encoded.


 Vargas likened its approach to "artificial intelligence encoding" and that Netflix is adding this capability by adding EYI IO's software code to its existing encoding systems, so it seems likely that we're talking about the "last pass" product in this instance – taking the encoded content and squeezing it down even more.


And they aren't talking about how extensively it's software has been deployed at Netflix. However, they said one indicator is if a Netflix stream starts up in 2-3 seconds (versus 20-30 secs.), you're likely viewing an EYE IO-enhanced stream. JB

craigleddy
craigleddy
12/5/2012 | 5:43:43 PM
re: Netflix Battles Bandwidth Caps


With an oink-oink here and an oink-oink there, Netflix is a bandwidth pig, EYE IO, EYE IO...oh hell, it's not really working.


Anyway, I'm sure service providers will be keeping an eye on this technology because Netflix is a big bandwidth pig and has been getting a free ride on SP pipes for too long. 


 

Pete Baldwin
Pete Baldwin
12/5/2012 | 5:43:43 PM
re: Netflix Battles Bandwidth Caps


We wrote this much about EYE IO and didn't make a single "Old MacDonald" crack?

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