Netflix: The Internet's US Traffic King

Netflix Inc. (Nasdaq: NFLX) is now the largest single source of Internet traffic over North American fixed-broadband connections, representing 29.7 percent of peak downstream traffic, according to a new report from Sandvine Inc. based on data from more than 220 service provider customers from around the world.

According to Sandvine's data, Netflix represents 22.2 percent of total application share in North American fixed-access traffic, just enough to outpace BitTorrent Inc. , but well ahead of HTTP and YouTube Inc. traffic (see diagram below).

As a broader group, "Real-Time Entertainment" apps gobbled up 49.2 percent of peak aggregate traffic in North America, up from 29.5 percent in 2009. Sandvine believes the category will represent 55 percent to 60 percent of peak aggregate traffic by the end of 2011.

In Europe, Sandvine found that BitTorrent was the largest single consumer of both upstream (59.7%) and downstream (21.6%) Internet traffic during "peak periods." In the U.K., BBC's iPlayer consumed 6.6 percent of peak downstream traffic.

Sandvine, a company that specializes in deep packet inspection and network policy control, generates these twice-yearly reports and makes its observations by aggregating anonymous service provider data, according to company EVP and co-founder Tom Donnelly.

Why this matters
Based on sheer traffic numbers, Netflix's popularity in North America is undeniable. But that popularity is also starting to put some serious stress on broadband networks. Sandvine's latest report may encourage ISPs to abandon their "all-you-can-eat" broadband subscription models and introduce usage-based billing instead, a trend Netflix doesn't want to see. (See Netflix Fears by-the-Byte Tiers .)

Some ISPs, including Comcast Corp. (Nasdaq: CMCSA, CMCSK), are already trying to get out ahead of the curve with monthly caps that rein in bandwidth hogs with "excessive use" policies that allow customers to consume data up to a relatively large ceiling before they receive warnings or risk getting their service shut off.

As a step beyond that, some U.S. ISPs, including AT&T Inc. (NYSE: T) and, more recently, CableOne , are starting to install usage-based billing policies that charge by the gigabyte once customers exceed their monthly limits.

Netflix has argued that ISPs that charge $1 or more per gigabyte over wired networks "would be grossly overpriced," claiming that the cost to an ISP to deliver a "marginal gigabyte" (about an hour of viewing via streaming) from one of Netflix's regional interchange points to a broadband customer is less than a penny, and falling.

For more
Read more about the rise of Netflix and the controversies surrounding usage-based billing.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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