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Netflix vs the ISPs

Discussion in 'BBS Hangout' started by arkoe, Mar 22, 2014.

  1. arkoe

    arkoe (ง'̀-'́)ง

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    Saw two different articles today about Netflix having trouble with the ISPs. It's interesting to me when it comes to what service the ISPs think they should provide vs what the general public think they do provide, especially when it comes to legal content.

    We're used to the internet breaking older business models. 2nd article makes it sound like the business model for the ISPs has now been broken now though by Netflix.

    Netflix CEO Slams ISPs for 'Extracting a Toll Because They Can'

    BY JULIANNE PEPITONE

    The battle rages on between Netflix and the country's biggest Internet service providers.

    Netflix CEO Reed Hastings said in a blog post Thursday that the company will pay more ISPs to ensure a good customer experience — but he slammed those providers for "extracting a toll because they can."

    It's the latest in a fight over whether Netflix and other data-heavy services should have to shoulder part of the cost of getting that content to customers.

    Through some ISPs, Hastings wrote, "Netflix performance has been constrained, subjecting consumers who pay a lot of money for high-speed Internet to high buffering rates, long wait times and poor video quality."

    At the core of the issue is "Net neutrality," or the idea that ISPs like AT&T and Comcast should treat all Internet traffic equally, and not favor or punish certain content.

    "Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service," Hastings wrote.

    Telecom companies won a battle in the net neutrality war in January, when a U.S. appeals court invalidated federal rules that banned carriers from favoring traffic from certain sources. Those rules were meant to stop carriers from selling faster connections to customers who pay more — not to settle debates between companies like Netflix and ISPs — but Netflix has still felt the implications of the ruling.

    In February, Netflix inked a deal to pay Comcast more for a speedy connection.

    Comcast is the parent company of NBCUniversal, which owns NBC News.

    "Providers like Netflix have always paid for their interconnection to the Internet and have always had ample options to ensure that their customers receive an optimal performance through all ISPs at a fair price," Comcast said in a statement emailed to NBC News.

    Netflix will pay other ISPs for the same deal, Hastings said. But he's not happy about it, and he called for stronger net neutrality rules.

    AT&T called Hastings' comments "arrogant."

    "As we all know, there is no free lunch, and there’s also no cost-free delivery of streaming movies. Someone has to pay that cost," Jim Cicconi, AT&T's senior executive vice president for external and legislative affairs, wrote in a company blog post.


    Are Netflix users ripping off the rest of us?

    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 (VZ, Fortune 500), Comcast (CMCSA, Fortune 500) and others, accusing them of "sacrificing the interests of their own customers" in demanding fees to ensure quick delivery of content from Netflix (NFLX) 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.

    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 (MSFT, Fortune 500), Google (GOOG, Fortune 500) and Facebook (FB, Fortune 500), 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.
     
  2. Duncan McDonuts

    Duncan McDonuts Contributing Member

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    Well, that's a bunch of BS. I thought by paying more for higher speed, I was paying to have that data connection. ISPs shouldn't be able to control how bandwidth is allocated depending on the website.

    That last quote by the Free Press is shockingly accurate. ISPs are able to determine which websites are allowed to conduct their business freely without repercussions, much like gangs can determine which businesses can operate safely if they pay protection money.
     
  3. SirCharlesFan

    SirCharlesFan Contributing Member

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    I think this going to become more and more likely as over the top streaming services evolve. A lot of cable/satellite companies dropped WWE PPVs when the WWE Network launched.

    I am waiting for the big cable companies to start raising the price of internet to make up for the loss in television revenue.
     
  4. tehG l i d e

    tehG l i d e Member

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    I have Comcast internet and Netflix is always smooth for me. Hulu Plus is always crapping the bed though.
     
  5. Space Ghost

    Space Ghost Contributing Member

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    I'll will reassure you completely that if the government regulated it, netflix would be paying out big time, more so than the private sector would charge.

    Look at our road infrastructure. Commercial and industrial a lot more in taxes and fees to use the roads than the average individual.

    What remains is that Netflix uses a great deal of the traffic on the internet. This affects everyone. If Netflix believes they can continue on utilizing the bandwidth ratio with no kick backs, they are wrong.
     
  6. Bandwagoner

    Bandwagoner Contributing Member

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    To use your analogy, commercial trucking wrecks the roads way more than out light cars and trucks do but they pay no where near the same taxes or tolls compared to wear and destruction.
     
  7. juicystream

    juicystream Contributing Member

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    More than the $70/M I'm already paying for internet?
     
  8. Duncan McDonuts

    Duncan McDonuts Contributing Member

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    ISPs have had no innovation or improvement to their infrastructure despite being given grants to improve their services. Yet, they sit on these funds while continuing to increase their monthly fees.

    We already pay higher prices for high speed internet than other countries. So, what are our ISPs doing incorrectly versus their international counterparts?

    I know that's a little off-topic, but it goes with my rant against the ISPs continuing to dominate their share of the market however they see fit. They provide a necessity with very little competition, and pretty much monopolize the market so that they can continue to rape us consumers.
     
  9. FlyerFanatic

    FlyerFanatic YOU BOYS LIKE MEXICO!?! YEEEHAAWW
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    google fiber needs to save us all.

    i for one will accept our google overlords
     
  10. vinsensual

    vinsensual Member

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    My understanding of infrastructure is limited, but if they're complaining about bandwidth ratios, does that mean people sharing that ISP are lagging during peak hours? Are there clogs in the series of tubes?

    It's hard to read this with an open mind where I'm not already thinking "screw comcast."
     
  11. Space Ghost

    Space Ghost Contributing Member

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    That is exactly my point. Netflix accounts for 30-40% of traffic, but they pay the same as anyone else.
     
  12. Space Ghost

    Space Ghost Contributing Member

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    There is truth in all the points of views. Comcast and most other ISP's, like most other big business, only care about their bottom dollar. They are there to make a profit, not to be a charity. If you want your 100Mbps connection, someone has to pay the piper. The consumer is not going to pay. The government is not going to pay. The cuts are made in slow growth in their infrastructure and cuts in their quality of service and customer service.

    Verizon Wireless is a good example. They aren't perfect, however, they are expensive and they have the best coverage. It comes at a premium.

    The cable companies and landline companies are becoming endangered. Cable companies paid a lot of money up front to get franchise fees to run cable and the landline companies have done the same. With the advent of the internet, both entities have learned to use their lines to provide internet. Landline (dialup and DSL) have made a killing over the last two decades with their internet. However, the technical limitations are quickly making them extinct, thanks to cable/fiber and cell phones.
    Fiber is the new boy in town. Unfortunately, they haven't had 3 decades to roll out fiber and everyone expects it to be in their living room yesterday at the same price as DSL. It just isn't going to happen.

    The sad part is there are many communities out there that could get fiber but they refuse to pay a little extra to get it ran. They would rather stay with their crappy DSL, whine and complain about the poor service.
     
  13. Yonkers

    Yonkers Contributing Member

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    People like me have already paid extra for a high bandwidth connection for the sole purpose of accessing content like Netflix. The demand is coming from people who've already paid for it. The ISPs are trying to double dip. Even tollways only charge you for either entering or leaving. You don't pay to get on AND off.
     
  14. arkoe

    arkoe (ง'̀-'́)ง

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    I do all the time. Sometimes I pay between getting on and off too.

    I don't really know how this works, but my assumption is Netflix has an ISP and I have an ISP. I say hey Netflix, I want to stream The Godfather. My ISP sends the request to Netflix's ISP who then together route the content back to me through some mix of Netflix's and my ISP's networks.

    I paid my ISP, Netflix paid their ISP. But now my ISP is saying, "Hey there Netflix. Pay me a fee or I'm giving arkoe slower service which will result in poor quality of The Godfather, in turn making your service look bad.". This is despite the fact that I already pay my ISP for bandwidth that should adequately cover the requirements to stream the movie at a decent quality and Netflix is (probably) already paying out the nose to their ISP.

    Why should Netflix have to pay my ISP, especially if I have already purchased a higher priced plan from my ISP to cover the requirements for a quality stream?
     
  15. Space Ghost

    Space Ghost Contributing Member

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    What is your definition of "extra high"? The basis of the internet and pricing works on a communal system. Your example of a tollway is not accurate.

    Person A can be on the internet everyday for a few hours using the internet to facebook, read the news and send emails back and forth for work. They might use 1 Gig of data in one month.

    Person B can watch a couple hours a day on netflix and use 30+ Gigs of data.

    Person A would pay double for the internet if they had to, while Person B is complaining about the low tier pricing being too expensive for the couple hours of the internet they use a day.

    Maybe a more fair practice is to offer unthrottled internet to everyone, but only charge them for the data they transfer?
     
  16. Ottomaton

    Ottomaton Contributing Member
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    This is going to get to the point that everybody is going to be paying for usage, like cell phone data plans, or the way that long distance used to be. Internet providers are going to strike deals with content providers that they like, and what you view on the Internet will come down to who is making deals with who.

    Never give away anything for free when you can figure out a way to charge someone for it.

    I miss the days when ISP's were run by nerdy idealists who thought they were remaking the world.
     
  17. Space Ghost

    Space Ghost Contributing Member

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    Think of a buffet that has millions of customers a day. There is a $3.99 for a salad buffet, $5.99 for the pasta buffet and salad, $7.99 for everything but meat, $9.99 for the meat buffet and $14.99 for the seafood(everything). Now imagine one patron coming in and paying the $14.99 but eating 40% of all the food for the day? Who exactly do you feel should foot the bill?
     
  18. ling ling

    ling ling Member

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    We are already paying a different bill for different levels of service. We aren't paying for the same bill.

    2MB
    15MB
    30MB
    45MB.
     
  19. ling ling

    ling ling Member

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    I'm not using netflix yet, btw.
     
  20. Duncan McDonuts

    Duncan McDonuts Contributing Member

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    The person eating 40% should foot the bill, and that bill should be $14.99. With the buffet business model, the buffet is still winning out in the long run because other patrons are not eating an equivalent amount towards their bill. That is the risk of their business model.
     

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