Sunny's been Rockin' all along
Netflix, why did it jump?
Netflix Wrangles with Internet Provider over Network
By Drew FitzGerald
Netflix Inc.'s (NFLX) latest network dispute shows the extent of Internet providers' growing irritation with bandwidth-hogging video content --and the unanswered question of who's responsible for its growing cost.
The argument spilled into the open this week after the website Multichannel News reported Time Warner Cable Inc.'s (TWC) refusal to join Open Connect , Netflix's name for the customized network it built to stream video content more quickly.
Time Warner Cable said it took issue with Netflix's decision to withhold its enhanced high-definition video, branded "Super HD," from customers unless it agreed to join Open Connect . That amounts to "unprecedented preferential treatment" for Internet providers that cooperate, the cable company said, and disadvantages to those that don't.
"Time Warner Cable's network is more than capable of delivering this content to Netflix subscribers today," the company said in a statement, adding it's still discussing "acceptable commercial terms" for its participation.
Netflix said it pays to run Open Connect and links the service "at no cost" to Internet service providers to make customers' experiences smoother. The Los Gatos, Calif., company already uses Open Connect to stream video to subscribers abroad but hasn't won over many U.S. Internet companies, which have grown accustomed to a traditional network model.
Netflix, like most data-intensive Web companies, started streaming video content through third-party content delivery networks such as Akamai Technologies Inc. (AKAM) and Limelight Networks Inc. (LLNW). Those companies also use specialized hardware to help data avoid network bottlenecks, charging Web companies for the privilege.
In June, Netflix said it was cutting out the middle man by moving most of its traffic to a company-owned content delivery network, following in the footsteps of other big Web companies like Google Inc. (GOOG) and Amazon.com Inc. (AMZN). It's a heavy investment that most Web services choose to outsource.
"A lot of companies have been trying to do what Akamai's been doing for a long time, and not too many have been successful," said Timothy Horan, an analyst for research firm Oppenheimer & Co.
Netflix has said it accounts for about 30% of peak Internet traffic in the U.S., making efficient use of bandwidth a top priority.
Open Connect has won support in the U.S. from Cablevision Systems Corp. (CVC) and Clearwire Corp. (CLWR), but most Internet service providers haven't yet agreed to participate.
Netflix is unique for its hybrid business model--it licenses media companies video content, owns its own content delivery network and famously outsources the engine for its library browser to Amazon Web Services. That makes Netflix an Amazon customer even as it competes with the Web giant's Instant Video service for consumers.
Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com
http://ih.advfn.com/p.php?pid=nmona&article=55893920
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