Netflix adds 3D and Super HD - Page 5

Just as some of us suspected:

Netflix Blocking Internet Access to HD Movies
Thursday, January 17, 2013

I got a feeling this is going to get ugly. TWC is already crying foul.

I agree that Netflix is walking a pretty thin line between being in violation of federal standards and not. But they'll probably get away with it because its a subscription service. The ISPs do have a legitimate gripe though.

It'd be interesting to know what those costs (installation and maintenance) are estimated to be for a given ISP. That article makes it seem like we'll all feel it. Also the ISP don't have to install Netflix's equipment to link up to Open Connect. Netflix says:

That sounds as though installing the storage appliances at the edges of their networks is a lower cost route for the ISPs. As I read it their documents, it seems as though deployment of the appliances relieves some of the cost of getting current Netflix traffic into an ISP's network.

I also don't see that Netflix is demanding anything. ISPs can decline to peer their Open Connect CDN (as they could have declined to peer any of the other CDNs), with their customers continuing to receive a level of service, just not some new features. As to not knowing "the details of their demands" it looks like Netflix has fairly well documented the process of connecting to their CDN as well as the responsibilities which they assume

I'd like for Cox to sign up, but I continue to watch things on Netflix and am not particularly suffering without "Super HD". That article smacks of yellow journalism. I'd like to hear a response from Netflix.
Edited by michaeltscott - 1/17/13 at 5:20pm

Yes, there seems to be quite a disconnect in the statements from both sides, Netflix says that it will not cost the ISP anything to install this equipment yet the ISPs are saying that Netflix expects them to pick up the cost, so which is it? We're not seeing the important details of this initiative, details that may shed an entirely different light on the situation. I suspect that "as long as they agree to terms" has something in it that the ISPs object to and we're not privy to what ever it is.

I wouldn't put too much stock in that earlier referenced report from the Competitive Enterprise Institute, they're a Libertarian think tank funded by the likes of the Koch bros among others, their focus is no regulation and free enterprise, as long as it suits the big business groups that fund it.

Reading the deployment guide at their site I don't see Netflix claiming any such thing. Netflix will provide the equipment for free, multiple ones if it suits a provider's needs. The provider does have to pay to install it and assign people to maintain them, though I doubt that its a full time job. But you don't have to install the appliances as long as you don't mind the cost of transmitting their content from one of the peering locations. I'd love to know how content moved by the commercial CDNs which Netflix now uses--AWS, Limelight, Level 3, Akamai--gets into the ISPs networks and how much of the cost of that they assume.

You're right, I just re-read it, but I don't imagine the install would be an amount that would cause this much issue, maintaining it would seem to be near nothing, although I do recall reading that Netflix insists on the ISP having a 24/7 contact in case of something going awry, for a large ISP that doesn't seem like a big obstacle(expense), but who knows.

It looks as if the ISPs object to Netfix bringing the data to their doorsteps and avoiding the peering charge that the ISPs want to charge the current CDNs. I recall that back when Level 3 took on the Netflix account that they were hit in the face with the costs for peering that data from ISPs such as Comcast, I'm not sure how that all ended up but given that Netflix is now trying to avoid the CDNs I'm guessing the result was not in Netflix's(or Level 3) favor. In other words, this program would result in loss on revenue for the ISP while still carrying the data to the end user.

I don't think we, meaning in the media as well, has enough information on this to really know what the real problems are, it would be nice to see an actual agreement, there could be something in there that neither side is making public.
Edited by keenan - 1/17/13 at 5:48pm

Yeah, but Netflix is giving the option of peering their CDN at common Internet exchanges and not taking any of their storage appliances.

It would be nice for someone who understands the issues deeply to publish something to explain it to everyone. At this point I don't like it but I'm resigned to the situation. Sort of like when I was in Cox San Diego North and they were taking forever to give us SyFy (then SciFi) HD, during the run of Battlestar Galactica.

Here's a piece on TWC's negative take on Netflix's Super HD/Open Connect policy.

Not quite. It would result in rise in cost for the ISP, not necessarily loss in revenue. Sorry to be pedantic.

I completely understand why ISPs would balk.

From what I understand from how the internet business works, ISPs have local "data centers" in which CDNs have servers. ISPs are paid by CDNs for the privilege of being "in-house." CDNs, in turn, are paid by the hosted "web sites," like Netflix, for enabling faster access to their web sites by being "in-house."

Now keep in mind that third-party entities like CDNs in a data center also pay for their hardware, installation and maintenance of their servers including electricity.

Now what Netflix wants to do is slick on multiple levels. This is more of public opinion/marketing battle.

Netflix wants its own CDN, which would eliminate the cost of third-party CDNs. But instead of paying ISPs to host its CDN server, Netflix flips the table around and say ISP should not only host but also maintain and power their CDN servers by manipulating the public to pressure the ISPs, i.e., you, the paying customer, can only get SuperHD and 3D if you tell your ISP to join our Open Connect program.

Netflix is acting like the mafia, trying to strong-arm and telling the ISPs, "I pay you? You should pay me but I'll let you have the honor and privilege of holding my sh!t at your house for free. You don't want to? Then I will get my posse to harass you day and night until you do."

There is no technical reason why people with fast internet connection cannot have access to SuperHD and 3D as long as they meet the speed/bandwidth criteria.

Netflix is trying to manipulate the customers and use ISPs' admittedly terrible public opinion and image against themselves. Netflix bascially saying that it wants to give you, the consumer, SuperHD and 3D but ISPs are not cooperating and standing in the way.

But in reality, what Netflix is trying to do is pass the cost of CDNs to ISPs. Even worse, Netflix is being dishonest to its own customers. Netflix is holding SuperHD and 3D hostage against its own customers in its battle; but is saying that it's not Netflix but ISPs who are depriving and denying Super HD and 3D from the paying customers.

I don't know whether what Netflix is doing is right but it sure is a slick piece of work.
Edited by Apostate - 1/18/13 at 8:23am

IMO, a very good summary of this Netflix fiasco. I have a feeling this going to bite them in the ass.

Don't you just love it!!

In the end, SuperHD and 3D mean the customers are going to end up paying higher price to either or both Netflix and ISP.

I tried to warn folks years ago about the cost of streaming. Most folks here tried to make fun of me and say it cost nearly nothing to stream.

Analyst: Netflix to Post $7 Million Q4 Loss
15 Jan, 2013 By: Erik Gruenwedel

From where do you understand this? I thought that CDNs like Limelight and Akamai set up their own server farms not in any ISP facility, in several locations across the country. I understand that some telcos (like AT&T and Verizon) have established their own CDNs with servers inside their networks; content providers like Netflix can pay to host their services on the telcos' CDN servers. Netflix creating their own CDN certainly undermines that model if an ISP was thinking of going that route.

Obviously, since some ISPs have already signed on it can't be universally bad (certainly not a black or white issue as many like to view it). And with anywhere near the estimate (per the link article) of their streaming accounting for (currently) 33% of downstream bandwidth consumption it's beyond needing to be addressed going forward. My take is they re-encoded the streams (for less traffic - same quality) and going forward want to ensure delivery performance and control/reduce costs... and I see zero reason to be against such.

My ISP was onboard early on and was CDN compatible the day of the announcement. I could immediately tell the difference between watching an episode of The League from the day before the announcement and the day after. The quality improvement is quite noticeable and I'm glad to have it. We have two major ISPs where I am that compete for their customers the way it should be, like they value us. I think early on they made the decision and realization that is was important to do this with Netflix for a variety of reasons rather than fight it.

It could be Netflix paid them very well to do so. Businesses rarely do things for free, there usually is monetary gain somewhere. If ISPs do this for Netflix then other CDNs will demand the same considerations and put the ISPs between a rock and a hard place.
Edited by Wendell R. Breland - 1/18/13 at 11:43am

Sorry for not being clear. I was a technology auditor in financial industry in my previous life.

Typically, external entities such as CDNs are not and will not be allowed to connect directly to ISP servers for security and control purposes. CDN data centers will connect to their server(s) in the ISP facility which, in turn, will be allowed to connect to ISP servers. All major data centers, including CDN server farms, are connected to each other via "backbone" or super duper fast internet connections. I didn't mean to convey that CDN data are physically located in ISP data centers (some may, though).

From reading between the lines, it sounds like Netflix is asking ISPs to pay for taking care of Netflix CDN servers in ISP facility.

Competition - That's the key. I am sure your ISP crunched the numbers and came up with the answer that being part of Netflix's Open Connect was a competitive advantage which they can tout in their marketing or something; and that the monetary cost was worth it.


That is absolutely true. I guess one321's ISP thought it was worth the risk. Rather short-sighted of ISP from ISP's perspective if you ask me. Good for the consumer in the short run, though.

How ridiculous. Those folks who made fun of you are ignorant fools. It takes tons of money to run data centers and technology massively.

The thing is that they're not asking them to take equipment, but offering it as an option which saves them the cost of bringing the data to Netflix's donated machines at the edges of their networks. If they want they can elect to connect at common Internet exchanges without taking any of Netflix's equipment. The question is whether the cost of installing Netflix's equipment on their networks and assigning personnel to deal with it is more cost effective than peering Netflix at those common exchanges and paying the cost of transmitting content to their networks from there. In any case it's not free, but does it cost enough to be particularly concerned about, when weighed against some MSO's millions of network service subs? Small ISPs/cable SOs around the country have chosen to do it.

"Hosting" a server is not simple and not cheap. ISP will have to pay people to maintain it, feed it power, cool it, run the 'wires,' configure backup systems to accomodate it, and give up physical space and bandwidth ISP can use to generate revenue from paying clients, etc. etc.

Also there is the liability issue. If Netflix goes down, can Netflix sue the ISP if ISP is the one responsible for taking care of Netflix stuff? I don't believe it's as simple as hooking up free Netlfix server to ISP server.

In a competitive environment and in small markets where the outage impact is relatively minimal, ISPs may weigh the risk/reward and decide that it's worth it to join Netflix Open Connection program as we have seen.

I personally think it's BS that Netflix is using its customers as pawn in their game. I have more than fast enough internet connection speed for SuperHD and 3D. Netflix is just not being honest about it being more to do with Netflix not wanting to spend the money rather than being ISP issue.

Again, hosting one of their "free storage appliances" is only one option. Netflix claims that they can connect to the Open Connect CDN at one of the common exchanges without taking any equipment from Netflix.

Whether it's cheap or not, if they choose to place one of Netflix's machines in their network, how big is the expense when spread over millions of network service subscribers? If they pass the cost along to those subscribers it something that's going to raise everyone's monthly internet service charges by dollars or pennies?

Who runs common exchanges? I assume ISPs. If so, ISPs will never allow Netflix to connect directly for security, liability and other reasons as I've mentioned before. ISPs will not potentially jeopardize their other clients for Netflix's sake.


This doesn't sound fair to non-Netflix internet service subscribers. Why should I pay or subsidize Netflix through my subscription fee when I am not benefitting from it? Also, isn't that volating the spirit of Net Neutrality, i.e., one internet entity getting preferential treatment over others? Net neutrality cuts both ways.

I assume Netflix is wanting the ISPs to directly peer to their Open Connect CDN, which is not something ISPs do willingly to anyone. It basically gives a direct path (instead of Netflix, for example, going through several different peers of the ISP before getting to the customer) on a high bandwidth link. It's almost equivalent to becoming a local network for the ISP instead of connecting through the public internet. http://en.wikipedia.org/wiki/Peering

Mostly it's big ISPs (level 1-2) that peer with each other.

On their Open Connect page Netflix is offering peering at a common exchange as an option. Are you saying that they're lying about that? (There's an explanation of Internet Exchange Points, or IXPs, here in Wikipedia).

To my mind it's akin to the ala carte cable channel issue. I pay for the hundreds of programming services that my cable provider gives me but only ever use about 20 of them (and day in day out only about 10). Is it fair that I pay for that? Again, what are we talking about when the cost of connecting to Open Connect is spread out through millions of subs? Dollars or pennies per month? Is it something that anyone would notice or give a damn about? I feel fairly sure that the hundreds of basic+expanded basic cable channels that I don't use, ever, cost me dollars every month.

The issue is far too complex to pass judgement with little or no facts. Take the simple is it cheaper to host (have local) or let the traffic travel through my Internet backbone connections. They both have related costs and without countless number of variables thrown in (a unique set per provider) there is no way of drawing any reasonable conclusions.

What are you talking about? Why would I accuse Netflix of lying about peering? If that's what Netlfix is claiming, that's fine. *shrug*

I read a little more about common exchanges and saw that common exchanges are not run by ISPs but by backbone providers, i.e., ISP to ISPs. I think xcrunner's post explained why peering will likely not happen.


It's apples and oranges. Cable programming and internet access are two different things. No one is making you pay for cable. Feel free to cancel if paying for channels you never watch really bothers you.

With internet, you can indeed do a la carte unlike cable. So what you are proposing is what you hate so much about cable companies. You want everyone, even people who don't want to, to pay for Netflix via their internet service subscription fee. You want ISPs to act like cable companies. A bit ironic and a tad hypocritical, no?

I do applaud Netflix's attempt to control costs as it will strengthen them in the long run and I'd like to have Netflix around. However, I take umbrage at Netflix using its paying customers as pawns and using SuperHD and 3D as a leverage against ISPs and depriving its customers in the process; instead of simply and rightly providing it to its customers who do have required internet speed/bandwidth. All it says to me is that, to Netflix, controlling cost is more important than providing the best service to the customers. Customers are not a priority right now. Who knows? Maybe Netflix is in worse financial condition than generally believed.
Edited by Apostate - 1/18/13 at 1:57pm

What I'm talking about is:

Your assertion that Netflix would never be allowed to connect to common exchanges seemed to imply that Netflix was lying when they said that ISPs interested in connecting to Open Connect could do it through common exchanges. Of course, you assertion was based on an assumption that ISPs run the common exchanges, which we now know isn't true.

I don't see that as an argument that peering won't happen. Some of the providers now connected to Open Connect may be using peering through an IXP--we don't know.

People paying for Internet service through my ISP can do the same, if they become aware that some amount of their fees is paying to connect others to Netflix's Open Connect servers when they don't subscribe to Netflix. The difference is that no significant number of network service subscribers is ever likely to become aware of that.

Most of the ISPs are cable companies (mine is). I don't like that they charge me for channels that I don't use, but it's the status quo and there's nothing that I can do about it. If they raise my Internet service fees by some tiny amount I will never know why nor am I likely to care, just as I have no idea they charge me what they do now. I'll pay what it cost until some other service provider becomes available to me who can give me the same or better for less.

Don't get me wrong--I'm not defending Netflix per se. I think that they should give me the Super HD encodes now and not hold them hostage to my ISPs decision of whether to connect to their CDN. I just don't agree with some of the reasoning put forth here.

Given that TWC says that they're in negotiations to connect to Open Connect despite disparaging Netflix's tactics gives me hope that the other major MSOs are likely also negotiating with them. If none of them can come to reasonable terms I suspect that Netflix will be forced to abandon this tact, if they want to be seen to be continually improving their service.
Edited by michaeltscott - 1/18/13 at 2:14pm

I agree with you 100% and I'd like to add sooner rather than after Netflix wastes time learning that its tactic is not helping its customers.