Cybertelecom Federal Internet Law & Policy An Educational Project

Netflix

History

Netflix was founded in 1997 as a video-delivery via DVD through the mail service. It first shipped DVDs in 1998, and went public in 2002. By 2010, Netflix was reportedly spending $700 million to transmit videos through the US Postal service. [Lawler] Netflix has seen steady growth in customers. [Balakrishman]

In 2007, Netflix introduced its video-delivery via streaming over the Internet service. In 2010, streaming video was offered as a stand-alone service. Netflix was made available to TV screens via boxes such as the Roku box and XBox. Netflix's online streaming service experienced explosive growth, while DVD only subscriptions have declined. [Netflix History] [Florance Declaration at 8] [Kyncl]

In 2007, Netflix spun off a hardware project that it had been developing in order to deliver videos to a black box in the home. Reed Hastings, CEO of Netflix, did not want to complicate Netflix's relationship with other hardware developers. "'I want to be able to call Steve Jobs and talk to him about putting Netflix on Apple TV,'” recalls one high-level source. “‘But if I’m making my own hardware, Steve’s not going to take my call.'” [Fast Company 1.23.13] The hardware project became the Roku box.

In 2010, Netflix reported a "postage and delivery" cost of $694 million; that number has declined steadily since Netflix split DVD and streaming subscriptions. The number of DVD subscriptions has likewise decreased from 11 million in 2011 to 7 million in 2013. [See Reuters, Netflix Gets Unfair Postal Advantage (2013)]

 

Timeline

• 2015 Netflix Announces Support for the Charter / TWC Merger
• 2014 Paid Peering agreements with Comcast and Verizon
• 2012 builds proprietary CDN OpenConnect
• 2010 Offers streaming video as a stand alone product
• 2007
  • Offers streaming video as a bundled product with DVDs
  • Spins off Roku Box
• 2002 Netflix goes public
• 1998 Shipped first DVDs
• 1997 Founded

Internet Interconnection Disputes

See also Comcast / TWC Merger.

Timeline

2014

• Netflix / AT&T CDN Paid Peering Agreement
• Netflix / Verizon CDN Paid Peering Agreement
• Netflix / Comcast CDN Paid Peering Agreement
  • Press Release, Comcast and Netflix Team Up To Provide Customers with Excellent User Experience (Feb. 23, 2014),

2013-14

• Cogent (Netflix) / Verizon
• Cogent (Netflix) / Comcast

2010

• Level 3 (Netflix) / Comcast
• Netflix migrates from Akamai (which has a paid peering relationship with Comcast) to Level 3 (which has a settlement free peering relationship with Comcast) for Comcast traffic

Open Connect CDN

See Content Delivery Networks

Who interconnections with Netflix Open Connect?

Open Connect Partners	Peered?
AT&T	Paid
Comcast	Paid
TWC	Paid
Verizon	Paid
Centurylink	Paid
Charter

• Victor Lickerson, Netflix is Paying AT&T to Make Movies Stream Faster, TIME (July 30, 2014)
• Jon Brodkin, Netflix Says 99 Percent of its Links with ISPs are Unpaid, Ars Technica (Aug. 26, 2014);
• In Re Application of Comcast Corp. and Time Warner Cable for Consent to Transfer Control of Licenses and Authorizations, MB Docket 14-57, Petition to Deny of Netflix, Inc., page 49 (Aug. 27, 2014) ("Globally, Netflix delivers its traffic without payment to 99 percent of terminating access networks. In the United States alone, Netflix exchanges traffic on a settlement-free basis with [[ ]] networks.")
• Todd Spangler, Netflix Responds to Comcast: It's 'Extortion' to Demand Payment for Delivering Video, Variety (Sept. 24, 2014) (Comcast indicates that Reed Hastings made public statements supporting the deal: "We found middle ground on our issues that worked for both of us for the long term, and works great for the consumers.")
• Peter Kafka, Netflix Says Verizon Isn't Slowing Down its Streams, Re/Code (Feb. 11, 2014) (“Netflix does not seem overly concerned regarding Net Neutrality, and continues to believe that violations would be escalated quickly. Netflix also indicated that it has no evidence or belief that its service is being throttled.”)
• Dr. Craig Labovitz, Massive Ongoing Changes in Content Distribution, Content Delivery Summit, Spring 2013, p. 10 ("Almost all higher education networks of size").
• James O'Toole, Faster Netflix Streaming Coming to Time Warner Cable, CNN Money August 20, 2014;
• Karl Bode, Netflix CDN Partners Soar in Latest Netflix ISP Rankings, DSLReports (Feb. 12, 2013);
• Todd Spangler, TWC: Netflix is Withholding Content to Gain Unprecedented Access to ISPs, Mulitchannel News (Jan. 16, 2013).
• Mike Snider, Netflix Nets Streaming Deal with Verizon, USA Today April 28, 2014.
• John Bergmayer, ISPs Should Do the Job They Are Hired to Do, Public Knowledge Blog, June 19, 2013,
• FiOS Falls Fast in Netflix ISP Ranking, Broadband DSLReports.com May 16, 2013
• Written Statement of Dave Schaeffer, Chairman and CEO, Cogent Communications Group, Inc., Before the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Hearing on Competition in the Video and Broadband Markets: The Proposed Merger of Comcast and Time Warner Cable, May 8, 2014
• Steve Donohue, Charter Integrates Netflix, Amazon, Hulu with TV Everywhere Portal, Fierce Cable November 1, 2011 ("With Charter reporting Tuesday that it lost 64,500 video subscribers during the third quarter, its Charter.net announcement could help its marketing efforts since it can boast that it's offering subscribers something that rivals such as AT&T  and DirecTV  aren't doing through their Web portals")

Data

• Boy, We Really Love Streaming Media, NCTA Blog Jan. 22, 2016 (Netflix has 44.7 M U.S. subscribers)
• Online Streamer's Video Traffic Rises More than 35% Year over Year, According to Study, Variety (May 14, 2013)
• Sandvine Report: Apple Takes Big Bite of Streaming Video, May 14, 2013  ("Netflix mobile data usage share doubled in the last 12 months in North America")
• Cisco Visual Networking Index: Forecast and Methodology, 2012–2017, May 29, 2013: Video Highlights
• Netflix Inc., 2010 Annual Report (Form 10-K) (Feb. 18, 2011)
• Letter from Reed Hastings, CEO and David Wells, CFO, Netflix to Shareholders of Netflix (Jan. 20, 2015), (for 2014, Netflix reported 39.1 million domestic streaming subscribers compared to 5.8 million domestic DVD subscribers)

Links

• Netflix CDN OpenConnect ("ISPs can directly connect their networks to Open Connect for free. ISPs can do this either by free peering with us at common Internet exchanges, or can save even more transit costs by putting our free storage appliances in or near their network. Major ISPs around the world have already connected to Open Connect, including Frontier, British Telecom, TDC, Clearwire, GVT, Telus, Bell Canada, Virgin, Cablevision, Google Fiber, Telmex, and more.")
• From Nickelodeons to Netflix, Interconnections: The Official Equinix Blog (Jun. 19, 2013),(discussing how Netflix's Open Connect CDN utilizes Equinix data centers to provide interconnection points)
• Netflix ISP Speed Index
• FiOS Falls Fast in Netflix ISP Ranking, Broadband DSLReports.com May 16, 2013,

Notes

• adaptive bit rate streaming

Open Internet

• Gregory S. Crawford,The Economics of Television and Online Video Markets, Working Paper No. 197,  June 2015 P 46 In January 2014, the U.S. Court of Appeals for the District of Columbia Circuit vacated the anti-blocking and anti-discrimination aspects of the Open Internet Order. Netflix saw its share price drop by 5% on the morning of the news and by 13% from its pre-Christmas peak asanalysts envisioned “hundreds of millions of dollars in data subsidies” (SNL Kagan (2014b)

Papers

• Netflix
  • Netflix Inc., JPMorgan Global Technology, Media and Telecom Conference Call, Seeking Alpha (May 20, 2014)
• OTI, Beyond Frustrated, The Sweeping Consumer Harms as a Result of ISP Disputes, Nov. 2014
  http://www.newamerica.org/downloads/OTI_Beyond_Frustrated_Final.pdf
• Daniel L. Brenner and Winston Maxwell, The Network Neutrality and the Netflix Dispute: Upcoming Challenges for Content Providers in Europe and the United States, 23 INTELL. PROP. & TECH. L.J. 3 (March 2011) 

News

• Inside Netflix's Project Griffith: The Forgotten History of Roku Under Reed Hastings, Fast Company, January 23, 2013