Netflix and the Internet bandwidth dilemma

Netflix and the Internet bandwidth dilemma

Summary: Netflix's latest price changes is only the tip of the ice-berg of problems that Internet video watchers face.

TOPICS: Telcos, Browser

I get it. You're ticked off at Netflix for raising its prices for online video streaming. I understand perfectly. I recently dropped my cable TV service for a combination of Internet TV services-Netflix, Hulu Plus, and Amazon Instant Video--my own iTunes-based video server, and over-the-air (OTA) TV. Of all of them, I watch Netflix the most. I'm not happy about paying more. I also don't think I have much of a choice in the matter.

You see, Netflix didn't have much of a choice in raising its prices. Just like the recording industry before it, video content owners are having a heck of a time shifting over from their old selling and broadcast models to Internet savvy business models. So Netflix knowing darn well that the price it was paying for the right to stream videos made a per-emptive move to raise its rates. Yes, they'll lose some customers, but they're betting they'll still have a good revenue stream. They're going to need that revenue just to keep their video streams flowing.

Here's why. Many of the major Internet Service Providers (ISP)s, such as Comcast, which now owns NBC/Universal, also control video content providers. They are not enthusiastic about encouraging any of the Internet video-on-demand businesses. They're much rather have you use their video services over their connections.

So, Would it surprise you to know that no sooner than Netflix raised itsrates than NBC/Universal announced that they'd signed a new deal with Netflix to supply them with content. It didn't me.

We don't know how much Netflix paid, but Michael Pachter, an analyst at Wedbush Securities, said he expected Netflix's content costs to balloon from $180 million in 2010 to $1.98 billion in 2012. With Netflix having to spend more than ten times the amount it's been paying for content, we should be rejoicing that we're only paying 60% more instead of 1,000% more for our Netflix Internet video watching habit.

You can expect that all the online video services will face similar price jumps. Ideally, the ISP/media companies would like you to use their in-house Internet video services such as Comcast's XFINITY service. Unfortunately these ISP-based Video on Demand (VoD) services tend to be, well, dismal.

But, as annoying as these price increases will be, that's only the tip of the ice-berg. The real problem is that video is already eating up the Internet's bandwidth. I can see Internet 'brownouts' in our future.

But, it might not come to that because the ISPs are all putting bandwidth caps on our connections. You may think that you could never use 250GB in a month. You could be wrong. Video streaming and cloud services take up a lot of bandwidth.

Just ask Andre Vrignaud. Mr. Vrignaud, a Comcast customer with a 15Mbps down/3Mbps up cable connection, just had Comcast cut his Internet off for a year because he broke their data cap. According to Vrignaud, "Comcast has cut my broadband with no appeal."

Now, Vrignaud is a heavy Internet user. He's a photographer who saves files in the highly accurate, but also huge RAW format, uses Carbonite for Internet back-ups, and he's recently started using the new Amazon Cloud Drive to store his large music collection. You can see where this is going can't you? Huge files, uploads costing against his cap as well as downloads, etc. etc, It turns out that, with today's cloud services, it didn't take him long at all to use up his 250GB a month allowance.

If you use those services, and/or your family watches a lot of Internet video, you too are going to crash right into those data caps too. And, it's the shortage of bandwidth and data caps that are going to be the real handicaps for making the most of Netflix and other Internet video services, not what these services will be charging. Indeed, if your ISP turns your connection off, online video charges will be the least of your worries.

Related Stories:

Netflix hikes prices, adds DVD-only plan

Netflix's pricing backlash: Follow the money, churn rates

Netflix: Bigger than cable. Too big for the Internet?

Dear Netflix': Price hike ignites social-media fire

Negative on Netflix? 5 alternatives

Topics: Telcos, Browser

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  • RE: Netflix and the Internet bandwidth dilemma

    I know I'm behind the times, still preferring DVDs to streaming. No doubt I'll be out in the cold completely when Netflix eventually drops DVDs altogether. They seem to be heading that way. Or maybe I'll catch up by then. Meanwhile, I'll be paying less. I'll still get 3 DVDs-out-at-a-time, and not have to pay more for the streaming which I never use.
    • RE: Netflix and the Internet bandwidth dilemma


      Exactly. I was on the 2 at-a-time DVD + streaming plan. When Netflix announced the change I changed over to the 3 at-a-time DVD only plan which cost just $1 more. I tried streaming and found it usable but wasn't enthusiastic and then AT&T decided that my unlimited data plan wouldn't be. Easy decision at that point.
    • Data caps

      In short - I would not have any over 10 MBS on A 250 GIG data CAP - You can simply use it up on Skype or downloads podcast Videos that you do not watch - I have been on the net since bbs days -

      If they don't want Netflix on it -
      Block their ips & .com - they can do it - We may not like it -
      They are A cable company they can say its not work with their plat form
      Joel Wilson
  • RE: Netflix and the Internet bandwidth dilemma

    Same can be said for those of us who also use Netflix via a 3G/4G service with a data cap.

    Faster means more much quicker
  • RE: Netflix and the Internet bandwidth dilemma

    I don't think the outrage is totally pointed at the cost increases. For me, it is the cost increase and the fact I am not getting anything more for the increase. Nothing in my email said that I was getting a better VOD movie selection to go with the increase. It didn't offer me to go to 2 dvds per month for the price increase, nor did it give me a third option that was a combination of the 2 plans that came in under the $16.00 a month pricing if I wanted to keep both plans. It was a take it or leave it email. Well, I left. I am just one person that won't dent the bottom line of Netflix, but I am tired of being nickle and dimed to death and treated as an after thought for being a loyal customer. Red Box, here I come...
    • RE: Netflix and the Internet bandwidth dilemma


      Def. Agree. Their streaming selection is the pits and there was no mention of an increased selection, just an increased pricing. I keep one dvd out so that I can see some of the newer stuff still. If I had gotten two dvds out I might have swallowed the price increase easier
      • RE: Netflix and the Internet bandwidth dilemma

        @simpleone71 @CowboyJake
        Nothing for nothing, but you are getting more, by not losing. When a suppliers cost rise, the cost is passed to customers in one of two ways:
        1) Additional costs
        2) Reduced services

        Most suppliers assume you have picked the supply you want, and keep that as the goal, thus increase costs to you.

        The alternative would be to leave you at your current cost, and reduce your service. Would this have made you any happier? I doubt it, but I could be wrong.

        Their gamble was that you will eventually see the value, not a loss.
    • RE: Netflix and the Internet bandwidth dilemma

      RedBox? Me 2!
  • I like Netflix streaming

    But yeah. It's pretty obvious the studios are limiting its content largely to stuff that doesn't sell elsewhere. Not that that's a bad thing, I like a lot of that old stuff and my kids love all the children's shows. Stuff I wouldn't buy outright anyway. It should be obvious though, the studios are not going to let Netflix kill their cable/DVD/Bluray/iTunes golden goose for $7.99 a month. The content is going to get pricey from here on out.
  • RE: Netflix and the Internet bandwidth dilemma

    Right, I'm supposed to feel sorry for Netflix? It's their bed and now they want me to lie in it? Screw that - every time you turn around you're getting whacked for just getting out of bed by these broadband & wireless carriers. If your utilities increased by %60 you would hit the roof and a class-action suit would be on a judges desk in 24 hours.
    Mr. G. Anson
  • RE: Netflix and the Internet bandwidth dilemma

    I live in a rural area where a Satellite Internet connection is, and will be for years to come, the only way to access the 'net. Even with a pricey connection our max limit per day would make you cry, speeds are such that previewing iTunes audio is iffy on some days, and services like Netflix are a dream never to be realised out here.
    Without a DVD you can put into a player we would never see the (almost) latest movies and can't really experience many of the latest online tools.
    My sympathy for urban folks crying over bandwidth limitations is growing thin. Like some of the other comments here we still like the hard copy. Difference is we have no choice.
    • re: Difference is we have no choice.

      @mikesgene - No one told you or forced you to live in some wheat field with dial-up connection speeds. My sympathy for rubes crying over needing to have a 24 foot satellite dish next to the double-wide trailerhome just to make a phone call is non-existent.
      • RE: Netflix and the Internet bandwidth dilemma

        @frizzllefry <br>You haven't been to the country for quite some time have you?
      • Message has been deleted.

      • RE: Netflix and the Internet bandwidth dilemma

        @frizzllefry If you enjoy getting oil, eating bread, eating corn, etc. you should feel sympathy for these people. When I worked in oil our rigs were in the middle of North Dakota with no town for 10-20 miles. I'd have to stay on site for a month at a time. For our society to operate, someone has to live in these places and reap the resources that we all use. Get over yourself...
      • RE: Netflix and the Internet bandwidth dilemma

        @frizzllefry Dork.
      • RE: Netflix and the Internet bandwidth dilemma


        Honestly! Now you've irked me, an urbanite who wishes that my retirement would allow me to move to the wide open country, but I have to deal with the mob-driven Comcast to contend for the privilege to have the option of having hard copy media sent to my address!

        Dude, try to see that your tiny perspective is pinching your pants!
      • RE: Netflix and the Internet bandwidth dilemma

        No one forces you to eat bread, flour for which has been grown in some wheat field planted by some folks who are lucky to have a dial-up connection. What would you rather have, bread and other food to eat, produced by those benighted bumpkins you look down your nose on, or live on the 95th floor with a 100 Mb per second fiber-optic Internet connection? The time may come when you will gladly trade your entire electronic possessions for a crust of dry bread. After the second world war, my German grandparents traded a beautiful Grundig radio to some farmer for a couple dozen eggs and a scrawny dead chicken. Maybe then you will have not only sympathy but intense envy for the folks out in the country who are still eating while you consider yourself lucky to have found a few rotten bones to chew on that you found in a dumpster down the street.
    • RE: Netflix and the Internet bandwidth dilemma


      I hear ya man... i am in the same boat it pisses me off to hear people complain about their 50mb comcast connection on getting 30-40mb.
      • RE: Netflix and the Internet bandwidth dilemma

        @MLHACK Where can I get the 50MB comcast? Lol. I get 5mbps from comcast if I'm lucky...