Netflix, HEVC and Net Neutrality. Who Ultimately Will Pay the Toll?

The poor folks at HDTVtest were reviewing a Samsung HU8500 UHDTV and noticed that Netflix was streaming House of Cards Season 2 at 4K in HEVC. According to the article, after cycling through 720p and 1080p, the stream ultimately switched up to 2160 HD at 15.6 Mbps. In dark scenes, there was very little difference, but in bright, colorful scenes, “it’s as if a veil had been lifted from the front of the screen, bringing objects – even faraway ones in long shots – into breathtaking clarity.”

The article posts a comparison of a picture of a frame in 1080p and 2160p. Here’s the 1080p frame. 

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Here’s the 2160 frame. You can see lots more detail in the text. 

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What do you need to view the 2160 stream? Netflix president Reed Hastings had his “let them eat cake,” moment when he answered this question. “It’s around 15 megabits per second,” Hastings stated, “It’s not too bad. If you’ve got a 50-megabit connection you’ll be fine.”

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Actually, after upgrading to Comcast I do have a 50 Mbps connection, even in rural SW Virginia, but I still stutter frequently when watching YouTube, ESPN and other sites, and I frequently see House of Cards drop down to lower quality streams during playback, often for the entire show. Sometimes it’s not the faucet in your kitchen that causes the problem, it’s the plumbing in your house or the pipes in the town. And sometimes, it’s just your ISP, intentionally trashing the experience in an attempt to extort fees from Netflix.

At a high level, the concept of “net neutrality” supposedly ensures that ISPs treat all data fairly, irrespective of the source. However, as you can see in the chart on the left, the average data rate that Netflix has been able to achieve with major ISPs has dropped significantly over the last few months. This led Netflix to pay “tolls” to multiple ISPs, including Comcast, to ensure that “sufficient capacity is made available and high quality service for consumers is restored.”

It’s an interesting issue. ISPs complain that Netflix consumes more than 30% of Internet traffic at peak times, and that Netflix should share the cost. Hastings says that since the ISPs aren’t offering to share their revenue with Netflix, cost sharing makes no sense. He also states “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.” As a consumer, it’s hard to argue with that. 

After reaching their agreement with Netflix, a Comcast spokesman commented, “The Open Internet rules never were designed to deal with peering and Internet interconnection, which have been an essential part of the growth of the Internet for two decades. 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. We are happy that Comcast and Netflix were able to reach an amicable, market-based solution to our interconnection issues and believe that our agreement demonstrates the effectiveness of the market as a mechanism to deal with these matters.”

And you thought House of Cards had a twisty, perilous plot. Now that HEVC is here, it’s going to be interesting to see if the ISPs support it, and how HEVC will affect your ISP charge, Netflix charge, or both. At the end of the day, for Netflix to be profitable, we, as consumers have to pay all of their costs and more, including these “tolls,” so at some level, we should expect them to be passed along. That said, BusinessWeek recently reported that the deal with Comcast might actually reduce Netflix’s cost by cutting out the middle-man CDNs. 

If so, well done on Netflix’s part; they get to reduce costs and keep the moral high ground. If not, we’re already used to paying a premium to watch HD content from sources like iTunes and Amazon; it will be interesting to see if Netflix HEVC ultimately comes with a similar price tag. 

About Jan Ozer

I help companies train new technical hires in streaming media-related positions; I also help companies optimize their codec selections and encoding stacks, and evaluate new encoders and codecs.

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