Just how many Netflix (s NFLX) subscribers does it take to clog a broadband provider’s pipes? It’s probably less than you think, if you believe one analyst’s estimates for the number of Netflix streaming users that already make up 20 percent of all U.S. Internet peak data traffic.
Earlier this year, network management vendor Sandvine issued a report with the shocking revelation that about 20 percent of all data traffic during the peak hours of 8:00 p.m. to 10:00 p.m. was due to Netflix streaming. Well, in light of the ongoing dispute between Comcast (s CMCSA) and Level 3 (s LVLT) over the costs of Netflix traffic being sent to the cable network’s subscribers, BTIG analyst Richard Greenfield decided to do a little back-of-the-envelope math to determine how many Netflix users were probably streaming during peak hours.
Greenfield’s math starts with the assumption that approximately 6-7 percent of broadband users were streaming Netflix content during peak hours and that about 70 percent of broadband users, or 56 million, use their Internet connections during peak hours. From there, he estimates the number of Netflix subscribers streaming during that time — 3.5 million — which is roughly one-third of Netflix users who stream content, and only one-fifth of its total subscriber base of 16.9 million. If true, that’s an astonishingly small number of users driving an incredibly large amount of broadband traffic.
The implications for broadband providers are huge, especially since it seems like Netflix is just getting started. About 66 percent of Netflix subscribers now use its streaming service: a number which has grown from 41 percent a year earlier. Its users now watch more video hours of streamed content than they do hours of DVD rentals, and these numbers will continue to grow, especially as Netflix adds subscribers as part of its new, lower-priced streaming-only plan. The amount of data attributed to Netflix will also increase as more consumers buy and connect new TVs, Blu-ray players and other devices to the Internet for streaming and begin watching full-length movies and other content on them.
It’s no wonder Comcast isn’t thrilled about the amount of Netflix traffic crossing its networks, and not terribly surprising it might want to be compensated for the imbalance. Comcast has resisted the urge to charge its end users for the increase in their bandwidth usage, saying it has no plans for usage-based pricing and keeping a 250GB usage cap in place instead. Getting compensated for interconnection fees may be one way it can deliver content to the end user, without drastically raising their bandwidth bills.
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