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Timothy B. Lee

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Posted at 07:53 AM ET, 05/17/2011

Netflix biggest driver of U.S. Internet traffic, puts spotlight on broadband pricing

Netflix streaming videos drove nearly 30 percent of all North American broadband Internet traffic during peak hours, with consumers continuing their voracious appetite for real-time entertainment on the Web, according to broadband analytics company Sandvine.

In its “Global Internet Phenomena Report: Spring 2011” released Tuesday, Sandvine said Netflix online videos had become the largest source of Internet traffic overall. Last October, Sandvine reported that 20 percent of all peak Internet traffic in the U.S. came from Netflix users.

The data will surely stoke the debate on usage-based pricing for Internet consumption, which companies like Netflix--with 23 million users-- warn could curb consumer appetites for watching streaming video online.

Already, some Internet providers are moving toward metered data plans. Last week, Cable One introduced tiers for 50 megabits per second speeds for a limit of 50 or 100 gigabytes per month. According to its Web site, the company (owned by The Washington Post Co.) will charge customers 50 cents for each gigabyte beyond the caps of those plans. It will continue to offer a flat rate-monthly plan too.

At the start of May, AT&T began limiting data usage to 150 gigabytes for DSL subscribers and 250 gigabytes for its customers of faster UVerse broadband customers. Users will be charged an extra $10 per month if they exceed the cap. Comcast also has a 250 gigabytes cap for its broadband users.

The Federal Communications Commission, in its “net neutrality” order last December, endorsed usage-based pricing, or pay-as-you-go billing for broadband Internet access.

Analyst Craig Moffett of Bernstein Research said the move toward usage-based pricing is essential for broadband providers to recover the expenses of building and maintaining their networks. Charging more for the heaviest users and less for lighter users has the potential to get more people online and using services like Hulu and Netflix, he said. It takes a lot of online video to fill 250 gigabytes of data, he said.

“Properly implemented, usage-based pricing has the potential to reinvigorate broadband penetration, at a time when penetration gains have slowed to a crawl,” Moffett wrote in a recent note, adding that broadband adoption has risen just 3 percentage points to 63 percent over the past year.

But consumer groups see a usage-based pricing as the way to stifle Internet use and keep low-income users off the Web. Overage fees will penalize consumers, who are moving more toward getting their television and video news over the Internet.

According to the Sandvine report, “real-time entertainment” services like YouTube and Netflix consumed 49.2 percent of peak aggregate traffic in 2010, up from 29.5 percent in 2009 – a 60 percent increase. Sandvine forecasts that the category for on-demand entertainment would represent 55-60 percent of peak aggregate traffic by the end of 2011.

Related Stories:

As Netflix grows, it becomes biggest threat to telecoms

Faster cell phones bring new wave of services, charges

Blockbuster, Dish Network’s aim at Netflix?

By  |  07:53 AM ET, 05/17/2011

 
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