Netflix’s Price Hike and the Bandwidth Dilemma

August 04, 2011

By Hiro Notaney
Director, Corporate Marketing

Like many loyal and early-adopter Netflix customers, I was peeved by a recent announcement that the company was almost doubling the price of my monthly subscription to $16. Is this how they repay all those years of loyalty? Jacking up the price with a month’s notice, take it or leave it. Of course from their perspective, it makes total sense. All those warehouses, housing, sorting and mailing physical DVDs must cost a pretty penny. The quicker they can transition us to getting our movies online, the better for their bottom line. To paraphrase Netflix CEO Reed Hastings, this was always the plan. That’s why the company is called Netflix, and not DVDs by Mail.  

When Netflix started its subscription service in 1999, it was barely conceivable that streaming movies online would be a successful business model. Netflix delivered more than a billion DVDs by mail over a decade while waiting for bandwidth availability to catch up to Hastings’ vision.  When it did arrive, though, cheap bandwidth turbo-boosted a number of businesses (think Skype, Hulu, YouTube, iTunes, Pandora—the list goes on). Check out Infinera’s Facebook Page (facebook.com/Infinera) for cool stats on how integral bandwidth-hogging technologies have become to our lives.

Service providers deserve a lot of the credit for putting in place the (mainly optical) transport and various last-mile technologies that provided all this bandwidth. Of course, like ungrateful teenagers, this isn’t enough for us.  In a paper entitled, The Fast Approaching 100g Era, Infonetics suggests that the applications for broadband are proliferating at such a torrid pace (blame the cloud!), the appetite for bandwidth is outstripping the capacity of current (10g) optical transport networks. As service providers look to deploy the next generation of transport technology, the Infonetics paper makes the point that the sheer volume of bits being transported means it won’t be enough to just grow capacity, service providers will need to look for technologies that expand network capacity while simplifying its management and lowering costs.

All of this is great news for Infinera and for you long-haul network architects, who prefer an elegant plug-and-play system to juggling multiple moving parts in your optical network. Infinera plans to deliver a 500Gb/s photonic integrated circuit (PIC) as part of a system which integrates 5 Terabit per second (Tb/s) OTN switching and 100Gb/s coherent optical transmission in early 2012. This 500Gb/s PIC replaces over 600 parts with two, thumb-nail size highly integrated Indium Phosphide chips. Not only are these chips cost-effective, but I believe this large-scale integration will provide better reliability across all 600+ functions.

But I digress. Back to my Netflix subscription, do you think I should get rid of the DVD-by-mail option and just go with streaming ($8/month) or keep both ($16/month)? Cast your vote below.

[polldaddy poll=5348387]

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