Report: US Netflix Traffic Increases 10% - Now 32.7% Of Peak Downstream Traffic

written by: Richard Kastelein

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Canadian company, Sandvine, a leading provider of intelligent broadband network solutions for fixed and mobile operators, today announced the release of their 10th Global Internet Phenomena Report: Fall 2011, including new Internet trends and extensive analysis of the implications for communications service providers which clearly indicate consumers, left to their own devices, have new preferences for connectivity and consumption.

This past July, Netflix announced changes to their pricing and package structure. This announcement caused a subscriber backlash, with many users threatening to cancel their service. FierceCable recently summarized the company's woes, complete with a timeline, in an article entitled, "Netflix's fall from grace: can it recover?"

This leads to the interesting question, have we seen "peak Netflix"? In other words, has Netflix traffic reached a maximum as a share of total Internet traffic in the United States? With so many Netflix-capable devices, the addressable market for the service is already enormous and will only increase, so it's hard to envision a scenario in which absolute levels of Netflix will decline. However, Netflix is facing increased local competition, and as a result new services might grow at a faster rate. Globally, Netflix will grow – the service is available in almost 50 countries and the company is aggressively pursuing licensing deals with locally-focused content – but in the United States specifically, we might have seen the peak.

Top trends noted and discussed in detail for service providers include: increased Netflix and over-the-top services adoption, the market penetration of revenue-replacement applications, the overall increase in mobile marketplaces, and the impact of Internet-ready consumer electronics devices.

Multiple Screens drive Multiple Streams

Subscribers are watching Real-Time Entertainment on an increasing number of screens. In many households you could very easily find a laptop or desktop computer, a smartphone, a tablet, and a TV with direct (smart TVs) or indirect (via a game console or set-top) Internet connectivity. When subscribers watching online video are free to choose between screens, they generally choose to watch content on the largest screen available to them. A TV offers a better viewing experience than a computer, a tablet is preferred over a smartphone, and a smartphone is superior to nothing at all.

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Screen size also has direct correlation to data usage. For example, when watching a video on a 60-inch HD capable plasma screen, most subscribers will opt for the highest video fidelity available. In that same scenario, higherquality audio might also be provided to the home theatre system. With so many screens available in a household it is also easy to imagine a situation where multiple streams occur simultaneously, like one individual watching a high definition Netflix movie on the primary television while another is flipping through YouTube clips on a tablet. Many services encourage this behaviour: for instance, Netflix, which offers some of the highest quality streams available, allows two concurrent streams. Netflix have also openly discussed the idea of a family plan which would allow multiple streams of multiple programs simultaneously.

This increasing number of concurrent streams has the potential to severely disrupt network capacity planning models and service plan design and price. With Real-Time Entertainment usage focused during an ever-shrinking peak period, network planning that fails to account for simultaneous streaming will manifest as a poor video quality of experience visible to every subscriber in the home.

“The fact that more video traffic is going to devices other than a PC should be a wake-up call that counting bytes is no longer sufficient for network planning. Communications Service Providers need to have detailed business intelligence on not only the devices being used but also the quality and length of the videos being watched so they can engineer for a high subscriber quality of experience and not simply adding capacity through continuous capital investment,” said Dave Caputo, CEO, Sandvine.

“Mobile operators are facing a reality of network costs that are increasing much faster than revenue – to bridge this gap, forward-thinking operators are also using Sandvine’s Usage Management product to launch premium services that guarantee unlimited usage of the applications that are most popular with subscribers. These packages offer a win-win arrangement: subscribers can confidently use their favorite applications, with the comfort of price certainty, while operators can cover the costs associated with delivering those services to the end user,” said Dave Caputo. “In addition, overall monthly consumption is more concentrated during the evening’s peak hours, so service providers may also consider offering service plans that shift usage to off-peak hours.”

More Real-Time Entertainment bytes (55%) are destined for game consoles, smart TVs, handhelds and mobile devices than to desktop and laptop computers (45%). Consequently, many content producers, equipment vendors and communications service providers have adapted a "three screen" strategy to deliver content to TVs, computers and mobile devices.

Major findings from the report include:

  1. Within fixed networks in the United States, Real-Time Entertainment applications are the primary drivers of network capacity requirements, accounting for 60% of peak downstream traffic, up from 50% in 2010. Rate-adaptive video represents the majority of video bandwidth, with Netflix alone representing 32.7% of peak downstream traffic, a relative increase of more than 10% since spring.
  2. We have entered the “Post-PC Era”, as the majority of Real-Time Entertainment traffic (55%, by volume) is destined for game consoles, set-top boxes, smart TVs, and mobile devices being used in the home, with only 45% actually going to desktop and laptop computers over North American fixed networks.
  3. Video in mobile networks continues to gain momentum. In North America, Real-Time Entertainment is now 32.6% of peak downstream traffic, while in Asia Pacific it is 41.8%. The largest contributor is YouTube, and other applications like peercasting PPStream and Netflix are making inroads.
  4. Mobile Marketplace traffic accounts for 9.4% of peak downstream usage in APAC and 5.8% in North America, led in both cases by Apple and Google. Applications like Skype and WhatsApp Messenger, that replace the traditional revenue sources of voice and texting, are being installed by growing numbers of subscribers.
  5. In North America on fixed networks, mean usage remained generally flat at the high end (22.7 GB from 23.0 GB reported in May) and median usage dropped to 5.8 GB from 7.0 GB. This shows that while subscribers aren’t using more traffic overall the usage gap between heavy and light users is broadening and that more data is being used during the small peak period window. In Asia-Pacific fixed networks, median monthly usage is 17.7 GB, which is the largest we have observed.

Sandvine’s publically-available Global Internet Phenomena reports are made available through Sandvine’s Network Analytics product, including the newly-launched Real-Time Entertainment Dashboard, which provides granular insight into streaming audio and video traffic. Ultimately, service providers invest in their networks to deliver a valued service to their end users, and the video QoE metric lets network operators see the return on their capacity planning and congestion management investments.


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