Will Netflix Kill the Internet?

The crushing demands of video delivery and mobile devices are changing the economics of the InternetBy any measure, Netflix is having a really good year. Its subscriber base jumped by 52 percent in the third quarter, and its stock price has doubled since July 1. Analysts and customers are bullish about the Los Gatos (Calif.) company as it moves from a DVD-delivery service to an on-demand entertainment provider and de facto rival to cable TV. Netflix’s 16 million subscribers are so eager to stream Sandra Bullock movies — Crash and The Blind Side are currently the No. 1 and No. 5 most-streamed movies — that the company now accounts for 20 percent of all Internet traffic during the typical American evening, according to Sandvine, which makes network monitoring equipment. At the Web 2.0 conference in mid-November, an onstage interviewer asked Netflix Chief Executive Officer Reed Hastings whether the Internet’s infrastructure can withstand the strain as his streaming business grows. “If there’s anything you’d want to bet on,” said Hastings, “it’s that technology will make bandwidth faster and cheaper.”That bet may not be as safe as it seems. It’s true that history is reassuring, and the steady progression from the dial-up modem to fiber-optic cable has led to bandwidth that easily meets demand. Yet there has been nothing like the double whammy of video and mobile that’s under way, say industry executives and analysts. A high-definition movie is magnitudes larger than an e-mail or a Web page, the kinds of content the Net was built to transmit. And there are now more than 50 million smartphone owners in the U.S., many of whom want to catch up on Glee while in line at the supermarket.
http://www.businessweek.com/magazine/content/10_50/b4207043617708.htm