On innovation and net neutrality: How Netflix can save the web

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Last Sunday, I clicked a blue “Play” button and watched The Other Guys on my computer—instantly. This is because I pay for Netflix, and in exchange for $9.99 per month, they give me access to a large library of movies for instant viewing or delivery. (Over the weekend, like magic, Indiana Jones and the Last Crusade showed up in my mailbox.)

However, as Netflix CEO Reed Hastings noted in a recent shareholders’ report, my continued enjoyment of “Watch Instantly” isn’t wholly guaranteed. His biggest concern today is the protection of network neutrality, an FCC-enforced idea that ensures indiscriminate delivery of internet content. “Net neutrality” for short, it’s a hot topic that’s been addressed many times by others more versed than I am, and is now becoming more important than ever.

The issue at hand is that Netflix is growing very popular: according to an Oct. 2010 Sandvine web traffic study, 20% of prime-time web traffic by volume in the U.S. last year was spent streaming Netflix instant video. But because every minute of video requires more bandwidth to deliver than, say, a hundred email messages*, the Netflix share of traffic is very large compared to that of other content providers. And so it’s no surprise that service providers like Comcast, Time Warner, and others, are looking for ways to capitalize on that disparity.

But herein lies a problem: if you think of the internet as a virtual library of vastly diverse content (like I do), then charging more to deliver online video to customers is like a bookstore charging a premium for picture books because they use more ink. That’s a slippery slope.

Why? Because the internet is one of our greatest sources of technological innovation for economic gain. President Barack Obama knows this: when he espoused American innovation in the State of the Union last month, he put Google and Facebook in the same sentence as Thomas Edison, Henry Ford and the Wright Brothers.

Along with other internet brands, Netflix offers us more than just a basic service: more importantly, they contribute profits and resources toward research and innovation. Two years ago, the company held an open contest and gave $1 million to the team who could improve their artificial recommendation algorithm by ten percent. Last year, Facebook developed a new PHP parser/compiler that helped them reduce their processing overhead by half—and then they donated their work back to the open source community. And then there’s that $54 billion that Google said they generated for the economy in 2009. Any new Internet policy needs to embrace and bolster these types of practices.

The bottom line is that “cloud-based” media brands like Netflix, Facebook, Google, Amazon, and Apple will drive the next surge of the American economy. And if we throttle that innovation by tying up online media in contracts and data delivery charges, we are shooting ourselves in the foot. All in all, online brands like Netflix are a good thing for American consumers—so it’s time we started treating them that way.

* Let’s figure about 2000 kilobits per second for a decent video stream (Netflix says that top U.S. internet service providers range between 1400 and 2700 kbps), so we’re talking 15,000 kilobytes for a minute of video (thanks, Google). Since there are about 17,500 emails in my email account, taking up about 2200 megabytes of space, we have 128 kilobytes per message. Divide. The estimate comes out to just under 120 emails per minute of streaming video.

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