Netflix Rolls Out Its Own CDN: Open Connect

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Netflix announced today that it is rolling out a new content delivery network of its own, called Open Connect, which will reduce its costs of delivery and could improve delivery of its content. But Open Connect isn’t just about reducing its reliance on third-party CDNs like Akamai, Limelight, and Level 3 — by connecting directly with ISPs, Netflix could improve the relationships it has network operators.

Through Open Connect, ISPs can choose to peer directly with Netflix at one of eight settlement-free peering exchanges. Or, if they want to, they can install one of Netflix’s Open Connect appliances into their own network. That would allow them to cache the content locally so that it doesn’t have to be transferred over the network whenever it’s requested. Either way, doing so could reduce the strain of Netflix traffic going over their networks.

For Netflix, that potentially means a lower cost of delivery, and a better overall user experience. And the pitch to carriers is that Open Connect could reduce network overhead, particularly as Netflix becomes an ever-bigger percentage of traffic delivered to end users.

In recent research, network optimization vendor Sandvine estimates that approximately one-third of all peak network traffic comes from broadband users streaming Netflix. Providing more efficient delivery of that traffic could mean less capex required to upgrade networks, which could also reduce some of the strain with ISPs whose end customers are streaming large amounts of Netflix video content.

Of course, not everyone will want to be part of the program. A few years ago, Comcast and Level 3 got into a spat over a peering exchange. At issue in that debate was the large amount of Netflix traffic that Level 3 was delivering into the Comcast network and the costs associated with supporting it.

While Open Connect is good news for Netflix and (potentially) good news for ISPs, the big losers will be the third-party CDNs that Netflix today employs to deliver the bulk of its traffic. They could each see sizable amounts of revenue depleted as Netflix transfers large file delivery off their networks.

But it remains to be seen how many ISPs will sign up for Open Connect, but it’s already having some effect on Netflix’s data traffic. Today, about 5 percent of traffic is delivered through Open Connect, but over the coming years, Netflix hopes to shift a majority of traffic to its own CDN.