Showing posts with label Costs. Show all posts
Showing posts with label Costs. Show all posts

Thursday, July 2, 2009

P2P, bandwidth, and FTTH urgency.


Figure 1 (from MPI-SWS) Bittorrent throttling by geographically spread ISPs. Red areas indicate ISPs throttling Bittorrent traffic.

This figure is from the Max Planck Institute for Software Systems' Glasnost project. It shows geographical regions where ISPs interfere with Bittorrent traffic. Comcast (and several other ISPs) claim that P2P applications of a few users slow down the Internet for all network users. All the bandwidth is used up by a miniscule subset of the subscribers, leaving everyone else with a slow network. Theres no reason to disbelieve this argument, a limited shared resource being over-used will result in poor quality for all users in the statistically multiplexed Internet.

There are 2 ways of dealing with the issue. Either bandwidth-hogging users are cut-off (like Bittorrent throttling), or, the network capacity is increased to accomadate the "over-use". The latter technique bailed us out the last time Internet traffic exploded. Broadband was roled out just as media rich Internet applications were catching on (or was it the other way?). Everyone was happy. Customers got better service for similar subscription costs, Web 2.0 companies got the pipes to deliver their content, and ISPs created the whole broadband business, with the option of up-selling through services like digital IPTV.

If it worked so well at that time, can't we do the same trick again? Why not roll out broader-broad-band: FTTH (Fiber to the home) for example? The simple answer is that we cannot, at least not quickly, given the cost. When broadband came the physical access network was already built! There were cable TV wires running to homes and there were phone lines. In terms of a tree analogy, the leaves of the access network were already connected up. All that remained to be done was to put in the trunk links and the branches. And there are a lot fewer branches than there are leaves. On the other hand, FTTH will be prohibitively expensive in many countries - the leaves need to be rewired. Therefore the rollout timeline is going to be slower as compared to broadband.

Back to P2P. Why single out P2P? Don't video CDNs like You-tube, Netflix, Hula etc. also consume large amounts of bandwidth? In my opinion the extra load on the access network imposed by P2P, due to the uploading aspect, creates a lot more congestion in the access network at present. A P2P system will upload (in theory) as much as is downloaded in the system. And all this happens on the access network. Thats a 2X increase in bytes traversing the most expensive component of the network (the edge). This means many many more expensive boxes to cover the leaves of the ISP's tree.

However, most broadband connections are asymmetric (downlinks have higher data rates than uplinks). So P2P is limited to a glass ceiling (the lower uplink bandwidth data rates). On the other hand, conventional CDNs push data down the wire, and so, there is no reason for CDNs to limit video quality and resolution until they hit the downlink rate. As high-quality video content catches on, there will be disgruntled users who wonder about the difference between what data-rate their subscription plan claims (XX Mbps) and what comes down the wire (XX/ZZ Mbps, ZZ being the over-subscription factor).

ISPs need to hurry up fiber-wiring up those leaves! And governments need to help with the capex! Another stimulus perhaps?

Wednesday, May 21, 2008

Finally, the "Net" in Netflix; plus, the bandwidth question

Netflix has released a set-top box that users can use to receive movies directly over their broadband Internet connections. The box, developed by the silicon valley company Roku, has received good reviews on CNET and PC Magazine for its nice interface and more-or-less good performance over most home-broadband connections.

Advantages for users
  • No propagation delay from snail-mail shipping DVDs - no more waiting for 2 days.
  • No need to mail back DVDs.
  • Ability to switch to another movie or show - you are not stuck with that wrong movie you placed in your Netflix queue.
  • No extra cost except the broadband connection and the $99 cost of the box.
Advantages for Netflix
  • Savings in storage, handling, and shipping costs (to-and-fro) of the DVDs. Theoretically, if all Netflix subscribers switch to this technology then Netflix can close its nation-wide distribution centers and also save on postage costs: assuming that Netflix pays the standard first-class mail rate of $0.42 to USPS, thats a $0.84 saving per mailed DVD. I think that the present overall cost of circulating a DVD to a user may be well above a dollar for Netflix.
  • Centralized content control and the ability to speedily deploy new movies, shows etc.
  • Ability to expand beyond the US in a relatively painless way - no distribution centers to set up, no additional staffing costs (analogous to how iTunes operates in Europe).
And the Bandwidth cost?

The Netflix system delivers video streams at 2.2 Mbps, 1Mbps, and an even lower bit-rate depending on the connection between the server and the receiving box. The quality naturally degrades according to the lessening bitrate, but let us assume that a user has a great Internet connection and that no bandwidth bottleneck exists between the serving CDN and this user and so s/he can watch the best 2.2Mbps quality for the entire 120 minutes of a movie.

Size of the movie:
2.2 Mbps x 7200 seconds (i.e. 120 minutes) = 15840 Mb = 15840/8 MB = 1980MB = 1980/1000 GB

= 1.98 GB.

So downloading a movie at the best quality means the CDN serves about 2GB of data to the end-user's Netflix- Roku box.

To arrive on the bandwidth costs, lets go with the figures presented in this PBS article about CDN pricing. Disclaimer: This article is more than a year old, and I have been reading about CDN price wars all along. So the current cost of bandwidth may actually be lower than stated.

From the PBS article the costs for streaming a 2GB stream to a user (assuming volume wholesale pricing):

Single server: $0.26
Akamai : $0.32
P2P: $0.0024

Ok first off, I like the P2P number the most but lets ignore that because P2P may not be able to compete in quality with CDNs (See my paper on this). Even if Netflix uses the most expensive Akamai CDN, they are getting away with just $32 cents per movie instead of the dollar-plus cost in the DVD-mailing model. Even if we assume a few more cents of overhead per movie due to the technology costs, I think Netflix is well in the green with this.

The beauty of Netflix's strategy is that they will be able to gradually wean people from the DVD mailing model to the this online content delivery model because of the convenience of the latter. And this without jeopardizing the DVD mailing model because there is no cannibalization here - its perfect migration with one less DVD mailing customer corresponding to one more streaming customer. Every DVD streamed will add up and lead to a drastic reduction in Netflix's operating costs.

Meanwhile, Roku will probably make some money out of their $99 box.

Last question: And the ISP?
Thats for later. Enjoy your movies.



Update: Netflix bandwidth costs come to about $5cents as of June 2009, according to this article.