Netflix's Internet traffic overtakes Web surfing

NEW YORK, N.Y. - Move over, Web surfing. Netflix movies now take up more of the Internet pipes going into North American homes.

NEW YORK, N.Y. - Move over, Web surfing. Netflix movies now take up more of the Internet pipes going into North American homes.

A study published Tuesday by Sandvine Inc. shows that Netflix movies and TV shows account for nearly 30 per cent of traffic into homes during peak evening hours, compared with less than 17 per cent for Web browsing.

Only about a quarter of homes with broadband subscribe to Netflix, but watching movies and TV shows online takes up a lot of bandwidth compared with Web surfing, email and practically every other Internet activity except file sharing and videoconferencing.

As late as last year, both Web surfing and peer-to-peer file sharing — mainly the illegal trading of copyrighted movies — were each larger than Netflix's traffic.

Sandvine makes equipment that helps cable and phone-company manage their Internet delivery systems. It collected data from unidentified customers for the survey. It has previously been linked to Comcast Corp., the largest Internet service provider in the U.S. Sandvine says its data should be representative of overall home Internet use.

The number of Netflix customers is growing quickly, to 23.6 million subscribers in the U.S. and Canada as of the end of March. The growing use of the streaming service is good news for the company, which is trying to reduce what it spends to mail DVDs.

However, its growing popularity is considered a potential danger to profits for Canada's cable operators, including Rogers (TSX:RCI.B), Bell (TSX:BCE), who have the service on their radar as analysts speculate whether Netflix's array of TV and movie offerings will convince more people to cancel their cable packages.

For now, there are few signs of people cancelling their pay-TV subscriptions in favour of Netflix, which doesn't provide live TV. In the United States this year, the number of Netflix subscribers surpassed the number of video subscribers at Comcast.

In Canada, Netflix has made major inroads since launching here last September, with 800,000 subscribers paying $7.99 a month for unlimited access to thousands of movies and TV shows. But critics complain that the streaming site doesn't have many new releases and its library is still limited.

The growth in Netflix traffic doesn't mean overall Internet traffic is growing faster than before. Rather, it means the type of traffic that's driving growth has shifted, as it has several times before. A few years ago, YouTube traffic was driving the growth of overall Internet traffic. It now accounts for 11 per cent of traffic into the home at peak hours, according to Sandvine.

Internet service providers are increasingly placing monthly limits on each subscriber's data consumption and charging extra when the limit is surpassed. Analysts see this strategy as insurance for the future, in case viewing shifts from traditional services to the Internet.

A number of channels exist for renting new releases and older titles online, such as Apple's iTunes, Cineplex and Rogers on Demand Online. Most of the latest movies are available, particularly top Hollywood fare.

The rental video business in Canada — including retail stores, mail-order services and digital offerings, but not TV video on demand products — totalled about $970 million in 2010, down 12 per cent from the previous year, says Toronto-based Convergence Consulting Group.

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