Netflix’s Content Delivery Chief Endures ISP Streaming Fees

Ken Florance wasn’t born in Northern California, but his biography reads like a CliffsNotes version of the area’s countercultural history. He dropped out of school and, in between Grateful Dead concerts and acid trips, made a pilgrimage to the Oregon home of Ken Kesey, the novelist and proponent of psychedelia. In the 1980s and ’90s, Florance taught himself IT and eventually worked his way into the first dot-com boom, managing large websites and learning the inner workings of the Internet. Now 51, he shuffles barefoot each morning into the garage of his Santa Cruz home to kneel before a Buddhist shrine and meditate for an hour before heading to work. His office is in the headquarters of Netflix (NFLX), where Florance is the vice president for content delivery.

The streaming company accounts for about a third of North America’s Internet traffic on a typical evening, and Florance’s team of 50 is charged with keeping the movies and TV shows rolling. It’s an enormous responsibility. On July 21 the company said its subscriptions had crossed the 50 million mark, accounting for $1.15 billion in revenue for the second quarter, up from $837 million in the same period last year. Florance, a happy-go-lucky pacifist with a cackle of a laugh, is now defending Netflix’s interests in one of the nastiest fights in online history: the battle with Internet service providers (ISPs) and regulators over the fundamental structure of the Web.

Florance says Netflix has spent hundreds of millions of dollars in the past three years to rebuild and expand its independent content delivery network (CDN). The network consists of sets of customized streaming servers (it takes 12 to hold the site’s entire catalog) placed in hundreds of data centers that belong to ISPs or other companies with which Netflix has traffic-sharing agreements. The idea is to spread out the servers far enough geographically that all users will be reasonably close to some of them, keeping service through the ISPs fast and relatively free of interruption. For years, Netflix outsourced this work to content delivery specialists. This summer its own equipment took on 100 percent of the load, according to Florance. The big hitch, he says, has been the toll ISPs charge to ensure smooth delivery. While Netflix pays, Florance argues it shouldn’t have to. “I will make Netflix content magically show up wherever,” he says. “In exchange, [ISPs] should provide the network your subscribers are paying for.”

This is a part of the eye-glazing net neutrality debate that actually concerns ordinary folks—50 million customers care about whether they get to enjoy House of Cards, Orange Is the New Black, and the rest of the company’s catalog. Netflix isn’t the kind of little guy typically associated with arguments for Internet freedom, but the basic question remains the same: Should ISPs such as Comcast (CMCSA) and Verizon (VZ) be able to demand fees for faster connections, or should they have to treat all traffic equally?

ISPs argue that Netflix takes up too much bandwidth and so any interruptions aren’t their problem. “Netflix sends out an unprecedented amount of traffic,” Verizon spokesman David Young said in a statement on July 10. “For whatever reason (perhaps to cut costs and improve its profitability), Netflix did not make arrangements to deliver this massive amount of traffic through connections that can handle it.” As Florance sees it, Netflix has helped drive demand for high-speed Internet access, and the ISPs should be grateful.

Netflix’s struggles with the ISPs are in some ways a reflection of its failure to negotiate traffic-sharing partnerships. For much of the Web’s history, companies with popular services struck informal deals among themselves to directly connect their networks, reducing traffic delays and sharing costs, a process called peering. “The engineers would meet at conferences, agree that it made sense to interconnect, shake hands, and configure their systems at the back of the room,” says William Norton, author of The Internet Peering Playbook.

That kind of freewheeling mentality is increasingly a thing of the past. As is Netflix’s charge-forward-and-sort-out-the-details-later attitude toward its business. In 2011 it infamously decided to spin out its DVD mailing business and call it Qwikster; consumers were outraged, and Netflix dropped the idea. Its streaming business is growing so quickly that the company has sometimes struggled to keep up.

In February, Netflix announced it had a deal to pay Comcast for direct access to its networks and high-speed connections; news of a similar paid deal with Verizon soon followed. Florance grimaces as he says there are more that have yet to be disclosed. Netflix is lobbying to outlaw the fees, but that will be much tougher now that it’s started paying, says Norton. “There are people for whom this is a religious issue, and they will argue that the deals set a terrible precedent,” he says. “From a practical perspective, though, there really is no longer much of a choice.”

Florance’s hippie history gives him perspective on the cultural shift in the industry. He and his future wife once lived in a tiny fishing cabin in Oregon, where he worked at a lumber mill. In 1984 they moved to Santa Cruz, where Florance turned a shift at a local community college’s supply warehouse into a long-term IT job. After learning to code and manage the school’s infrastructure, he went on to work for technology consultant NaviSite in 1998 before moving to Netflix in 2003, when the company had fewer than 1 million customers and was all about mailing red envelopes. By 2007, when Chief Executive Officer Reed Hastings decided on a whim to reveal Netflix’s nascent streaming service at a conference in New York, it was Florance who took a cross-country flight to make sure the demonstration went smoothly.

He sounds nostalgic about the more communal way the business used to work, even as he rails against the ISPs. “To me, $0 is a stable price point,” he says. “If it’s not $0, one party always wants to go up, and the other always wants to go down. The reason the Internet scaled so quickly is precisely because it lacked that kind of friction.” Right on, man.

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25 July 2014 | 12:39 am – Source:

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