Netflix Case Study - Memo

To: Netflix CEO, Reed Hastings

Business Impact Summary:

In 2012-2014, Netflix’s customers began complaining about the poor quality of video streaming that was offered to them. Customers were unsure of whether or not their streaming issue had to do with Netflix or their broadband ISPs. Netflix upon receiving numbers of complaints about the time it took for customers to stream videos decided to find a way to improve their service to its customers. In doing so, Netflix initiated towards moving its traffic off of CDNs and onto Cogent, a third party provider who had a settlement – free peering agreement with Comcast’s network. No sooner than signing off on this arrangement with Cogent, Netflix realized that its Comcast customers were experiencing the same streaming problems that they were trying to avoid. At the same time, Netflix was concocting to unveil its own CDN or “Open Network.” This Open Network would endure and carry the traffic to its Comcast subscribers who were rapidly terminating their Netflix service. However, in order to release the bottleneck of the congestion and permit fluidity of its streaming, Netflix purchased all the transit providers who did not pay interconnection fees to Comcast. Comcast’s Senior Vice President of Network Engineering, Kevin McElearney described Netflix’s management of its congestion as “Aggressive traffic Buildup” in an attempt to “create consumer disruption,” therefore attempting to push Comcast to give into Netflix’s craving demand for more bandwidth. In the end, this attempt by Netflix put those third party providers outside of the peering policies they had augmented with Comcast and the situation with Comcast customers was never improved. McElearney highlighted that Netflix made Comcast customers Netflix experience completely “unwatchable”.

Recommendation 1:

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