Netflix announces dedicated CDN called Open Connect

US-based online video service Netflix has announced its own Content Delivery Network (CDN) called Open Connect, designed to deliver its video traffic more efficiently, and leading to market jitters for general-purpose CDNs such as Akamai.

The idea behind the new CDN is to enable ISPs to install Open Connect gear within their own networks or peer with Netflix directly, freeing them from potential bottlenecks caused by Netflix data on other general-purpose commercial CDNs.

Ken Florance, vice president of content delivery at Netflix, states on the official Netflix Open Connect blog: “The world’s other major Internet video provider, YouTube, has long had its own content delivery network. Given our size and growth, it now makes economic sense for Netflix to have one as well. We’ll continue to work with our commercial CDN partners for the next few years, but eventually most of our data will be served by Open Connect.

“With a user base that is once again growing and new partnerships expected to boost the networks content delivery in 2013, news of a Netflix owned and operated CDN could not come at a better time for consumers and ISPs.”

However, many stateside analysts have interpreted this move as being bad news for established CDN providers such as Akamai, Level 3 or Limelight, and downgraded their stock ratings accordingly – despite the Open Connect platform being designed solely to carry Netflix traffic.

Dan Rayburn, Principal Analyst at Frost & Sullivan comments on online news and analysis site Streaming Media (here): “The real impact on Akamai by Netflix building their own CDN is minimal. Far too many on Wall Street want to imply this has a big impact on Akamai’s business or that this is the start of a new trend of content owners taking their video delivery in-house. This could not be further from the truth.

“While Akamai does have some of the US-based traffic, it’s not a big percentage. I estimate that Limelight and Level 3 deliver more than 80% of Netflix’s US-based video traffic. While Akamai delivers a larger portion of Netflix’s video outside of North America, Netflix still does not have many subscribers outside the US so the overall traffic volume isn’t huge. In addition, these caches being deployed by Netflix are for video traffic only.”

Mr. Rayburn goes on to lambast the suggestion that Akamai lost an opportunity to sell their managed or licensed CDN platform, adding: “Since Netflix does not own a network and is placing their caches inside third party networks, there is no way a licensed or managed CDN platform could work for what Netflix is building. So Akamai didn’t “miss out” on any kind of licensed of managed CDN sale with Netflix.”

More information on the Open Connect platform can be found on the official website here.

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