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How can ISPs need more money for service when Netflix charges only $7.99?

6 points by t3hSpork ↗ HN
So here is my thought: Lets take, as an example,a group of people who get Netflix. Those same people use CheapBastardISP. Those customers pay $50 a month for broadband. They use that broadband to connect to Netflix and download movies. The ISP screams that their customers are using too much bandwidth and Netflix needs to pay them more.... this makes no sense. The customer uses the ISP's pipe and Netflix pipe to download the movie. If Netflix can pay for that amount of bandwidth use when customers pay $8, why cant the ISPs handle that amount of bandwidth on $50?

I seriously do not think that Netflix takes up more than 1/6th of the total internet use of all their customers on average.

11 comments

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minimaxir
You're comparing apples and oranges.
t3hSpork
I'd like to know how. I am confused. :) it just seems to me that Netflix pays for bandwidth and so does the ISP. And bandwidth use is what is at question here because its what the ISP is complaining customers use too much of.
minimaxir
Both capital expenditures (hardware, staff, etc.) and demand are much, much higher for ISPs than Netflix, both of which justify a larger price to the consumer.
logn
Because the ISPs oversell their actual bandwidth on the hope that no one actually uses all of it at the same time. It's like how an airline might overbook a flight expecting a few people to not show up. Then Netflix comes along and everyone can very easily max out their bandwidth simultaneously all streaming movies in the evening.
dlhavema
I can see this as a valid point, but netflix has been around for years now. surely they still can't still be using the same thought process..

airlines get burned anytime they oversell and everyone does show up, they give out flight vouchers, hotel rooms, meal tickets all on top of another flight a few hours later or the next day..

pwg
Lack of true competition.

ISP's have little true competition anymore against other ISPs, so there is very little competitive pressure to force prices down to the actual costs plus a small margin.

Or, to put it another way, the ISP can charge $50 just because it can.

sergiotapia
Because there is no competition. They are the only ones with the basketball court and the basketball to boot. Cities have tried to implement their own internet only for them to whine "anticompetitive!" and then increase their prices $10.
feld
Bandwidth isn't cheap if you're away from a large metropolitan area. Our prices are somewhere near $3k per gigabit circuit, but you can do 10gbit for like $6k. Cogent and HE are dirt cheap if you can get them, but Cogent is garbage and HE isn't always available.

Netflix is a serious strain on our networks. It only takes 75 subscribers streaming HD concurrently to eat 500mbit. Do the math. 75*$6=$600, but our cost on that bandwidth is $1500?

It hurts. Don't blame the ISPs though. The entire ecosystem is designed to screw anyone who can't get multiple 40gbit+ circuits.

edit: had netflix at $7 not $8

Might I also add that a year and a half ago we were still paying $2000 for a T3?

staunch
How about we blame the metro ISPs and not the rural ones? The 80% of Americans that live in cities should all have world-class internet the way people in Tokyo and Helsinki do.
NameNickHN
The reason is greed and the means is extortion. They have the ability to slow down traffic if a service isn't paying up and that gives them the tool.
ig1
Because last mile bandwidth has significantly different economics to data centre and interchange bandwidth economics.