01 February 2011

Short Netflix

Starting on March 1, Ontario TekSavvy members who subscribed to the 5Mbps plan have a new usage cap of 25GB, "substantially down from the 200GB or unlimited deals TekSavvy was able to offer before the CRTC's decision to impose usage based billing," the message added.
Well now.  That would be about 20 hours of SD viewing, and a bit less than 10 of HD on Netflix, assuming no other usage.  Across all devices.  Or, to put this in a bit better perspective, about 20 minutes a day.
Overage?  $2/gb, or about two bucks an hour of use on SD and $5/hr on HD.
There goes Netflix's "$8 all you can eat" buffet!
Hulu isn’t going to be in good shape, either.  The simple fact of the matter is that there is not currently enough network infrastructure in place to enable everyone to be streaming HD video for hours on end every day.  And yet, Netflix’s business model is predicated on people being able to just that.  And that costs ISPs lots of money.

Now, before you go objecting to a potential cap or rise in prices, understand that this is the normal functioning of the market, and the alternative is highly congested traffic or a shutdown altogether.  With the caps in place, ISPs will be more profitable, and others will see their profitability and want in on the take.  Once competition enters, they will drive down prices, either by coming up with new ways to bundle data or by finding ways to operate at lower costs.  They will either die off or be mimicked, but prices will eventually come down.

Also, websites, realizing that they will lose traffic due to the new data caps, will find a way to compress data into smaller bundles as well.  Google is working on a way to compress photo data size by 40-50% without losing resolution.  If it works, data caps will ensure that sites take advantage of this.  Video compression will be another big area, as well as audio compression.  In short, don’t worry too much about data caps as the market will ensure that there will eventually be a way to make people happy.

In the meantime, look to short Netflix.  There is no way that the come up with a way to compress HD video before the new ISP pricing structure takes place.  And if you want HD, get Blu-Ray.

UPDATE: Karl Denninger has more

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