Can a New Video Format Save Netflix From Future ISP Shakedowns?

The tussle over costs associated with video streaming bandwidth is becoming ridiculous. Netflix is crying extortion, because the big ISPs began allegedly throttling Netflix download speeds mere weeks after the FCC lost its net neutrality court case against Verizon, and the ISPs are saying that because Netflix is responsible for 30 percent of peak Internet bandwidth usage, it should partially pay for the necessary infrastructure upgrades. Transit providers like Level 3 and Cogent argue that the IPSs knew this problem was coming and should invest in fixing the situation—after all, many of the required infrastructure components are already in place, but have yet to be turned on. As a stopgap, Netflix is paying Comcast an estimated $25 million to $50 million to install their servers in Comcast’s infrastructure. Industry analysts say the video giant is looking at making similar deals with Verizon and AT&T.

In the meantime, this of course makes it so Netflix customers have to deal with the hassle of ridiculously long buffering—even though compared with other highly developed countries, we Americans pay an exorbitant amount for high-speed Internet. But what will happen in the long term?

I bet if the amount of data required to stream a video over an ISP’’s network decreases, these debates would diminish: ISPs wouldn’t have enough of an argument regarding bandwidth usage to demand additional payments.

This is where high-efficiency video coding (HEVC), or H.265, comes into play. The video format has been in development for the last couple of years and compresses a video data packet up to as little as 50 percent of the current MPEG-4, or H.264, format, all while maintaining or improving standard or high-definition video quality. For example, a 720p movie transmitting in HEVC will only require 600 Kbps to crisply stream, a connection speed drastically lower than the current average of 4.5 Mbps.

This essentially means that if Netflix makes it a priority to adapt its library to HEVC, the ISPs currently squeezing it for cash will benefit immensely from this transition, and with very little upfront cost.

To me, the solution is simple. Since HEVC slashes bandwidth requirements for HD streaming so heavily, ISPs should incentivize Netflix to convert its library to HEVC. If videos required less download data to stream, the ISPs infrastructure wouldn’t be overloaded during peak hours from Netflix customers, and thus the problem is solved.

True, converting H.264 to H.265 is time-consuming and expensive. But Netflix is already adopting H.265 as a progression from H.264, which they use today, said Joris Evers, the vice president and head of European communications for Netflix, in an email. Surely with some fiscal incentives this process can be expedited.

Amazon is also getting in on HEVC but won’t discuss its plan past using the compression method to stream ultra HD television shows, said Jenna Snyder, an Amazon spokesperson.

While HEVC-encoded videos will certainly be the future of streaming, there are still a few hurdles left before it’s widely implemented. Alongside conversion costs, companies might hold off on rolling out video using H.265 until consumers have access to enough HEVC-compatible hardware and software.

H.265 is three to four times more complex to process than H.264, thus requiring newer systems to support it. TV manufactures are currently working toward that, but built in HEVC support will take a few product generations. However, because the process is being streamlined by developers and product manufacturers the adoption will occur much faster than it did with H.264, says John Held, a DivX spokesperson. H.264’s initial development was finalized in 2003, but it wasn’t until 2009 that it actually began to get a foothold in the market. It took until late 2011 for H.264 to cross an 80 percent industry-wide adoption threshold. But Held says because of the coordination between developers and manufacturers, HEVC could potentially replace H.264’s market superiority within the next few years. 

Another potential snag: Google is pushing its own super compression format, VP9, which is currently being used in Chrome and Mozilla Firefox and on YouTube. But companies looking to implement a new compression system might not have to choose between VP9 and H.265. Like many of Google’s projects, VP9 is open-source and free to use, so it’s reasonable that companies will implement both formats—assuming VP9 keeps HEVC’s royalty costs low once its licensing fees are established.

Despite these challenges, major ISPs working together with Netflix to adapt its massive library into a data-friendly format is a better long-term solution for every party involved. Assuming Netflix’s customer base continues growing, failing to make this change will only postpone the issue until the new infrastructure upgrades also become overloaded.