Video Streaming Is Straining, But Who Will Ease The Tension?

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Suzie Felber's kids are only just learning what a commercial is.

"They start screaming when they come on," she says. "They think the TV's broken."

The Felbers usually stream television shows over the Internet in their New Jersey home.

More and more people are following suit, using services such as Netflix and Amazon Prime. But these programs take up a huge amount of digital bandwidth, and that's led to a dispute between these services and the Internet service providers that carry them.

Slower Service

The Felbers access the Internet through Verizon FiOS, and it's worked pretty well — until recently. Felber says a few days ago she and her husband were trying to watch the blockbuster Netflix series House of Cards, and something weird happened.

"It went from high def to low def, but it wasn't high def very much and then it was pixelating, like the game Minecraft, it was just little boxes," she says. "It looked sort of like when we tried to watch video over the Internet in 1998."

The same thing appears to have happened to many Netflix customers in recent days, just as the second season of House of Cards was being released. Richard Broughton, head of broadband at IHS, says such programs take up a lot of digital bits and bytes.

"As these are really taking off, and as people watch more and more video, obviously that means the effect is multiplied many, many times over," he says, "and it's this that's causing the immediate strain on the networks."

This has provoked a simmering conflict between video companies like Netflix and the Internet service providers they rely on. Big providers like Verizon have made no secret of the fact they resent the huge strain on their networks.

"Just using the Netflix example — it uses a lot of bandwidth and it takes money and a lot of infrastructure to support that, and it also has implications for the rest of the traffic," says Jeff Silva, a telecommunications analyst at Medley Global Advisors.

Sharing The Burden

Critics suggest these big Internet service providers aren't building out their networks enough to keep pace with the huge growth in demand. And many say the companies can get away with it because U.S. providers don't face much real competition.

One of the ways Internet companies have flexed their muscle involves "peering," a way for companies to share bandwidth when they need it.

"It's one of those components of the Internet that you don't hear as much about, but it's pretty integral to how the Internet works," Silva says.

Verizon used to have a peering agreement with provider Cogent Communications, but the two companies have had a dispute over who should pay for network improvements. Cogent has accused Verizon of doing things that clogged up Internet traffic, which Verizon denies.

IHS's Broughton says there was a similar dispute in South Korea a few years ago, and it was ultimately arbitrated by the government. He says the same thing may have to happen now in the U.S.

"Certainly, I think there's a role for regulatory intervention to ensure that both parties are getting a fair deal out of it, and that consumers get access to the services they want to," he says.

But such an intervention seems unlikely. U.S. regulators and Internet providers are now locked in a bitter legal battle over the issue of net neutrality. It's essentially a fight over whether companies like Verizon and Comcast can favor some content providers over others.

The courts recently issued a ruling siding with the Internet companies, but the Federal Communications Commission made clear this week it hasn't given up on its efforts to enforce net neutrality. Meanwhile, the full promise of video streaming remains on hold — even as it grows more popular with consumers.

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