Wednesday, June 6, 2012 at 5:56 pm.

Netflix’s new ‘Open Connect Network’

Inside baseball, but interesting: Netflix is launching its own content delivery network (“CDN”) and is letting Internet service providers run the software within their networks. Actually, any “high-volume provider of large media files” can use it for themselves, too.

Here’s a good explanation of the new service and what it means by TechCrunch’s Ryan Lawler:

Through Open Connect, ISPs can choose to peer directly with Netflix at one of eight settlement-free peering exchanges. Or, if they want to, they can install one of Netflix’s Open Connect appliances into their own network. That would allow them to cache the content locally so that it doesn’t have to be transferred over the network whenever it’s requested. Either way, doing so could reduce the strain of Netflix traffic going over their networks.

As far as competition goes, this looks like bad news for commercial CDNs like Akamai, Limelight, Level3, etc. Though as Netflix notes in its blog post, YouTube has had its own CDN for a while now, so it seemed inevitable that Netflix would eventually, too.

Netflix CEO Reed Hastings made some noise about Comcast a couple of months ago for excluding its own videos from its customers’ download caps, which are designed to discourage subscribers from streaming too many videos from, say, Netflix. “Comcast should apply caps equally, or not at all,” Hastings said.

The argument supporting Comcast’s behavior was that its own videos travel within its network, while Netflix movies have to get pulled down from the public Internet, which, in theory, costs more. Today, Netflix seems to be dislodging that argument by giving Comcast a tool to distribute Netflix videos more efficiently, too. From the outside, at least, it sounds pretty cool.

Meanwhile, Comcast is raising its caps… and likely moving toward consumption-based Internet billing.