Should Netflix Walk Away from Its CDN

Netflix has invested tens of millions of dollars in building out its CDN infrastructure, if not hundreds of millions of dollars. According to StreamingMedia.com, prior to their CDN build-out, Netflix customers never had any streaming issues. Once Netflix built their CDN, and started delivering video over it, that’s when all the problems started happening. Reading the press over the last few months, I’ve come to the conclusion that Netflix is in a no-win situation, in that there is no way they are going to win the battle against Verizon, AT&T and Comcast. Because not only must Netflix battle these three large Telecoms, but they must fight against the systems (peering) and processes that have been put in place by Telecoms over the last decade. Akamai, Limelight, and EdgeCast pay transit fees to the Tier 1 Carriers, why should Netflix get a free pass.

The debate is just endless waste of cycles. Netflix is in the VOD business, not the telecom business. Verizon, AT&T, Telefonica, Orange, BT, DT and all other last mile Telecom providers with VOD operations will never encounter Netflix like problems, since they deliver content over their own last mile networks. Netflix doesn’t have that luxury, since they don’t have a network backbone. Even if they did, it would be dedicated to Netflix content, and my guess is that Netflix wouldn’t share it with other ISPs, so peering is out of the question. Reed Hastings is a rock star, but he needs to face the music, and walk away from its CDN project. Nothing wrong with taking one in the gut, and then walk away. Netflix is a $25B company that was built on taking risk. They are better off investing their energies in creating content. Netflix, sell your CDN operations to Akamai, then go back to using Akamai, Limelight, Level 3 and EdgeCast. Focus instead on children’s content, cause right now, you’re a little light in that area.