Netflix promises to shave 20 percent from bandwidth with new approach to variable bitrate

Variable bitrate delivery has been a cornerstone of Netflix's (NASDAQ: NFLX) streaming technology for several years now, making it possible for video streams to continue playing despite changes in bandwidth availability along the last mile of a network. However, the top subscription video on demand (SVOD) provider says it will soon roll out new technology that will maintain streaming quality while reducing its overall bandwidth usage by up to 20 percent.

According to Variety, Netflix has been working on this technology since 2011. Its video algorithms team, which is responsible for developing and maintaining its variable bitrate encoding software, decided "they had gotten it all wrong" in developing files based on bandwidth available to end customers. Currently, Netflix (like most other OTT video providers today) encodes several versions of a video file, from the lowest bitrate of 235 kbps to a maximum 5800 kbps. Its video is delivered at a bitrate that can change dynamically depending on a subscriber's bandwidth at a given moment.

Netflix's updated algorithms will focus much more on video compression -- and rather than take a wholesale, compress-'em-all-let-God-sort-it-out approach when it comes to setting encoding rules, the provider is giving a set of rules to each and every title in its video library.

The reasoning behind the change is that each title has a varying amount of complexity when being prepared for streaming, Variety's Janko Roettgers said. To a computer, encoding a children's animated series is much less complex than encoding a special effects-laden action movie like The Avengers. Meantime, trying to force an action movie to compress down to the lowest available bitrate can lead to artifacting.

Encoding on a per-title basis across its massive content library also required new automation technology in order to analyze each movie and series. However, the result will likely be worth it: users dealing with less available bandwidth may be able to watch less-complex content in full HD at a bitrate as low as 1.5 Mbps.

Better use of bandwidth will improve streaming quality for its subscribers and reduce bottlenecks at the network edge, where Netflix's data crosses onto an ISP's network. But the impetus behind the technology update probably isn't purely altruistic. Netflix currently takes up 37 percent of available bandwidth in the U.S. at peak viewing hours, according to Sandvine's latest report. That's more than half of the 70 percent of bandwidth being consumed by all online video providers. Knocking 20 percent off of its bandwidth consumption will also help Netflix shave costs associated with data transport.

With more 4K content availability in the works, Netflix is likely also making sure that its top-tier subscribers, on its $11.99 premium plan, get the high-quality video stream that they're paying for.

Meantime, Netflix continues to report on how well the top Internet service providers fare when it comes to streaming their content. The November Speed Index showed Verizon FiOS (NYSE: VZ) topping the chart for the second month in a row. But more interesting was the gradual speed increase shown by providers over the past 12 months.

"While the ISPs at the top of the U.S. index remained in tight competition for the last year, the speeds of those providers have risen more than 0.5 Mbps since November 2014," said Anne Marie Squeo, a Netflix spokesperson, in a blog post on the company's website. "Verizon, which was No. 1 then and held the same rank last month, has risen to 3.83 Mbps from 3.27 Mbps last November. Cox, in second place, rose to 3.76 Mbps from 3.11 Mbps a year ago, with BrightHouse, Cablevision and others showing similar gains."

Netflix Speed Index 2 year comparison

Two-year comparison of average Netflix streaming speeds on top U.S. ISPs' networks show a steady rise in overall speed. View an even bigger version. (Source: Netflix Speed Index)

Verizon FiOS and AT&T's U-verse (NYSE: T) services languished near the bottom of the Speed Index until July 2014, when both vaulted from an average Netflix streaming speed of near 1.5 Mbps to more than 3 Mbps and 2.5 Mbps, respectively.

The SVOD provider's new compression and encoding strategy likely won't make the Speed Index a thing of the past, but if its video delivery improves as promised, the epic blame-game battles over neutral interconnects versus throttling that were reportedly behind those fiber providers' curiously slow speeds could disappear and become just another chapter in the building of the Internet.

For more:
- see this Variety article
- see the Netflix speed index

Related articles:
Netflix accounts for 37% of broadband traffic; FiOS, TWC don't plan to carry gun shopping channel
Netflix shares slip on Sarandos' comments over content rights issues
LRG: 81 percent of U.S. households can access a broadband connection
Level 3 says ISPs should not be able to hide poor performance

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