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Thu March 27, 2014
Business

When Everyone Wants To Watch 'House Of Cards,' Who Pays?

Originally published on Mon March 31, 2014 12:18 pm

We are going to trace one simple Internet request. It's one that lots of people have made lately.

Rachel Margolis, a Time Warner cable subscriber in Brooklyn, wants to watch an episode of House of Cards on Netflix.

When Rachel clicks on House of Cards on her TV screen, her request travels out of her apartment on a cable, to a box on the corner, then under the East River to a giant building on the West Side of Manhattan. Think of the Empire State Building, turned on its side.

Time Warner's cables run into this building, along with cables of all the big broadband companies around New York, along with cables bringing content from Yahoo, Google, Twitter and many others. This is where all the companies talk to each other. It's called a carrier hotel.

There's a room where the real action happens, called the Meet-Me Room. It's full of wires, physically connecting the companies that provide content to the companies that deliver it to people like Rachel.

When Rachel's request gets to the Meet-Me Room, it switches from cables paid for by Time Warner to cables paid for by Netflix. Netflix has made deals with a lot of different companies whose cables come into this room.

Rachel's request gets routed from the Meet-Me Room to one of the 16 or so places House of Cards is stored. It could be in New York, but it also could be in Virginia, Chicago, Atlanta or Miami. A request for House of Cards can, and often does, travel thousands of miles.

Once Rachel's request is received, House of Cards makes the return trip, back through the Meet-Me Room. When Netflix is sending content across the Internet back to the Meet-Me Room, it has lots of options, and it makes deals with lots of different companies.

But for the last mile — from the Meet-Me Room back to Rachel — there's only one option. For the last mile, Netflix content has to run through the local service provider. In Rachel's case, that's Time Warner.

This is why there are fights right now between Netflix and Internet service providers. The fight comes down to this: Who's going to pay to keep the videos running smoothly? Will it be Netflix, which is sending all the data? Or companies like Time Warner, whose customers, like Rachel, are demanding it?

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

DAVID GREENE, HOST:

All right. This is a little scary. You want to know what accounts for a third of all the data pulled down from the Internet in North America? That would be Netflix and all the movies and shows being streamed there.

As some of you probably know, all that traffic means it can take a while to load videos. Well, Netflix would love to smooth out that experience, but that would mean upgrading the infrastructure. And who's going to pay for that? Netflix or the Internet service providers?

NPR's Zoe Chace with our Planet Money team takes us into the tubes.

ZOE CHACE, BYLINE: We're going to trace one simple Internet request, one that lots of people have made lately.

RACHEL MARGOLIS: Hi. My name is Rachel Margolis. I'm in Brooklyn, in my apartment. And we're about to watch "House of Cards."

(SOUNDBITE OF TV SHOW, "HOUSE OF CARDS")

UNIDENTIFIED MAN: ...Spotsylvania behind us if you are.

KEVIN SPACEY: (as Francis Underwood) I want nothing more.

CHACE: And what's going on?

MARGOLIS: Still, no idea.

CHACE: It turns out that getting this episode from Netflix to here is at least as complicated as what happened in season two of "House of Cards."

(SOUNDBITE OF TV SHOW, "HOUSE OF CARDS")

SPACEY: (as Francis Underwood) ...when someone's on the ropes. That's when you throw a combination to the gut and a left hook to the jaw.

CHACE: So, where does your Internet come from?

MARGOLIS: That cable-thingy in my wall.

CHACE: Do you know what happens on the other side of the wall?

MARGOLIS: No, no.

CHACE: What's happening on the other side of the wall is a battle of sorts, a battle between Netflix and the Internet service providers, companies like Time Warner, who brought the cord into Rachel's apartment. To explain the issue, let's follow Rachel's request to play "House of Cards." Rachel clicks, the request travels out on a cable to a box on the corner. And the sticker says: Time Warner Cable of New York City. Time Warner sends it across the river to this magical place in Manhattan.

BEN GONYEA: You're at 111 8th Avenue.

CHACE: It's so big.

GONYEA: Third-largest building. So, you assume Empire State Building, but just turned on its side.

CHACE: This is Ben Gonyea of a company called Telx. The Time Warner cables come into this building. So do all the cables of all the different providers. And a lot of the companies who use them - the Yahoos, the Googles, the Twitters - this place is where all these companies talk to each other. It's called a carrier hotel, and they're in lots of cities. But the real action here is in what you might think of as the hotel bar. This is where all of the different parts of the Internet meet.

GONYEA: So, what we're walking into now is the building meet-me room.

CHACE: The meet-me room.

GONYEA: This is the meet-me room.

CHACE: Meet-me room. They call it the meet-me room. Just wires.

GONYEA: Just wires, that's right.

CHACE: Everywhere.

GONYEA: I mean...

CHACE: This is a crucial moment for Rachel's request, because up till now, all the wires have been paid for by Time Warner. And it's about to move into the world where Netflix pays the bills. Netflix has made deals with a lot of companies that have pipes that come into this room and, boom, Rachel's request is out, heading to one of the places where "House of Cards" is kept, maybe New York or maybe...

DAVE SCHAEFFER: Northern Virginia, Chicago, Atlanta, Miami.

CHACE: And this is the guy who gets it off the shelf. Dave Schaeffer is CEO of Cogent, one of the many companies that Netflix uses to get your videos. They own a bunch of pipes, and their job is to get the video as fast as possible.

SCHAEFFER: On average, that request will actually travel 2,400 miles.

CHACE: Finally. Actually, this whole thing only takes, like, a millisecond, but finally, Netflix is giving Rachel what she asked for, and the episode pretty much takes the same route back.

SCHAEFFER: Miami.

GONYEA: This is the meet-me room.

CHACE: Time Warner Cable.

MARGOLIS: Second season...

(SOUNDBITE OF TV SHOW)

SPACEY: (as Francis) ...in the gut and a left hook to the jaw.

CHACE: When millions of people are trying to do this at the same time, this is when Netflix gets slow. They need more pipes. They need more wires in the meet-me room. And so Netflix is doing a lot of deals right now. And they actually have a lot of options when it comes to getting their content from Miami and Atlanta back to New York. But the last mile...

SHANE GREENSTEIN: When it delivers data to Rachel in Brooklyn, at some point, its set of choices are reduced.

CHACE: Shane Greenstein teaches the business of the Internet at Chicago's Kellogg School.

GREENSTEIN: At some point, it has to cut a deal with Time Warner. At some point, it has to go over Time Warner pipe.

CHACE: This is why there are fights right now between Netflix and Internet service providers, because it comes down to who's going to pay to upgrade the service, keep the videos running smoothly: the Netflixes, who are pouring all this data into the pipes, or the Time Warners, whose customers, like Rachel, are demanding it. Zoe Chace, NPR News. Transcript provided by NPR, Copyright NPR.