• Getting streaming video from its source to the end user isn't a simple proposition. Video is too data intensive to flow automatically in a glitch-free manner from a video company's servers to an end user watching a movie on an Internet-connected TV. Content providers — everyone from Hulu and Netflix to a mid-sized publisher of Web video — face an array of options and several layers of middle-men to get their content to audiences. This report will explain the different components and choices, while demystifying the entire ecosystem.
  • Transit providers like Cogent, Level 3, and XO Communications are the basic pipelines for moving video around. Transit companies connect content providers to the "last-mile ISPs" — the Internet Service Providers that control the connections and lines that lead directly into consumer homes.
  • Content Distribution Networks, or CDNs, such as Akamai and LimeLight are the specialists in making sure that the content providers are getting the best video performance at the best price. CDNs overlap with the transit providers (Level 3 provides both services), but they are distinct in the sense that they don't just get the video to a destination. They also provide added value, including consulting services, customized video routing, and servers that cache and dole out video at optimal times. The CDNs collectively will account for nearly three-fifths of consumer Internet traffic in the U.S. in 2014, according to DeepFields.
  • Transit and CDN prices are negotiated on an ad-hoc basis, based on a number of factors, including traffic volume, time of use, and other determinants. But throughput (bandwidth/speed) is the key factor driving traffic prices. Most CDN and transit contracts include service level agreements (SLA) that guarantee a level of service quality to the content providers.
  • In an effort to gain more control over the quality and cost of moving video around, many content providers have built out their own CDN networks. Examples include Netflix OpenConnect and Google's (YouTube) Global Cache.
  • The relationship between content providers, CDNs, transit providers, and the ISPs are governed by "peering agreements," which is just another way of referring to the contracts that stipulate the volume of traffic that each player is entitled to at different prices, including free and paid tiers.
  • Both content providers and ISPs have misrepresented the economics and mechanics [...]