Forget the CDN players, Netflix is caching its own video

Netflix(s nflx) is rolling its own content delivery network (CDN) and inviting ISPs to either connect directly to its vast library of video streaming content at global peering sites or cache its content within their own networks. Called Open Connect, the service will help Netflix cut the umbilical cord to commercial CDN providers like Limelight(s llnw) and Level 3(s lvlt) and will bring it closer to the cable and telco ISPs ultimately responsible for delivering its movies and TV shows.
Netflix explained that the company’s data volumes have ballooned to petabyte levels, making it only natural for Netflix to become one of the few Internet companies to shed commercial CDNs and build its own network. From Netflix’s blog:

Now, in addition to these general-purpose commercial CDNs, we are enabling ISPs to get Netflix video data from Open Connect, a single-purpose Netflix content delivery network we’ve established.  The world’s other major Internet video provider, YouTube(s goog), has long had its own content delivery network. Given our size and growth, it now makes economic sense for Netflix to have one as well.  We’ll continue to work with our commercial CDN partners for the next few years, but eventually most of our data will be served by Open Connect.

In fact, a good chunk of Netflix’s traffic is already on Open Connect. Netflix said that 5 percent of its streaming traffic already runs through its proprietary servers. Netflix is hoping to coax more ISPs onto the platform by giving away the parts for free. It isn’t charging for peering access at Internet exchanges, and is sharing its open-source designs for server hardware and software with any takers.
It remains to be seen how receptive the Comcasts(s cmsca), Verizons(s vz) and AT&Ts(s t) of the world will be to the idea. Telcos like AT&T have built their own CDNs, and they charge content providers like Netflix to cache their content. Other ISPs actually earn a paycheck from commercial CDN providers to host content servers on their networks. With the Open Connect, those revenue streams would go away. But if ISPs were to take Open Connect into their networks they could save considerably on network transport costs by moving the source of Netflix’s enormous traffic flow closer to their customers.
For more on CDNs, be sure to check out GigaOM’s Structure conference held in San Francisco, June 20-21. Paul Sagan, CEO of CDN giant Akamai will be speaking, and a live stream of his talk will be available on the GigaOm site.