Netflix builds its own delivery network

Netflix has created its own content delivery network called Open Connect. It's a series of servers, routers and fiber that can send Netflix video from the source to Internet Service Providers (ISPs).

Previously, Netflix had been relying exclusively on third parties to deliver its content from its servers to ISPs. Level 3 had been the company's primary content delivery network since November 2010, but Netflix also relied on Akamai to handle some of its traffic. Shares of Akamai plunged on the news. About 5% of Netflix content is now being served up by Open Connect, and Netflix said in a blog post that it expects Open Connect to eventually become its primary delivery tool. It will make the shift gradually, as its multi-year agreements with the third parties come to an end. Why make the change? Netflix serves up just under 1 billion hours of streaming video per month, second only to Google's YouTube. That amounts to petabytes of data -- millions of gigabytes each month -- sent over borrowed networks. At a certain point, it makes sense to stop relying on landlords and buy the building yourself.