Netflix Still Dominates Web Traffic Even as Amazon Keeps Growing

NEW YORK (TheStreet) -- Netflix (NFLX) is dominating Internet traffic--especially at night--and everyone from Comcast (CMCSA) to Time Warner (TWX) to the Federal Communications Commission is trying to deal with it.

The video streaming powerhouse accounts for 35% of all downloaded Internet traffic, according to Sandvine, a broadband research company. To put Netflix's domination in perspective, Google's (GOOG) YouTube ranks second at 14% while Facebook (FB) comes in at 3%, Apple (AAPL) iTunes at 2.8% and Amazon's (AMZN) Instant Video service at 2.6%.

One question is whether Time Warner's HBOGO cuts into Netflix's traffic when the popular video streaming outlet starts its stand alone Internet offering next year. HBO is targeting the roughly 10 million U.S. homes that have an Internet connection but don't subscribe to cable TV, and making it more appealing to the additional 70 million homes that get cable but don't subscribe to HBO.

Facebook's introduction of its video autoplay is also gaining popularity. Subscriber usage increased by as much as 60% on mobile networks and over 200% on fixed networks during the past year, Sandvine said. Amazon's position, while well behind Netflix, has doubled over the past 18 months, said the Waterloo, Ontario-based broadband monitor.

The report underscores the enormous presence that Netflix plays in the life of home and mobile entertainment, and the reason that Comcast, the country's largest Internet provider, has intimated that higher fees should be applied to companies and people who use more broadband.

Comcast and Netflix in February agreed to deal in which the Los Gatos, Cali-based streaming service pays the Philadelphia-based Internet provider for a direct connection to its broadband networks in order to ensure that Netflix customers receive uninterrupted viewing.

The FCC is also keenly aware of Netflix outsized presence in broadband connections, and is expected to issue rules next year that could give Internet providers greater leeway in establishing tiered rates depending on usage.

President Obama earlier this month weighed into the debate over government regulation of the Internet calling for the FCC to issue rules to prevent broadband operators from blocking, slowing or creating "fast lanes," or paid prioritization, for users willing to pay higher fees. Nonetheless, Obama emphasized that he opposes rate regulation, leaving open the possibility that the FCC could approve tiered-usage plans for retail consumers.

Because Google, Facebook, Netflix and about 30 other large content and content distribution companies account for more than half of all Internet traffic, they want to limit the ability of broadband providers led by Comcast and Verizon to determine how fast or at what cost their content is delivered to the end user. Advocates for start-up companies similarly worry that they wouldn't be able to compete with larger, wealthier companies that dominate their industries if they're forced to pay extra for speed and access.

--Written by Leon Lazaroff in New York

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Leon Lazaroff is TheStreet's deputy managing editor.

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