In the late 90’s, Netflix revolutionized the way we rent movies, by providing a monthly flat-fee service for the rental of DVD and Blu-ray titles. More recently, with its biggest competitor, Blockbuster, filing for bankruptcy, Netflix has shifted its focus to Internet video streaming. However, the “Watch Instantly” option was always limiting as to what movies were available for streaming.

In August 2010, Netflix announced it had reached a billion dollar deal to stream movies from Paramount, Lionsgate, and MGM. Three months later, Netflix also introduced a streaming-only plan in the U.S. with a lower monthly fee. With such a push for video streaming, it comes as no surprise that Comcast and other Internet providers aren’t thrilled about the amount of Netflix traffic crossing its networks.

One network management vendor estimates that 20% of all U.S. data traffic between the peak hours of 8:00PM to 10:00PM is due to Netflix streaming. The implications for Internet providers are severe, seeing how Netflix is only moving to up its streaming video offering. About 66% of Netflix subscribers now use its steaming service, up from 41% last year. Netflix users now watch more hours of streamed content than hours of DVD rentals and these numbers are continually growing.

Netflix’s executives must have known that this could one day lead to a backlash from ISPs, as they have long been advocating for solid net neutrality rules to make sure Netflix streams don’t get blocked. It’s no wonder that Comcast feels they should be compensated for the imbalance that Netflix is creating. Comcast has resisted the urge to charge its end users for the increase, but its options are becoming limited. Getting compensated for interconnection fees may be one way it can deliver content to the end user, without drastically raising their bandwidth bills. It will be interesting to see how Netflix and other media streaming sites affect Internet bandwidth and ISP pricing in the next few years.