On HBO's new comedy, Silicon Valley, a team of coders at the start-up Pied Piper work feverishly to cash in on a unique compression technology invented by founder and CEO Richard Hendriks (played by actor Thomas Middleditch). We may see a real-life version of this company soon enough. Hopefully, without the dysfunction and chaos that characterizes Pied Piper on the show.
Why? We're swimming in data, and according to a January analysis at Re/code, will soon produce more than we can hope to store. Mix in changing net neutrality rules and we've the makings of a new, tiered Internet in which broadband suppliers apportion bandwidth by charging their most consumptive customers more for access.
Comcast (NASDAQ: CMCSA ) recently teased the idea of tiered service at the Moffett Nathanson Media & Communications Summit last week. Specifically, Executive Vice President David Cohen said that "people who use more should pay more and people who use less should pay less" when it comes to broadband service. Cohen also said that Comcast may someday introduce data caps that limit consumption to 350 to 500 GB per month, enough to download and stream at least 70 5-gig HD movies.
How that might work practically? We can't yet be sure. For now, we know that Comcast is testing a 300 GB monthly data cap in Maine and select markets throughout the southern United States. I'd expect a national rollout within five years. Either way, Comcast is preparing its network for ever-higher data payloads.
Meanwhile, existing compression technologies are gaining steam. For example, privately held Rainstor is using de-duplication technology to reduce the clutter involved with capturing and storing huge data sets for later analysis. Riverbed Technology (NASDAQ: RVBD ) uses a similar process for accelerating data transmission across wide area networks.
Who needs Pied Piper ... besides Hooli, of course
Predicting where the next round of relief will come from is no easy task. So how we should approach the problem? Think about the companies that have the most to gain from better compression. Specifically, the companies that routinely account for most of the "upstream" and "downstream" traffic flowing across the Internet. Netflix (NASDAQ: NFLX ) and Google (NASDAQ: GOOGL ) (NASDAQ: GOOG ) top the most current list, which researcher Sandvine compiles twice annually:
Watch for infrastructure investments by these players, whether it's a new form of de-duplication or something else. As investors, that's probably where we want to be as well. Do you agree? Do you think HBO's Silicon Valley is prescient in pitching compression technology as the Next Big Thing? Please leave your take in the comments section below.
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