Netflix was born out of this grad-school math problem

From Quartz magazine: Netflix was born out of this grad-school math problem

While studying computer science at Stanford University in the 1980s, Hastings said there was an exercise by computer scientist Andrew Tanenbaum in which he had to work out the bandwidth of a station wagon carrying tapes across the US. “It turns out that’s a very high-speed network,” Hastings said, speaking at a Mobile World Congress session in Barcelona. “From that original exercise, it made me think we can build Netflix first on DVD and then eventually the internet would catch up with the postal system and pass it.”

This is how Tanenbaum and co-writer David Wetherall described the problem in their book Computer Networks (fifth edition, pdf):

One of the most common ways to transport data from one computer to another is to write them onto magnetic tape or removable media (e.g., recordable DVDs), physically transport the tape or disks to the destination machine, and read them back in again. Although this method is not as sophisticated as using a geosynchronous communication satellite, it is often more cost effective, especially for applications in which high bandwidth or cost per bit transported is the key factor.

A simple calculation will make this point clear. An industry-standard Ultrium tape can hold 800 gigabytes. A box 60 × 60 × 60 cm can hold about 1000 of these tapes, for a total capacity of 800 terabytes, or 6400 terabits (6.4 petabits). A box of tapes can be delivered anywhere in the United States in 24 hours by Federal Express and other companies. The effective bandwidth of this transmission is 6400 terabits/86,400 sec, or a bit over 70 Gbps. If the destination is only an hour away by road, the bandwidth is increased to over 1700 Gbps. No computer network can even approach this. Of course, networks are getting faster, but tape densities are increasing, too.

If we now look at cost, we get a similar picture. The cost of an Ultrium tape is around $40 when bought in bulk. A tape can be reused at least 10 times, so the tape cost is maybe $4000 per box per usage. Add to this another $1000 for shipping (probably much less), and we have a cost of roughly $5000 to ship 800 TB. This amounts to shipping a gigabyte for a little over half a cent. No network can beat that. The moral of the story is:

Never underestimate the bandwidth of a station wagon full of tapes hurtling down the highway.