Netflix – pain or gain for operators?

Written by on July 13, 2015 in Guest Blog with 3 Comments

Pain or gainAccording to this article Netflix popularity requires NBN price rethink from The Age, that while some major service providers in Australia have been zero-rating Netflix streaming since it’s official launch in March, the practice is unlikely to continue for long.

“iiNet chief executive David Buckingham says the massive popularity of internet services like Netflix means current broadband plans will not be sustainable under the national broadband network unless the company building it drastically slashes prices.”

“The whole industry is running around trying to deal with [Netflix],” Mr Buckingham told Fairfax Media. “We got 6-to-12 months’ worth of [data] growth in six weeks. Nobody can forecast that. This is an unprecedented shift in the market that no one anticipated.”

I am not sure that I can agree with Mr. Buckingham with regards the “no one anticipated”, I do feel his pain.  The fact is that Netflix has pretty much had the same effect on service provider networks everywhere it has launched internationally.  If Netflix caught the Aussie operators unawares, it was because they didn’t do their homework.  Netflix of course, follows up their first swipe at operators with their dreaded speed index (Netflix continues to name and shame).

The biggest concern for telcos is the Australian NBN charges the operators a fee “called the connectivity virtual circuit charge (CVC), which costs $17.50 per 1 megabit per second. iiNet chief technology officer Mark Dioguardi in April warned that users could be forced to pay a “Netflix tax” of $26 a month extra for moderate HD streaming, and $60 a month for the ability to watch occasional 4K streams.”   The big question is who will wear the cost?

In another Netflix related article (here), Orange claims that OTT companies make good partners, because ‘they need us to grow.’

We use it [Netflix] to attract new customers who have another ISP,” said Rufin. “If they come and take the bundle within Orange, they will have this service included [in their Orange pay-TV bundle]. The price will be better, the service will be easier, there is only one bill. So that’s quite an attractive strategy.”

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About the Author

About the Author: Jonathon has been lurking around the Telecoms and Internet space for the last 20 years. He is now a man on a mission – that being the reformation of the Industry Analyst business. He is working with his co-conspirators on transforming the Industry Analyst world forever as an Expert with EMI. .


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  1. Tony Poulos says:

    The plot thickens. Reports emerged today that the three month exclusive deal between Netflix and SingTel-Optus is coming to an end and that Optus’ main competitors are clambering for a similar deal with Netflix – even Telstra that owns half of the leading Pay TV operator, Foxtel. One wonders how long operators will continue to had out free Netflix subscriptions to attract new customers, especially when the service is taking up to 30% of their bandwidth.

  2. Peter Coleman says:

    I just wish I could get something better than ADSL where I live. All of this discussion about game changing technology is irrelevant in Indonesia until we get proper infrastructure rolled out across the nation. The only disruptive here is the ongoing corruption that is preventing the country from developing into at least a portion of the developing nation that the leaders of this wonderful country foolishly believe it is. Still living in the dark ages here.

    • Tony Poulos says:

      You think you have it bad. I live in ‘provincial’ France, 5km from a major regional centre and less than 100km from the city of Lyon. The best ‘broadband’ ADSL I can get is 2Mbps down, 0.5Mbps up. And this is supposed to be a first world country, a major powerhouse in Europe. Even my last abode in Thailand was getting 20Mbps! Watching Netflix is a dream!

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