A recent study suggests that some 10 per cent of Canadians now use the streaming video service Netflix. But the company evidently believes it could be doing better — and providing a better service to Canadians — were it not for Canada’s internet service providers.
“It’s almost a human rights violation what they’re charging for internet access in Canada,” Netflix Chief Content Officer Ted Sarandos told a conference in Los Angeles last week, as quoted by GigaOM.
“The problem in Canada is … they have almost third-world access to the internet,” he added in an interview a day later.
At the heart of the matter for Netflix is "usage-based billing," or limiting the amount subscribers can download per month, a practice some Canadian ISPs put into place at roughly the same time that Netflix was preparing its move into the Canadian market. Some ISPs that already had caps lowered those limits in response to Netflix's arrival.
Using Netflix on an internet service with a low download limit can lead to prohibitively expensive overage fees.
Internet providers in Canada are frequently “vertically integrated” as part of larger media companies, such as Bell and Rogers. As a result, Netflix is in effect a competitor to those companies’ on-demand cable TV services, which charge on a pay-per-view basis rather than offering a flat monthly fee like Netflix does.
In a sign that Canada's big media companies see Netflix as a threat, Bell Canada recently announced plans to launch its own Netflix-style streaming service.
All major Canadian ISPs now employ usage-based billing. The lowest cap is on Videotron’s basic service — 5 gigabytes per month, or slightly more than one typical high-definition movie per month. Bell’s lowest-tier service, by comparison, has a gig cap of 15 gigabytes, or three hi-def movies. All ISPs have high-end services that provide at least 200 gigabytes per month.
Netflix’s response to this has been to reduce the quality of the video it streams to Canadians, saving some bandwidth. But the company is clearly on the warpath against the practices of Canadian ISPs. In a letter to the CRTC in 2011, Netflix argued that the ISPs’ claim they need to charge overage fees in order to reduce network congestion “relies on highly questionable assumptions.” The company said ISPs like Bell are making a 99 per cent profit margin on what they charge for exceeding download limits.
Yet the notion that Canada’s internet is substandard as a result of usage-based billing is arguable. A recent study suggested Canada is fourth in the world when it comes to the internet having an impact on society -- though the study does point out that Canada lags when it comes to internet infrastructure.
Another study showed Canada is ninth in the world when it comes to access to broadband, ranking higher than the U.S. or the U.K.
(H/t: Mark Evans at Forbes)
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