Optus opens net neutrality stoush with Netflix

James McGrath
By James McGrath | 21 April 2015

The relationship between key Australian internet service providers and Netflix is further deteriorating today, barely a month after the relationships were formally announced.

Optus, speaking at telecommuncations conference Commsday Summit 2015 in Sydney yesterday (20 April), floated the idea of charging Netflix to access a premium tier of bandwidth to ensure a stable, smooth high-definition service reached customers.

“We're talking about the possibility of a premium service that we as a network provider can ensure to an OTT provider if they pay for that. Charging is one way to do it [but] I think there are more innovative, more creative ways that we are working on," Singtel-Optus CEO Allen Lew was quoted by the Australian Financial Review as saying.

"We need to make sure the OTT providers, whether they're Netflix or others, understand that to preserve the network quality and give you a HD high definition] video in your homes, they need to work collaboratively with us."

Meanwhile, IiNet outlined the heavy impact of Netflix on its traffic, with chief technology officer Mark Dioguardi saying that Netflix currently accounted for 25% of its traffic, highlighting the strain the service is putting on its network.

Late last week, Netflix said it regretted the deals signed with iiNet and Optus, saying that it probably shouldn't have done so in the first place.

“In Australia, we recently sought to protect our new members from data caps by participating in ISP programs that, while common in Australia, effectively condone discrimination among video services (some capped, some not),” it told investors.

“We should have avoided that and will avoid it going forward.”

Netflix has been a staunch defender of internet neutrality, having been into battle with US internet service provider Comcast over internet neutrality in the past with claims and counter-claims flying in a bitter battle which had been spanning for years, but ramped up considerably as legislative change loomed.

The US Federal Communications Commission ruled against allowing telecommunications companies from creating tiered services in Februray, a decision still being challenged.

The current comments against iiNet and Optus along with Optus flagging a tiered system could signal the start of an internet neutrality stoush in Australia.

Netflix's Australian representatives declined to comment.

Elsewhere in subscription-video-on-demand news rival service Quickflix reported that it had seen a 6% increase in paying customers in the quarter to 123,553, a quarter in which the likes of Netflix, Stan, and an enhanced Presto launched. It was also up on the September quarter in 2014, when it had 118,204 paying members.

It pointed to increased consumer awareness of the category caused by the market entry of Netflix as a reason it was able to shift more customers from trials and onto paying subscriptions.

This didn't translate into revenue, however, with subscription revenue dropping 1% quarter-on-quarter to $4.9 million.

It also reduced the amount of cash in its bank account by 40% to $1.26 million as the result of higher promotion costs during the quarter.

Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au

Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.

Read more about these related brands, agencies and people

comments powered by Disqus