Netflix confronting Canadian challenges

Blog, Disruption, Les Routledge

Video streaming eats up a lot of bandwidth. This isn’t a problem for Netflix in the U.S., where one of the strictest plans is Comcast Corp.’s, which limits users to 250 gigabytes per month. That’s still enough to watch eight hours of Netflix per day. In Canada, Internet providers have capped bandwidth use much more aggressively….

…“A bit is a bit is a bit. If you’re a heavy user, regardless of what’s causing the heavy use, you will pay more. That’s the concept,” said Mirko Bibic, Bell Canada’s senior vice-president for regulatory affairs. “The caps we’ve established are well above our average users. If you’re a super-super heavy user, you should pay more….

…a Credit Suisse report last week noted that a Netflix subscriber with a Rogers Lite account would be charged an extra $4 per hour for watching any more than roughly half an hour per day

News like this makes me wonder if there should be structural separation between companies that operate broadcasting operations under the Broadcast Act and those that operate telecom undertakings that are defined under the Telecom Act.

Is it a good thing in public policy to have incumbent operators empowered to effectively block the introduction of digital delivery of video content in favour of their legacy model of broadcasting digital content?

Specifically, where does one measure when “a bit is a bit”?  If it was done at the point of the customer terminal (i.e. the television), that would imply that the broadcast arm should be paying the telecom operation variable usage fee to deliver their signals as well.  If, for example, they are going to charge customers $4 per hour to watch television delivered via the Internet, why is that charge not applied to a on-demand digital video signal delivered via the service operated by the Cable or Telco company?

For example, take the case of pay-per-view offered over some telecom or cable television services as described in the following discussion forum post

How is the argument you used for Shaw providing a service like Netflix going to change the capacity limit of the infrastucture? So it is OK if a neighbor of mine gets to watch 30 HD videos off a Shaw authorized service and make my internet slow, but not OK for me to do the same but with Netflix? The media is still being transported the same way irregardless if Shaw or Netflix is providing it, as the bottleneck is the coaxial cable. Unless Shaw is going to be upgrading every region where this new VOD service is implemented with Fiber to ensure other people in the region don’t suffer from another individual’s overusage of the service; I don’t see this argument holding up.

In some systems, the show is sent from a video-server located within the telecom or cable company’s premises.  In the Netflix situation, the video server happens to be located outside the walls of the telecom or cable company head end.  At the end of the day, both movies consume network capacity between the head-end and the customer.  Why is the telco or cable company, allowed to congest its network between the head end and the customer to deliver on-demand digital video content at no cost while a Netflix user is charged a supplemental usage fee to receive the comparable bit stream?  If a bit is a bit, then why is the telco or cable video operation not charged a comparable fee or subject to comparable bandwidth caps?