Netflix: a tale of two countries

28 Jan

Wow, what an interesting week in internet land, especially for Canadians. The buzz all week has been usage-based billing, or metered internet usage. On Tuesday, the regulator handed down its final decision on the issue, which will ultimately make it very difficult if not impossible for any ISP to offer unlimited internet usage.

People are pissed. As of this writing (Thursday afternoon), more than 70,000 had signed the Stop The Meter online petition. One fellow, Jean-Francois Mezei - who runs a small computer consultancy in Quebec called Vaxination Informatique - has taken it upon himself to file an appeal with the federal government to have the whole thing struck down. It’s a good read; some of it is very technical, but otherwise he covers the innate problems with the whole situation.

At the centre of this storm, believe it or not, is movie and TV show streaming service Netflix. The company announced its latest financial results on Wednesday and, in a refreshing moment of candour (for an executive), CEO Reed Hastings laid out what’s going on with the company’s recent expansion into Canada, land of the capped internet. He said our restrictive usage caps are a ”potentially a significant negative for Netflix,” and he criticized the high rates big ISPs are charging when users go over their limits.  “Hopefully we can work with the different consumer groups and providers and get a better costing structure… more in the one-penny range or (plans) bundled in with a much higher cap.”

Netflix followed up Hastings’ comments yesterday by releasing some illuminating charts. The graphs show how well Netflix performs on different ISP connections, both in the U.S. and Canada. The charts show Netflix performing better in general in Canada than in the U.S., which prompted some people to suggest our networks are better.

Whoa, wait a second there Nelly. That’s a mighty big conclusion to be jumping to. There are a couple of things to keep in mind before we can make that leap in logic (not that it’s necessarily not true).

The biggest issue is Netflix’s performance-versus-usage threshold. There is a very strong logical argument for why U.S. ISPs don’t want Netflix to perform well - perhaps more so than their Canadian counterparts. The typical American internet user has hundreds of gigabytes of monthly usage, if not unlimited, to play with. So if ISPs can’t discourage internet users from watching Netflix that way, well why not try and make the experience negative in some other way? I’m not saying U.S. ISPs are interfering with or degrading Netflix quality, but it would be foolish of them to go out of their way and devote special resources to making it an optimal experience.

In Canada, it’s a very different story. In many ways, ISPs perversely want internet users to have a great experience on Netflix so that they use it more. That gets them up over that monthly usage cap, which results in more revenue. Why not optimize the experience? It makes all sorts of sense. As long as Netflix is still a virtual remainder bin of content devoid of any good new releases or television shows, for the big ISPs it’s a case of, “What me worry?”

Let’s not forget, also, that we have net neutrality rules in Canada whereas the U.S. is still trying to get them sorted. The Netflix charts are a great thing for Canadian ISPs to point at and say, “Look how well we’re provisioning a potential competitor! How dare you suggest we’re anti-competitive!?!”

It’s really amazing how online video is unfolding in Canada. When illegal torrent file-sharing emerged as the big threat to our TV providers a few years ago, they moved en masse to slow it down and cripple it with internet management measures that are still in effect. Now, as the legal options are emerging, they’re moving to slow them down and cripple them with different measures: usage limits.

One way or another, they’re successfully stemming the tide with the blessing of our regulator and the silent complicity of our government. Is it any wonder Blockbuster Video is still doing okay in Canada despite going bust in the United States? Hey Industry Minister Tony Clement: nice “digital economy” you’ve got going there.


14 Responses to Netflix: a tale of two countries

  1. Doug Stark

    January 28, 2011 at 8:23 am

    When 10 out of 13 postions on the CRTC are held by people who work for (in some cases holding companies) of the big five telco/cable group - is it any wonder which way they vote? Work for a newspaper such as the Globe - guess who YOU vote for. CTV reporter - same there. And they are not forced - they see where their pay stubs come from. There is one postion open I believe out of the 13 - they don’t or won’t even throw a bone to us and put a consumer or member of the public on the board? Why? They don’t want that 12-1 record on voting appearing all the time. Doesn’t look good you know.

    If I were Netflix - right now I would have my lawyers drawing up the papers to submit to the US Government over a free trade violation…

  2. Parallax Abstraction

    January 28, 2011 at 10:38 am

    While I applaud the Netflix CEO for finally weighing in on this issue, I would definitely like to ask him where the Hell he’s been all this time. Much like all the other attention the UBB issue is getting right now, no one seemed to say much about it until the decision was already made and it became orders of magnitude harder to stop it. Maybe things would have been different if large companies like this got off their backsides and did something about it *before* it kicked their business model in the teeth.

  3. Mychol Scully

    January 30, 2011 at 1:34 am

    For some time (a few years ago), the Federal government, the CRTC and a lot of other players were beating the drum of “correcting the Digital Divide”. This was all about reducing the discrepancy between the “digital haves” and the “digital have-nots”.

    HOW does the CRTC’s ruling regarding usage-based billing address or support this (former) priority? There’s been ZERO discussion of how this change will impact community centres, public libraries and other public access resources to the digital universe.

    The current members of the CRTC commission are clearly in some sort of conflict of interest position, but no one seems willing (or has the balls) to call it out for what it is.

    More than 107,000 signatures are collected on the petition at How many more will be required before the CRTC and the Federal government do the right thing and pull down this offensive, abusive and opportunistic policy?

  4. RobertMano

    January 30, 2011 at 1:38 am

    Thank you Mr Nowak, as always, for supporting an open internet for all Canadians. Since our ISPs own all the TV networks, like CTV and Global, the only place to get the straight story is on a site like yours. Thats why an open internet is so important, and worth fighting for.

    Canadian ISPs are using UBB as an excuse to control our access to their TV competitors, ie: Netflix, Hulu, etc.  It is clearly a conflict of interest to allow a TV Broadcaster who is also an ISP, to limit our access to their competition.  

    With these massive new overage fees, once you are over your recently lowered “usage cap” with Shaw, every HD Netflix movie will cost you an extra $8!

    This is how Netflix feels about this situation:

    Here is what YOU can do to put a stop to metered billing:

    FAX your complaint to the CRTC:  1-819-994-0218
    FAX your complaint to Tony Clement:  1-613-992-0302

    If you want to contact your local MP, and ask them what THEY are doing to prevent the destruction of the Canadian internet, please send them a FAX or written letter.  You can find out who your local representative is here:

    Fight back!  Visit Open Media’s facebook page, and join the fight - Thousands of Canadians working together to put an END to metered billing!

    Please sign the petition!  Forward it to your friends, family, and co-workers. We need to act on this, or every single Windows update, web page, and email will cost you money.
    100,000 signatures and growing fast, but we need YOUR support!

  5. tim dobson

    January 30, 2011 at 3:00 am

    This CRTC decision is a prime weapon for the federal Conservatives to rattle in the upcoming Federal Election. As a minority government their options are limited. As a majority they would not stand for this. case in point :the Cell Phone monopolies and how they reversed the CRTC decision on getting new providers.
    Criminal Code change for endless shopkeeper victim in Toronto? you bet!
    I say milk this public outcry and declare it a national election issue - before they call the election. Embarrass the Telcos and the CRTC. Create a platform for Tony Clement to ask him the reverse a crtc decision like he did for the cell phone issue. Or at least what changes can be done with a majority government. Much of the CRTC is a Liberal dinosaur from Trudeau years. I’ll continue to boycott all of those major canadian companies with poor service (rogers, bell, air canada, telus)

  6. Levin Rodriguez

    January 30, 2011 at 7:20 am

    I disagree with article that in Canada the telcos want Netflix and other internet media sites to provide a good experience. Both major telcos Rogers & Bell have their own cable or satellite…they routinely gouge their customwrs because the lack of options. internet media is becoming more and more intersting…i recently bought a Boxee Box and was truly amazed by how much content you can watch from the internet. Fot canadian telcoa ubb is a way to douple dip, Bell already hace their tv-ip ready. They will get you fromthe tv service plus for your level or consumtion, if you can’t afforde it, then you would have to buy their satelite service or go to Rogers who would do the same. The CRTC allows these two companies to stab
    Ish a de fafto duopoly of tv and internet in canada. This is an embarrasement to the country as tolls/taxes the future of peoducts and services to come. Tne CRTC IS A SHAME, the silence from Clemente/Harper is complicity… much for encouraging entreperneuship, competitiveness and investment.

  7. Cam

    January 30, 2011 at 9:18 am

    I for one am tired of the CRTC telling us, as Canadians, what we may or may not watch and when we may watch it. I’m tired of them telling us we can’t use the internet in ways it was designed for. I think it is ridiculous how a free use system like the internet has become a profit center for the big companies.

    I say we call for the disbandment of the CRTC all together and create a new forum run by consumer advocates with no ties to big business or government. They should be a politically neutral group to promote free or nearly free communication in Canada with a world focus.

    Unfortunately, the day that happens will be the day pigs learn to fly on their own.

    So now I’ll go back to watching my weeks-old “New” programming on my over-priced cable connection like the CRTC wants me to do.

    I thought they were here for us, not the big companies?

  8. Sasa

    January 30, 2011 at 12:39 pm

    Service in Canada for EVERYTHING YOU PURCHASE is HORRIBLE due to fact there is no HEALTHY COMPETITION.Just a sample of bad service decisions.I recently got in my mail that my service with Rogers will Change and if I want to I can BUY my MODEM that I am RENTING FOR THE PAST 5 YEARS for the price of 3$ am month, for a 99$ what an insult!!!!But when competition arrive we tent to block or close market place for all other players.The “Canadian Content” also can be used against CRTC if they (BELL and Rogers) plan to stream American(or foreign movies) made movies,on demand, via the Internet that violates promoting the Canadian content on our broadcast networks…even if it is on demand should it be CANADIAN CONTENT LETS SAY 60%???

  9. siouxZQ

    January 30, 2011 at 1:58 pm

    For Sasa re: Canadian content …
    My husband is an actor (Scott Hutchinson(I) on IMDB). His agency had to fold last year (maybe 2009) because there was not enough film/TV produced in Canada to keep their roster of actors going. There have been some fantastic Canadian films (The Last Casino for one) and TV shows (This is Wonderland, According to Doyle, Being Erica) but they are really few and far between. It is time that Canada supported Canadians - the CRTC is effectively stopping access to NFB - our National Film Board, which is OWNED by Canadians. For some reason, we generally just lay down and let everyone walk all over us … this time, lets stand up and shout them down and don’t allow Big Business to sucker punch us.

  10. eduboris

    January 30, 2011 at 2:58 pm

    another reason the monetary system is wrong, imagine if the goal of all the people was not to gain money but rather knowledge and use resources based system….

    • Anonymoose

      February 3, 2011 at 10:56 am

      >>imagine if the goal of all the people was not to gain money but rather knowledge and use resources based system…

      Isn’t that just Gene Roddenberry’s utopian future, starring William Shatner and Patrick Stewart?


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