Home > government, internet, netflix > Netflix and Canada: hey brother, can you spare a gig?

Netflix and Canada: hey brother, can you spare a gig?

Last night saw a pair of new developments in the ongoing saga that is usage-based billing. Firstly, Bell Canada announced it was sort of withdrawing its plan to implement UBB while, a little later in the evening, Netflix said it was implementing a new option that will let subscribers lower the quality of their video and thereby use less of their monthly internet limit.

Let’s start with a quick refresher course on UBB. Essentially, usage-based billing is when an internet service provider bills a subscriber for how much data they download and upload each month. The more a person uses, the more they pay on top of their monthly subscription fee. The big ISPs such as Bell say this is in order to discourage heavy users, who congest the network and slow things down for everybody. A while back, I explored some of the myths the big ISPs and other supporters have put forward to rationalize this - check that out if you haven’t already.

Bell has had this scheme in place with its own retail customers for a few years now, but things only got heated when it tried to foist UBB on its wholesale customers, which are smaller, independent ISPs such as Primus and Teksavvy. The CRTC, Canada’s national regulator, gave its blessing to the move, thereby kicking off a wave of protest that resulted in nearly half a million people signing an online petition in opposition. The government took notice and told the regulator to go back to the drawing board or it would find its decision overturned.

So last night, Bell decided that discretion was the better part of valour and said it would instead propose a new “aggregated volume pricing” scheme to the CRTC. The new plan will simply add up all of the traffic a given wholesale ISP accrues and charge accordingly at a considerably lower rate than under UBB. The idea is a definite improvement because it likely means wholesale ISPs will still be able to offer their large usage plans, since it won’t be individual users who get dinged, but the smaller companies’ costs would still go up. As the folks at OpenMedia, the advocacy group that has been leading the charge against UBB, put it:

While this is a positive move, it is only a Band-Aid solution to a much larger problem. We at OpenMedia.ca hope the CRTC takes Bell’s submission as a sign that widespread usage-based billing is not an acceptable model for Internet pricing, and that it creates policy to support the affordable Internet.

Which brings us to Netflix, the online video-streaming provider that is really at the centre of this whole brouhaha. Prior to last night, watching an hour of standard-definition Netflix video consumed about one gigabyte of monthly usage, or two gigabytes of high definition. Most Canadians are on plans that provide around 50 to 60 gigabytes a month, so if they used their internet connection for nothing but Netflix, they could watch a corresponding amount of hours, or about 25 to 30 hours of HD video. That’s only about seven hours a week, which isn’t a lot. And let’s face it: nobody is going to use their connection solely for Netflix, so really the amount most people would have left over might amount to a smidgen of video per week.

With the announcement last night, Netflix subscribers can now adjust their quality of video downward. The “good” setting uses only about 300 megabytes an hour, or a third of a gigabtye, or they can choose “better” (0.7 GB) or “best,” which was the only setting previously available.

Let’s just say that folks on Twitter were less than amused. As one person said: “I see the incumbents using Netflix’s announcement to prove that caps somehow ‘enhance innovation.’”

It’s not necessary to harp on Bell’s plan because Netflix’s well-timed announcement actually tells us all we need to know about it. Bell’s filing is actually standard operating procedure for big telecom companies and one that I saw repeatedly in New Zealand: when there is the danger of government or regulatory intervention, throw some half-assed solution into the mix and hope it gets traction. If it doesn’t, at least it buys some time from the intervention.

Netflix’s announcement is great, though. As a fast-growing U.S. company that has shareholders very focused on its expansion opportunities outside the country, the move will bring some rather interesting international media attention to Canada. I suspect many of the stories will take the tone of, “Oh look, Netflix is watering its product down for those poor suckers in Canada.” By mid-afternoon Tuesday, Canada will be an even bigger laughing stock of the internet world than it was before.

That may actually be the company’s intent. Netflix is actively lobbying the government and regulators - see here and here - so adding in a little media pressure would go nicely with that.

The company’s move also raises some questions for Netflix Canada subscribers. If they’re forced to take a lower quality of service, shouldn’t they have the option of paying less? That seems logical, but if the subscription price is lowered, that makes the company’s business case considerably tougher. Either way, Netflix is damned if they do, damned if they don’t. Canadians either have to accept that they can’t use the service as much as they want, or they have to settle for a degraded version of it. Here’s a company that seems doomed under the current set-up.

Of course, we need to remember this isn’t just about Netflix. The company just has the unfortunate burden of being the stalking horse for all new and innovative companies that might need big internet pipes to do business. It’s going to take more than half-assed proposals from big ISPs to ensure that such companies have a future here in Canada.

UPDATE: It also occurred to me that it’s not just Netflix that can’t operate properly here, neither can World of Warcraft. Less than a week ago, Rogers - our second-largest cable company - admitted it can’t even control its own internet throttling and that people playing the game would have to implement special settings to get it to work. How can anyone even pretend we don’t have serious, serious problems here?

Categories: government, internet, netflix
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  1. Misaow
    March 29, 2011 at 10:29 am | #1

    Hi Peter,

    On a note about Netflix, they have also announced that they will be carrying Paramount films in Canada soon which should bolster the lineup.

    With regards to World of Warcraft, I have first hand experienced the throttling that occurs on Rogers because the game itself uses p2p protocols to download live updates and game content (as well as major patches) and essentially Rogers starts to drop packets and slows your speed and increases your latency from sub 50ms to upwards of 2000ms, and this happens every time the game downloads something, which could be textures or the latest hotfixes, or even just temp files. You also get throttled when you have to upload a lot of information to the WoW server (such as some boss fights) and the instant you start to upload more than 5kb/s you get throttled.

    Of course when you call Rogers CSR to complain they will tell you that they don’t throttle ANYTHING (which is a lie because Rogers themselves stated that they throttle ANY p2p application, even if it was for cancer research).

    Anyways, /end rant


  2. Torontoworker
    March 29, 2011 at 11:31 am | #2

    Not speaking as a lwayer here - because I’m not one - but why isn’t Netflix doing a Freetrade challenge? One could make a case that a Government body is ‘allowing’ their business to be disrupted by business practices designed to restrict a cross border business based in the USA.

    If Netflix decides that the business model that the major cable / Satellite companies are forcing upon its clients is SOLEY to restrict and undermine their entry into Canada and hence foreclose on their business in this country - then it may meet a Free Trade challenge.

    Companies such as Rogers and Bell have not helped themselves here with the timing of their ‘crack down’ on the ISP independents and of course – their conflict of interest in owning competing on demand movie delivery modes.

    If I were Netflix I wouldn’t even fool around with lowering the value of their product (720P and lower) and risk the wrath of their current (and future)Canadian clients – I would lower the legal boom right NOW in the middle of a Federal election. They have nothing too lose as I see them leaving Canada inside of two years under current business conditions anyway.

  3. March 29, 2011 at 11:45 am | #3

    Great post! I actually think Netflix is handling this very well by offering a lower quality/data option.

    I don’t see it as lowering the quality of the product, but rather they are reacting & adjusting themselves to the market (Canada). To me that shows that Neflix is a company that listens to it’s customers vs. the Big TeleCom’s who do not. And Canadians are just looking for a company who will listen to them!

    I see a bright future for Netflix in Canada.

  4. Martin
    March 29, 2011 at 2:27 pm | #4

    First of all, great post.

    However, you mention that, in regards to the decision by Netflix to lower the quality of streaming: “The company’s move also raises some questions for Netflix Canada subscribers. If they’re forced to take a lower quality of service, shouldn’t they have the option of paying less?”

    Netflix has only lowered the the DEFAULT quality of streaming video. As far as I understand, settings may still be adjusted upward if users wish to receive higher quality video and risk the overage fees (or if they have unlimited internet.) I don’t know if merely expanding the options available to consumers is alone grounds for reduced pricing, especially when they’re merely reacting to the pricing schemes of other companies in an attempt to save their consumers money (and generate publicity, as you mentioned.)

  5. Thrall
    March 29, 2011 at 2:47 pm | #5

    WoW works just fine for me. No throttling problems. Of course, I don’t subscribe to Rogers, nor the small ISPs.

    • Failmaster
      March 29, 2011 at 7:38 pm | #6

      @Thrall: Excellent, so you have contributed absolutely nothing to this discussion. How about you come back when you’re not completely worthless?

  6. Torontoworker
    March 30, 2011 at 3:41 pm | #8

    Bell just laided off 20 people at it’s on demand service in Don Mills.

  1. March 29, 2011 at 12:18 pm | #1
  2. March 29, 2011 at 2:32 pm | #2
  3. March 30, 2011 at 3:49 pm | #3

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