Netflix won’t count against iiNet broadband caps in Australia

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So much for net neutrality: Netflix has struck a deal with Australia’s iiNet ISP to exempt its traffic from iiNet’s broadband caps. This means that iiNet subscribers will be able to watch as much Netflix as they want, without the fear that their viewing will lead to any overage charges. But it’s also bad news for any upstart trying to compete with Netflix, and it runs counter to the company’s long and very public defense of net neutrality.

iiNet revealed

iiNet currently has a 100GB cap for its cheapest broadband plans, and charges customers who exceed that quota $0.60 AUS (about $0.47) per additional gigabyte. The company also has 300GB, 600GB and 1TB plans. Netflix estimates that its customers use up to 7GB of data per hour for the company’s best-looking 1080p HD streams. However, averages are typically much lower.

In the past, Netflix has taken a strong stance against broadband caps. In 2012, its CEO Reed Hastings said that Comcast was violating net neutrality priciples by exempting its own online video services from its broadband caps. “Comcast should apply caps equally, or not at all,” Hastings wrote on his Facebook page back then.

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FreeBand Tech., Inc.

This is no surprise to anyone that is familiar with the consumer demand and economics of toll-free data. It is not only what real customers (and voters) expect in terms of enhanced choice / customer support, it is also very beneficial for them in their day-to-day lives (i.e., the user’s option of choosing an online service that has free data included or choosing one that does not). In fact, it is very rare to meet someone who would not immediately and intuitively prefer to have a few toll-free apps on their phone, sitting side-by-side with apps that were not toll-free. The more choice and diversity we have, the better.

As for the innovator issue, all of the innovative incumbents (Google, Amazon, Netflix, etc.) did just fine convincing people to use their new and innovative services when they launched, even though those customers had to pay for the enabling bandwidth out of pocket. The next crop of innovative companies will succeed here too, even if they can’t bundle free data from the start. If their apps are good, people will use them whether the bandwidth is free or not. If free market (competitive) realities dictate their including free data as the next evolution of their product or service, that too will happen. And it will all be the result of the consumers demanding such — which is exactly the way it should be.

This is why the toll-free issue (e.g., bundling free bandwidth with an app) really had no place in the more controversial net neutrality debate (which dealt with paid byte delivery prioritization / speeding / slowing users down). These are very distinct issues and ones that likely will be treated differently once consumers are up to speed on the fundamentals pertaining to each.

Richard Bennett

It would be wise to refrain from labeling everything that confuses or upsets you as a net neutrality violation. Consider these two simple facts:

1. Australia is a remote country where ISPs have data caps because global transit is so expensive. The Netflix deal probably involves locally sited servers, and may very well require Netflix to cover transit between its primary distribution centers and Australia, so it’s a good deal for the ISP that warrants a pass from volume-based-billing.

2. Netflix and any other potential video streamer pays 20X more for content than for transit, so anyone who wants to compete in this space will need some bucks regardless of communication costs.

I’m not a big fan of the way Netflix runs its business, but I don’t see any issue with what’s going on here. If this violates net neutrality, then net neutrality is not such a hot idea.

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