When the large telecommunication providers managed to get a win (http://www.crtc.gc.ca/eng/archive/2010/2010-802.htm) at the Canadian Radio-television Telecommunications Commission on the idea of usage-based billing for Internet services, there was such a public uproar, virtually every major political party came to tell the CRTC to review its decision.
While usage-based billing appears at first to be a business-versus-consumer issue, it is a legal battle likely to be fought in the business-versus-business arena.
The CRTC decision affected a small number of independent Internet providers still offering high or unlimited broadband usage through the infrastructure of the large telecommunication companies.
But for the majority of consumers — who use the main cable and satellite companies — usage-based billing is already here once they surpass the ever-shrinking bandwith caps. And businesses that rely on a lot of broadband to deliver their services to customers are crying foul.
That’s why the next battle is likely to involve Netflix Inc., which came to Canada late last year and has been getting a growing audience. The problem is an average personal internet plan costs $2 per gigabyte once the customer goes over the monthly quota. At after-the-after-quota rate, a Netflix movie costs $4 for standard quality and $8 for high definition. The service is based on a $7.99 all-you-can-view model if the charges from the Internet provider are not included.
Realizing its business model is under threat, Netflix Inc. appears to be gearing up for a fight, hiring lobbyists in Ottawa that include Subrata Bhattacharjee of Heenan Blaikie LLP’s competition team in Toronto and public relations representative Lynne Hamilton of the GCI Group.
At issue will likely be whether large telecommunication companies are overcharging for internet broadband so their other services — things like movies on demand or speciality television channels — are not adversely affected by the rise of Netflix in Canada. And one cannot but wonder about why internet companies keep the caps so low in Canada, compared to the United States, where there are either no caps or they are on average three to six times higher than in Canada.
One thing is for sure, Netflix is not going anywhere, if the data coming out of study released in the U.S. today is any indication for the future picture in Canada. It shows 61 per cent of movies in the U.S. are now streamed on Netflix, followed distantly by the American cousins of the Canadian telecommunication companies — Comcast, DirecTV, and Time Warner Cable.