Netflix Regrets Streaming Deals With Optus And iiNet

If you're an Optus or iiNet customer, I hope you're loving every minute of unmetered Netflix streaming, because the streaming giant that signed the deal in the first place hates it.

That's right: Netflix regrets ever signing unmetered arrangements with Aussie ISPs.

More:

Here Are All The Aussie ISPs That Will Stream Netflix Quota-Free

In a note to investors today, Netflix discussed its ongoing Net Neutrality fight in the United States.

Net Neutrality is the idea that all traffic going over the internet should be treated equally, rather than have some content slowed or billed differently from ISP to ISP.

Netflix has been fighting US ISPs over the right to a flat, fair and open internet for years now, and it wishes it had never got involved in the fight in Australia.

Netflix thinks that by signing these unmetered relationships with ISPs like Optus and iiNet, it is effectively conceding a fight over Net Neutrality.

The streaming giant added in its statement that it wouldn't look to do any more unmetered streaming deals.

Here's the investor note:

Data caps inhibit Internet innovation and are bad for consumers. In Australia, we recently sought to protect our new members from data caps by participating in ISP programs that, while common in Australia, effectively condone discrimination among video services (some capped, some not). We should have avoided that and will avoid it going forward. Fortunately, most fixed-line ISPs are raising or eliminating data caps in line with our belief that ISPs should provide great video for all services in a market and let consumers do the choosing.

Netflix has form when complaining about data caps.

When speaking to Gizmodo Australia a few months ago, Netflix CEO Reed Hastings said that there's just no need for data caps anywhere in the world.

"There’s no reason for data caps. We want to make the internet unmetered. Period. The capped model is antiquated: we want to make it about speed. 10Mbps will cost more than 1Mbps and 50Mbps will cost more than 10Mbps and that makes sense. Historically, there was so little content in Australia that many users went over the international links and those are pretty expensive, but now there’s more and more content and content caching in Australia."

Hastings did add to that comment in our interview by saying that at the end of the day, Australian ISPs don't really care what Netflix thinks, so these new comments are unlikely to change the status quo.

Netflix is still more than happy to take Australians' money though. The expansion into Australia and New Zealand has increased the number of "addressable households" by eight million. While it won't say how many Aussie customers has actually signed up just yet, it's a fair bet that most of them have at least heard of Netflix by now.

WATCH MORE: Entertainment News


Comments

    He does understand the difference between un-metered internet and Net Neutrality, right?

    Sounds like a really dumb thing to say.
    Its a different market here, and if they DIDNT do that alot of people wouldnt be getting Netflix at all.

      Probably not the most cogent argument but it's clear enough for most people on how he thinks the internet should work.

      On the subject of un-metered use; I think many people will still choose to take the leap to stream - but you are right - it would be a slower uptake. Personally I made the leap last year. Since making the change my internet usage has actually dropped.

      He's saying exactly what he meant to say. That data caps reduce net neutrality, because it gives the ISP a carrot to say "don't go there, stay here and you won't use your allowance.

      Un-metered and net neutrality is exactly the same thing, one provider is getting a commercial advantage over another because their traffic is treated differently on the network. Sure it's not "fast lanes" like in the USA, but here it's "Free lanes", where Netflix, or Bigpond, get free traffic for their customers on some ISPs, while other video services don't.

        Its a very good point, however it depends on the definition of Net Neutrality. For me it relates to the US (where it originated) around ISP fast lanes.

        For arguments sake my original comment was not 100% correct.

        True, this gives some ISP's an unfair advantage but its not an agreement with Netflix as such. Its an agreement that the ISP will not charge users for Netflix usage. Any ISP can do this independent of Netflix if they wish (as far as my knowledge on network is concerned).

        So if other ISP's think its a market advantage, just choose not to meter it.

          I think that's the core issue with Net Neutrality. ISPs should not get a say on whether a given service succeeds or fails; that should be entirely up the consumers (and the service itself).

          If your ISP chooses to offer their affiliated service unmetered (e.g. BigPond Movies), that gives it an unfair advantage over the competitors. Netflix is the beneficiary here, but it's good to see them sticking to their principles regardless - the real solution is unmetered everything.

        Not true from an infrastructure point of view - what happened is that Netflix deployed their CDN nodes into those ISPs or nearby peering points and then those ISPs unmetered the IP ranges that the CDN nodes are on in their network. This saves the ISP back-haul costs. CDNs made the whole neutrality thing moot nearly a decade ago now, surprised "super smart tech CxOs" are not upfront about this - my employer pays handsomely for privileged access to your home network, and so does Fairfax who own this blog.

    But all they did here was have their data unmetered. Where Net neutrality is about ISPs charging companies more to get their data sent faster through the internet pipes. AFAIK the unmetered data deals only treats the data as unmetered. The data has no special treatment in terms of speed or any priority over any other data.

      That's not all net neutrality is about. Thats just the part the media has been pushing, because its what suits them.

        You say that like we, the royal we of the "global media illuminati" have secret meetings over coffee every week :D

        Seriously though, this is another facet of the Net Neutrality argument and @that_dan_person hit the nail on the head.

        Netflix wants every ISP to play on the same, flat field. That is, a neutral one as the term implies. Umetered agreements with some and not others does not a level field make. What's interesting here is how Netflix shot itself in the foot on this one. I don't think it realised until the deals were signed that it was compromising its own position on a neutral internet. Fascinating to see it cop to that.

          Belong tripled my traffic allowance, that's the right way to do it. If I chose Stan over Netflix, I'd see no benefit with the unmetered service, whereas Belong (and a few others I heard) realise that the problem IS the data cap.

          Favouring Netflix with unmetered is exactly the definition of UNneutral.

          Last edited 16/04/15 9:24 am

            To be fair, if didn't have data caps, there would be one less thing for ISPs to compete over.
            There needs to be some competition in the market.

            I hate data caps (I'm on unlimited optus cable) but if every ISP offered 1,10,50,100Mbps plans and nothing else, it would be a pretty dull marketplace. How would they compete? How would prices vary? Optus and Telstra would undercut everyone else since they own all the infrastructure and we'd really get nothing else out of it.

            Let's get everyone off ADSL first, then worry about data caps.

              The thing is, it's an artificial thing to compete over. Price and speed should be plenty to compete over.

                Agreed, but we do still have limited bandwidth on the undersea cables right?

                Which one is really more restrictive, the amount of data transferred or how fast it's transferred.
                I assume they depend on each-other but realistically the difference between 50 and 100mbps is minimal compared to downloading 100gb or 500gb each month.

                  International bandwidth used to be an issue when it was only Telstra/Alcatel and SingTel in a comfortable duopoly, but a number of new cables have been laid by third parties now, and there's plenty of capacity (and more coming). And should we fill that up, still more can be added.

                  Hastings is right; there's no need for data caps, period. The only caveat I would add is over mobile, as spectrum bandwidth is a limited and shared resource, unlike fixed connections.

                And customer service. And service reliability.

                  To me, that's important. That's the only reason I chose iiNet.

              telstra already owns all the infrastructure and they are the most expensive ISP around

              I don't chose Internode over the others for their prices or their caps, and certainly not their speed. I choose them because they are one of the only ISPs that have a support line worth going through.

              Why can't they compete on customer service? Speeds are cool, I wish we could compete with speed, but that's not possible.

          Netflix surely wouldn't have been that dumb. I'm guessing they understood the implications only too well, but felt they needed to compromise to close off any threats to a positive launch in Australia. But I'm also guessing that the take-up has shown Netflix that it wasn't really necessary, so now it's backtracking. Just my guess, though.

          I see both sides of the debate have merit, however the playing field in my perspective- is totally different.

          ISPs like Telstra do not offer unlimited data usage on their home internet plans, but other carrier such as Optus- actually do.

          this is not the fault of Netflix, no matter where they install their Australian data centres/servers. The simple fact is that this streaming service is not something ANY of the ISPs have to barter internationally with- unless people overseas want to have access to Australian only content(I discovered Round the Twist on netflix last night- very nostalgic guilt trip)- in which case this only benefits the Australian ISPs more.

          I can understand and even accept mobile data caps to try and give less incentive for users to add congestion to our mobile networks- but there is no excuse whatsoever these days for home ISPs to NOT be offering unlimited data when others in the market do and they have shown they can still make a profit out of doing so. I place all the blame entirely on the other ISPs for not reaching out or even for offering unlimited data.

      @that_dan_person
      Here is what happens. If they sign a deal with netflix that their data is unmetered it may not cost netflix.. But it will give IInet etc an advantage or disadvantage over other ISP's

      So now if i want to watch netflix and dont want to crush my data in a family of 5 then i have to look at telstra. If i want to watch unmetered presto then i need telstra. This is like cable tv companies now. I need to sign up to 3 ISP's to get unmetred everything. Its not like electrical companies who say electricity is used at X rate no matter what. They dont say "if you use SolarAir hot water systems you get charged half price"

      Electricity is just that..

        I have an unlimited plan with my ISP so data usage doesn't mean anything to me. Problem solved.

        Unless you're talking mobile data, but the data caps have a different purpose there.

          Thats what netflix reqests instead of ISP deals.
          But my telstra is now 1TB i mean ill never use that.. but my housemates seem to find ways to power through it each month... P$rn addicts perhaps?

    Ugh. Dammit. He has a point.

    It's not Net Neutrality as most people understand it (ie: fast lanes and slow lanes), but it's still content providers negotiating with ISPs for preferential treatment.

    Being unmetered gets Netflix an advantage over Quickflix, Presto/Play, Stan on data caps, not speed. (Although in this case it's probably more an incentive to change ISPs to get better access to Netflix, that's still bad, too. It's corporations negotiating access advantage.)

    Telstra sent me a letter saying they increased by data cap by 300gb for free. I suspect this was due to the introduction of Netflix, though they just say its because I'm a long time customer.

      Nope, Telstra have been restructuring their data caps. I recently just switched my $190 p/m mobile bill to $95 p/m because of these changes.

      Sadly new customers can't take advantage of the new broadband deals just yet even though they were supposed to role out on the 9th.

        For once.
        Usually it's new customers who get the incentives like more data while existing customers are stooged.

        Whirlpool thread disagrees. Heaps of people calling up or using chat to negotiate the new plans with more data and lower prices straight up when churning from other ISP's.

        What does $95 a month (or even $190) get you that a Boost $40 unlimited doesn't?

          4G?

            If that's all I'll stick to paying half (/one fifth) as much.

          I use the internet a lot during my commute to and from work so I had to get a 9GB data pack on top of my plan, now I get 10GBs of included data for $85 less.

      Hey worked out even better for me as a Telstra customer too. Didn't get unmetered Netflix, but they just happened to start doubling all their data plans at the same time! No on peak/off peak, no unmetered deal with Netflix, I just went from 200gb to 500gb overnight for the same money and can use it however I want :)

      No they are doing that and have been for 2 - 3 months.. :)

    I do enjoy watching Netflix unmetered, I use it almost every day. To come back so soon and say you're not happy because of a fight happening in the U.S shouldn't be our problem.

    If they thought that this was going to be a problem why did they bother signing deals with iiNet and Optus?

    I believe that what is being offered is 100% fair to all Australians considering the vast majority of American Netflix users have unlimited broadband caps.

    Last edited 16/04/15 8:40 am

      It's not just a problem in the US. Net Neutrality could very well become a problem here. Our government is run by tech illiterate people. I'm pretty sure some good lobbying could convince them to allow fast lanes because it would "increase the economy" (people/companies pay more).

      If they thought that this was going to be a problem why did they bother signing deals with iiNet and Optus?

      Well if you read the article he very clearly answered that very question.

      How is it fair to people who are not on iinet or Optus? Now there are free lanes and not free lanes. Doesn't sound very neutral to me.

        I did read the article, it was a rhetorical question.

        How is it fair to people who are not on iinet or Optus? Now there are free lanes and not free lanes. Doesn't sound very neutral to me./q>
        That's not what the article is about though, yes it's a problem that needs to be solved but Netflix taking away whatever privilege we currently have isn't fair either.

        This agreement between Netflix and ISP's is proof that things can change, reversing these decisions shows our government how weak at the knees "a single" corporate entity can be.

        Agreements such as these show true promise to Australia's future entertainment value on the internet,I'm not greedy but we've being waiting too damn long for things to start changing.

          The unmetered thing isn't being reversed.

          Free lanes or fast lanes, still a net neutrality issue.

    Well actually there ARE reasons for data caps. All data that comes into Australia comes in via undersea cable. ALL providers pay for the data through those cables. The main reason some providers don't offer 'unlimited' is because if they did the amount bandwidth for everyone would reduce because everyone would blitz their connection. Any provider that offers unlimited would sacrifice overall network speeds unless they had the network backhaul to support it. You get what you pay for.

      The real reason why a lot of ISPs don't offer unlimited is more to do with who owns the lines, which is Telstra. The biggest mistake the Howard government ever did when selling off Telstra was not keeping the Network and only sold Telstra off as a provider and not a provider and supplier. If they kept the Network then we may have had a NBN style network now instead of the drawn out, delayed, mishmash of the so called NBN.

        Probably? Try definitely. It would of been in Telstra's best interest to lobby the govt for NBN years ago if they didn't own the lines.

        Except unlimited plans have flourished even with Telstra owning a significant part of the national communications infrastructure.

        thedamtron is correct to a degree - one of the biggest issues we've had is with international links since we're basically a big island with a lot of traffic that goes overseas. Those undersea cables aren't cheap to lay and maintain. That said the situation has gotten better over time and with more services moving here to Australia it's less of an issue.

        Also our comparatively low population density and demand to extend services beyond the black stump has a part to play in how pricing works. It's overly simplistic to point at Telstra/the government/shadow people and claim they're the 'real' reason.

          I'm curious, if it's mostly overseas data lines that limit ISPs' ability to offer unlimited data (ignoring profiteering for a moment), what about just a blanket of "Anything on our internal network is unmetred" from an Australia wide perspective? Internode offers unlimited downloads from Australian Steam servers regardless of who owns the server. If that was extended to all Australian traffic, would that still be in a red zone for net neutrality supporters?

          I personally fully believe in net neutrality but am stuck with a small data cap. I was going to use Netflix regardless of being unmetred (although it helps).

          I also believe that unmetred data isn't the perfect answer. I reckon a combination of increasing the "shaped" speeds for customers and making a 500GB data plan viable for families.

          If I could have full ADSL2+ with 500GB of data for my family, and a shaped speed of, say, 1Mbit instead of 256Kbit then I would be totally content.

          Still want my gigabit unlimited plan but that ain't happening haha

      And that's why speed tiers make sense in place of data allowance. The issue isn't that the overseas cable or local infrastructure can't handle transferring unlimited data.. they can't handle everyone transferring unlimited data at their offered speeds.

      If instead the ISP's moved to a tiered speed system, then they'd be able to know in advance what they had to supply (x customers at x speed, y customers at y speed, add up speeds and supply that bandwidth).

      We've also got to get rid of this concept of "up to X Mbps" because it's a total rort.. they can give you anything they want basically and ignore what you signed up for.

        There in lies the problem - Australian ISPs can't sell based on speed because of the non-uniform nature of our infrastructure. Up to 25mbit is how it's sold because no speed can be guaranteed due to infrastructure factors. In the US the cable infrastructure is able to deliver a minimum.

        NBN would have fixed this, but the multi-technology mix BS we are getting now is still going to be non-uniform and sold as up to 30mbit

      Actually data caps (or charging based on volume of data transferred) only really happens at the retail end. Everywhere else it's based on speed. Your ISP buys connections based on this basis for their backhauls, peering connections and connections to the internet (eg 100mbit line costs x)

      However consumers don't understand this model, and it doesn't allow for variable data requirements so when constructing retail products it's just easier to implement a data cap.

      Last edited 16/04/15 10:53 am

        True, but if you have less data, people aren't able to fully saturate those links all the time so it evens out.

          Yes that's right, it's just another way of balancing demand.

          Most corporate products (eg. SHDSL) operate at a fixed speed (usually slower than ADSL) without data caps. This is actually much easier to price and provision as they just need to have that capacity available for that customer everywhere in the route - but it works out quite expensive.

          Last edited 16/04/15 11:11 am

      your argument is rendered invalid when services like Netflix, Stan, and others host their content inside of Australia now- and not overseas. This is purely local access with negotiations happening between different ISPs essentially

    Without knowing the details of the agreements, or who handed whom money (if any), I don't see this as an issue with net neutrality: Anyone is able to put their content servers inside the ISP's data centers to allow unmetered access to their content.

    I'm pretty positive that Valve isn't paying iiNet to host unmetered steam content for example.

    Having said that, I do agree with their stance that data caps need to go away and be replaced with speed tiers instead. I'm just cautious that given the history of services offered in Australia, the speed tiers will be a complete rip off: I would expect to get 1 to 5Mbps for what I pay now with iiNet for example, and have to pay $100 per month to get ADSL 2 etc. You know they aren't going to be nice about it.. I would think most ISP's couldn't offer ADSL 2 unmetered and keep the current service quality, because they don't have the infrastructure in place to do that. It's costs money, which eats into profits.

    ISPs must be laughing all the way to the bank. The marketing kudos of being able to say they do unmetered Netflix and an obvious traffic reduction as torrenting reduces.

    Last edited 16/04/15 1:27 pm

      I understand that Netflix is still being delivered from the US so they will be paying for big international pipes. Torrenting on the other hand will prefer local people as they will generally be quicker.

      And who torrents old shows and movies? That is what's on Netflix. Most torrenting is the new stuff that is not on there yet.

        No, they are deploying CDN nodes and use other "open market" CDNs - something VPN use of Netfix always broke, as an aside.

    Uncapped = throttled to be clear. Contention is contention folks - there is no magic here, the averaged user pays for a certain planned capacity of bits per month based on their pricing tier. In countries with uncapped a variety of "nasty" ISP measures are used to make the pricing work:
    1. modem level throttling (this is effectively how Telstra and Optus offer different cable speeds already)
    2. worse contention ratios (number of homes sharing each Gbps of back-haul/POP capacity)
    3. actual packet hacking based on protocol, so called "layer 7 rate control"
    4. "sin bin" routing via lower capacity core routers for heavy users
    4. RST of % packets from "bad users"
    5. Proxying certain traffic

    Based on this, does the whole net neutrality discussion in countries with uncapped makes more sense now ?

    So what does it mean that Bigpond just handed me an additional 300gig a month? Corrot much for remaining, instead of moving to iinet or Optus?

    So I guess this guy doesn't want customers then? Because without unmetered access, subscriptions will drop pretty fast.

    Last edited 16/04/15 11:30 pm

      Or our ISPs can drop data limits and change to a speed based model as the guy suggested. It actually makes sense really.

        Yeah but that's not going to happen anytime soon, is it? ISP's certainly aren't going to do it because this guy says so.

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