Despite its 50 per cent ownership of Aussie pay TV stalwart Foxtel, Telstra is talking with Netflix to promote the service and integrate its video storage and server hardware in Telstra's own data centres.
According to "senior industry sources" quoted by the Australian Financial Review, Telstra and Netflix are in discussions to host the latter's Open Connect Appliances in its Australian data centres, allowing Telstra customers and partners to access Netflix's library of TV shows and movies from a local source rather than through international or inter-state data links.
Telstra's partner Foxtel already competes directly with Netflix through its archival TV and movies streaming service Presto, and also has an a la carte streaming plus live TV service in Foxtel Play. A Telstra deal with Netflix would likely lead to a lot of annoyance at Foxtel, but would insulate Telstra against shifts in fickle customers' choice of streaming service.
That deal might be a precursor to a more serious partnership — a Telstra spokesperson told the AFR that the two companies are in talks "regarding marketing and promotion arrangements". Any kind of deal that saw Telstra's massive installed customer base over either fixed-line cable, ADSL and NBN services or over its mobile network allowed free, unmetered or discounted access to Netflix would be a huge blow to Optus and iiNet's quota-free promotions. That said, Netflix has said it regrets its existing deals with those carriers.
Unmetered Netflix, though, could come with the problem of massive strain on Telstra's network; that issue has caused significant headaches for iiNet in recent weeks as the volume of traffic in peak viewing times slowed other services and general internet access to a crawl. iiNet is investing heavily in upgrading backhaul capacity to accommodate demand. [AFR]