Netflix is coming to Canada.  Sort of.

Canadians will be able to sign up for Netflix’s on-demand video streaming service beginning this fall, but will Canadians be interested in using the unlimited service on their usage-limited broadband accounts?

Netflix is not planning on bringing its rental-by-mail service to Canada, instead relying exclusively on streaming its library on-demand over the Internet. Netflix currently licenses streaming rights for over 17,000 titles in its 100,000 plus library.  How many of those titles with be licensed for Canadian subscribers is not yet known, nor is an exact price for the service.  Netflix will launch for English-speaking Canadians at the outset, with French to come later.  This is the first time Netflix is making its service available outside of the United States.

But many Canadians are questioning the value of Netflix in their heavily-usage-limited country.  Most Canadian ISPs have either chosen or been forced to limit subscribers’ broadband usage.  Even ISPs that want to offer unlimited service find flat rate wholesale pricing nearly impossible to get because of Bell’s stranglehold on the market.  Cable providers like Rogers have implemented their own usage limits to boost revenue and keep costs down.

For Canadians living under an average usage cap of 40-60 gigabytes per month, adding streaming video will only eat their allowance that much faster.

“Netflix and the Canadian press covering this story have ignored the reality of bit-capped Canada,” writes Stop the Cap! reader Jeffrey from Calgary.  “I would be paying $75 a month for a broadband account and be limited in how I could use the service.  The CRTC (Canada’s equivalent of the Federal Communications Commission) has been in the providers’ pockets for years and this is why high bandwidth services bypass Canada or risk failure if offered here.”

Rogers, one of Canada's biggest cable companies, also happens to own one of the largest chains of video rental stores: Rogers Plus

Jeffrey believes Canada’s largest broadband providers, including Bell, Rogers, Shaw, Telus, and Vidéotron will never allow Netflix.ca to gain the kind of foothold it has in the United States.

“These companies all own or control Canada’s cable, IPTV, and satellite TV services, all of which are threatened by an American company like Netflix,” Jeffrey notes. “They’ve already got universal usage limits on their accounts, but these guys will also run to the CRTC and Canadian government to throw up roadblocks over everything from copyright and licensing issues to Canadian content rules and the initially ignored Québécois.”

Jeffrey believes more than anything else, Internet Overcharging schemes will serve their role in keeping would-be competitors under control.

“In Canada, we already had the debate about who gets to use our pipes for free,” he says. “Thanks to the CRTC, only the providers get to use them for free.  Everyone else pays a usage tax to them which fattens their bottom lines while stunting the growth of Canadian broadband.”

In Quebec, it’s much the same story.  Asperger notes Zip.ca, a Canadian rent-by-mail service, can get him 20 new DVD releases a month for around $25.  If he signed up for Netflix, anything beyond five DVD’s a month would put him over his limit forcing him to “pay and pay, and then pay some more.”  With Canadian ISP’s increasing their penalty rates for exceeding usage allowances, the overlimit fee could easily exceed the cost of just sticking with Zip.ca’s by-mail service.

Or, for many Quebecers, the next best alternative is Bibliothèque et Archives nationales du Québec, which offers an enormous collection of DVD’s that can be checked out for free.

Canadian press accounts of Netflix’s imminent entry into Canada have largely ignored the limits Canadian Internet providers impose on their subscribers, something readily noted by readers who comment on those stories.  Canadian consumers are well aware of their usage limits, and they avoid services that could expose them to even higher broadband bills.

Those who use their Internet service heavily, unaware of overlimit fees up to $5 per gigabyte, will be educated by bill shock when their next bill arrives in the mail.  After that, no more Netflix.ca for them.

Still, Netflix.ca will probably deliver a challenge to the already-stressed Canadian video rental market where Blockbuster and Rogers Plus duke it out for a dwindling number of renters.  Price cuts have not stopped the erosion of interest in DVD rentals, and Blockbuster is mired in more than $900 million in debt, trying to avoid bankruptcy.

The Canadian Radio-television Telecommunications Commission's support of industry-promoted Internet Overcharging schemes may limit Netflix's success in Canada.

If Netflix’s streaming library, mostly of titles two or more years old, is deemed sufficient by many Canadians, it could also cause a wave of cancellations of premium movie channels and other cable services.

The Ottawa Citizen reports some analysts believe Netflix.ca will cause an earthquake in the Canadian entertainment marketplace.

Carmi Levy, an independent technology analyst based in London, Ont., believes Canadians can expect a major entertainment industry shakeup this fall.

Levy says Netflix will sound the death knell for movie-rental services such as Blockbuster and Rogers Video and will force a pricing war among traditional cable and satellite TV providers who will be forced to scramble to keep customers.

“Netflix is not some Johnny-Come-Lately to the market. Even though they are new to Canada, they have been so successful in the U.S. that only a Canadian living underneath a rock wouldn’t be aware of their brand,” Levy said. “It’s the most seismic change to the content distribution system landscape that we have seen. It forces the incumbents to change their business model.”

Levy said the arrival of Netflix will allow casual TV watchers to cut their satellite and cable TV bills in favour of Netflix’s all-you-can-eat monthly offering. He said the $9 U.S. a month charged by the company was carefully thought out and he expects to see a similar price on the service later this year.

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CBC News discussed the introduction of Netflix Canada and how it will work with Netflix vice president Steve Swasey.  (5 minutes)

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CTV News and its Business News Network ran four reports on the impact usage caps might have on the service, what kinds of titles will be available, and what it means for Canada’s entertainment businesses.  (12 minutes)

The classic one-two punch of Internet Overcharging is to limit your broadband usage -and- throttle speeds downwards.  AT&T wireless customers in several major cities across the United States are experiencing that for themselves over the long holiday weekend, reporting upload speeds have been throttled down to 100kbps or less (one-tenth of the speed most customers enjoyed as late as last week).

Speedtest.net has shown AT&T network throttling in many parts of Baltimore, Boston, Cincinnati, Cleveland, Columbus, Denver, Des Moines, Detroit, Fairfax, Houston, Kansas City, Las Vegas, New York, Orlando, Phoenix, St. Paul,  Salt Lake City, and Washington, D.C.

The speeds are so noticeably slow, it has become a national story as irate customers find their wireless broadband service first usage capped at just 2GB per month, and now upload speed throttled to the point of unusability.  AT&T promised a statement explaining the issue, but one has not yet been forthcoming.  Some speculated the throttles were designed to reduce congestion on AT&T’s network over the holiday, while others suspect a technical fault.

Reducing your wireless speed reduces the impact on AT&T’s backhaul network, which in turn reduces congestion and the number of dropped wireless calls.

The introduction of speed throttles for “heavy users” is a favorite in countries where overcharging schemes predominate.  Most permit a preset amount of traffic to pass at normal speeds, but once customers exceed an arbitrary allowance, a temporary speed throttle gets applied to dramatically reduce speeds and discourage further use.  Some limit customers to a selected amount of traffic per day, others per month.  Once the window expires, the throttle is automatically removed.

While there is no indication AT&T is applying such a throttle at this point, the company has strongly opposed efforts to ban such schemes.  AT&T has a history of antagonizing its wireless customers with poor network performance, and has been judged the least favorite provider by Consumer Reports.

Telstra is Australia's largest telecommunications company. (Photo: Telstra)

It’s not as if the Australian government didn’t warn private broadband providers, notably Telstra.  For the past several years, Australians have endured expensive, slow, heavily usage-limited broadband service that has put the country well behind many other Commonwealth nations.  Australian Communications Minister Stephen Conroy finally warned the nation’s largest telecommunications provider if it didn’t move forward on upgrades and improved service, the government would be forced to step in to protect the national interest.

Instead of improving service, Telstra spent years stonewalling the government and the Australian public, while banking high profits for broadband service.  That’s a familiar story for North Americans, stuck with companies like Bell, Rogers, AT&T, Comcast and Verizon — all of whom seek ultimate control over what kind of service you receive, what you pay for it, and what websites you can and, perhaps down the road, cannot visit without paying a surcharge.

Australia is closing the chapter on this story with a happier outcome for its 22 million citizens.  Perhaps the United States and Canada could learn a thing or two from the folks down under.

Bringing U.S. Oligopoly-Style Management to Australian Broadband: The Sol Trujillo Years — 2005 to 2009

Telstra, a former government monopoly comparable to the American Bell System, was privatized in the late 1990s.  Telstra looked to the United States for a chief executive that had experience navigating that transition.  They found Sol Trujillo working his way up the management ladder at AT&T, finally culminating in chairmanship of former Baby Bell Qwest Communications.  Would Trujillo like to take on the challenge of managing Australia’s largest phone company? Trujillo signed on with as Telstra’s CEO in 2005 promising to modernize the business and to bring American-style innovation to the South Pacific.

Instead, Trujillo established an American-style rapacious oligopoly.

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Channel Nine in Australia reported on Telstra’s sudden interest in union-busting after Sol Trujillo arrived in 2005.  (1 minute)

Sol Trujillo

In his first year at the company, Trujillo started an all-out war to get rid of Telstra’s organized labor, slashing 10,000 jobs to “save the company money” all while boosting his own salary.  What started as $3 million in compensation in 2005 would rise to more than $11 million dollars just four years later, even as the value of Telstra declined by more than $25 billion on his watch.

Trujillo alienated his employees and officials in the Australian government.  Then-Prime Minister John Howard attacked Trujillo’s salary boost as abusive.

“I’m not complaining about the salary I get but I do think the average Australian, who gets paid a lot less than I do … regards that sort of salary as being absolutely unreasonable,” Mr Howard said on Southern Cross radio. “And it doesn’t help the capitalist system, which I believe in very passionately, that some people appear to abuse it.”

Trujillo’s salary was 38 times greater than the highest official in Australia’s government.

The average Australian retiree gets by on $219AUS a week.

Trujillo had to make due with more than $211,000 a week.

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Channel Nine ran this report on the controversy over Sol Trujillo’s compensation package.  That old meme about having to pay high salaries to attract quality talent would have been more convincing had Trujillo’s policies not caused a $25 billion reduction in Telstra’s value.   (2 minutes)

Customers weren’t exactly endeared to spending more of their money on Telstra products and services.  Telstra had already embarked on cost controls for network upgrades, leveraged its monopoly power in many parts of the country with high rates for usage-restricted service, and bungled a critical application to participate in Australia’s National Broadband Network.

Australia’s National Broadband Plan, a roadmap for broadband improvements, set pre-conditions to involve small and medium-sized businesses in network construction.  Trujillo balked, demanding that Telstra — and only Telstra — should have the right to determine what kind of network should be built in the country.  More importantly, unless they exclusively ran it, the company would do everything in its power to block or destroy it.

Internet Overcharging schemes limit enjoyment of broadband usage across Australia. Telstra provides a usage meter estimator that includes all of the useless measurements for e-mail, images, and web browsing. But throw in some movie watching and the gas gauge really starts to spike.

The Sydney Morning Herald business reporter Ian Verrender was stunned:

Telstra has employed a three-step strategy to muscle out any competition.

It can be neatly condensed into three words: Bluster, Belligerence and Obfuscation.  We [just] saw it again in spades.

Telstra has been excluded from one of the most ambitious infrastructure projects announced by a Federal Government in decades: the construction of a national broadband network.

Could it really be that Telstra’s board and management were so incompetent that they could not get past stage one in a tender process of this magnitude?

After all, there were only four main criteria that had to be met. The first was the proposal had to be lodged in English. The second and third had equally low hurdles. Metric measurements – not the old inches, feet and miles – were required and the bid had to be signed. Nothing too difficult there.

But the fourth criterion appeared to stump Telstra. It didn’t include any plan for the inclusion of small business. And so the Communications Minister, Stephen Conroy, was obliged to exclude Telstra, an announcement that shook 12 per cent from the value of the country’s biggest telecommunications company.

This was no accident on Telstra’s part. It knew it was lodging a non-conforming proposal. Why, you ask?

The answer is simple. Telstra does not want a national broadband network, particularly one that involves anyone else. That includes taxpayers.

And if one has to be built, Telstra will do everything in its power to delay or kill the process. Yesterday marked stage one in a protracted war, ultimately designed to defeat one of Prime Minister Kevin Rudd’s key election promises.

Trujillo claimed yesterday that Telstra had been unfairly excluded from the process on a technicality. That’s just rubbish.

In recent months, the company, its chairman, Don McGauchie, and Trujillo repeatedly threatened to walk away from the tender process, and lodged the proposal only a few hours before the deadline.

Trujillo’s rhetoric yesterday was laced with the usual mixture of bravado and threats. He compared Australia to North Korea or Cuba. He declared only Telstra was capable of building the type of network required by the Government.

But two lines stand out. First this: “Customers make the choice of who they do business with; regulators and governments and others do not.” And then: “We reserve our rights regarding future action.”

The message is clear. Telstra will launch legal action at every opportunity – and even when there aren’t opportunities.

That time-honored American practice of simply suing your way through any legislative or regulatory roadblocks threatened to come to Australia.

The exclusion of Telstra from such a revolutionary broadband project didn’t sit well with the board or shareholders, and directly led to Trujillo’s ouster in 2009.  By then, he had alienated customers, the government, and just about everyone else.  Perhaps the government would allow a second look at a Telstra broadband application if it was submitted by someone other than Sol Trujillo?  It couldn’t hurt to find out.

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Channel Nine covers the ousting of Sol Trujillo, wondering what sort of golden parachute he’d receive on the way out the door.  (3 minutes)

Just weeks after leaving, Trujillo decided to settle scores with Australia, telling reporters that he thought the country was backwards and racist.

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Payback time.  Trujillo threw a hissyfit in a BBC interview calling Australia’s lack of laissez-faire regulatory policies backwards, and treatment towards him racist.  (Channel Nine – 1 minute)

The Post-Trujillo Era: More Arrogance and Ruthlessness, But a Communications Minister Outmaneuvers the Telecom Giant — 2009 to Present Day

Telstra spent the summer of 2009 attempting to heal the Trujillo-caused wounds with conciliatory statements in the Australian media.  Telstra’s new chief executive, David Thodey, admitted the company’s customer service record needed improvement.  He distanced himself from some of the more caustic comments from the former CEO, and claimed the company was on-track to be a major participant in improving Australia’s broadband experience.

Conroy

But as the months progressed, Australia’s Communications Minister, Stephen Conroy ultimately concluded he was getting the lip service treatment that Telstra had delivered Australians for years.  Conroy, already suspicious of the company’s control-minded tendencies, quietly began bending the ear of Prime Minister Kevin Rudd.  Conroy had watched Telstra’s steadfast refusal to work constructively towards a National Broadband Network (NBN).  By last summer, the company was making proposals for underwhelming broadband expansion.  Fiber optic broadband was unnecessary and expensive, they said.  Besides, the service Telstra was providing was already good enough.

Australians didn’t agree.  Part of the platform that brought the Rudd government to power was the promise of better broadband service in Australia.  Waiting for Telstra to provide it was a futile exercise.

Conroy told Rudd the government should not be setting its broadband policy agenda based on what worked most conveniently for private providers.  If they won’t move, then let’s get them out of the way, Conroy suggested.  Rudd, working for the interests of the Australian people — not just a handful of telecom companies seeking riches with substandard service at monopoly prices, agreed.

After reviewing the proposals submitted to design and construct 21st century broadband service for Australia, Rudd dismissed them all, calling them inadequate.  The government, he announced, would go it alone and build the network itself — delivering a fiber to the home network for 90 percent of Australians on an open network available to any provider that wanted to rent access at wholesale rates.

More importantly, Conroy was not going to allow Telstra to continually block progress on the NBN.  Conroy was not some supine minister willing to compromise away the goal of super-fast affordable broadband.  His critics called him Machiavellian, slashing and burning anything that stood in his way.  But Conroy was steadfast — corporations would never be allowed to dictate broadband terms to the government.  He warned Telstra to cooperate or face the consequences.

Telstra continued to stall and stonewall, and last September, the Rudd government delivered what it promised — a forced break-up of Telstra.  The company was given a choice — either sell back its copper wire landline network to the government or divest itself of satellite TV service Foxtel and lose access to any additional wireless mobile frequencies for Telstra’s cellular service.

The equivalent in the United States would be to declare fiber to the home to be in the national interest, and if AT&T and Verizon didn’t deliver it to nearly every home in their service areas, the government would move in and do it themselves, taking back ownership of the AT&T and Verizon’s infrastructure along the way.

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Network Ten covered the announced break up of Telstra by the federal government.  (2 minutes)

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Channel Nine ran several reports on the announced breakup of Telstra, including an interview with the opposition.  (6 minutes)

Australia Declares Broadband a Utility Service that Private Providers Cannot Control

Monday marked a day in history for Telstra, agreeing to sell back its copper wire landline business (for which it will receive $11 billion in compensation).  In return, Telstra is assured wholesale access to the new fiber broadband network, and can market products and services on it.  It cannot, however, serve as a gatekeeper to keep competitors out nor maintain virtual monopoly service, especially for less suburban and rural customers.

Some telecom analysts believe the deal is actually good news for Telstra, if they’d see beyond their control tendencies.  After all, they say, Telstra gets to rid itself of a legacy copper-wire landline network that is expensive to maintain and serves a dwindling number of consumers, many who have switched to wireless.  They also get to develop and market new high bandwidth applications on a network they are no longer responsible for financing.

It’s a win for the government as well who gets a single, national fiber network built in the public interest, which makes it far easier to recoup the billions in costs to build it.  They’ll even likely make a profit suitable to defray the costs of subsidizing wireless broadband service for Australia’s rural residents, to be served with at least 12Mbps connections.  No cost-recovery fees on customer bills, no usage limitations that restrict innovation, and broadband that serves everyone, not just a handful of corporations that seek to monetize every aspect of it.

Conroy wouldn’t think much of America’s National Broadband Plan, which relies near-exclusively on private providers voluntarily doing the right thing. Conroy stopped putting blind faith in Australia’s large telecommunications companies.  The Obama Administration hasn’t.

We’ve seen millions spent lobbying to permit a handful of providers to control broadband service on their terms.  Few will provide fiber to the home service and many are content leaving rural Americans with dial-up service.  With dreams of Internet Overcharging schemes to manipulate usage to maximize profits even higher, things could get much worse.  What’s right for AT&T isn’t right for us.

For Australia, who has lived under such monopolistic broadband regimes for over a decade, a National Broadband Network without arbitrary usage limits and available to all — rural and urban — is the promised land.  It will leapfrog Australia well ahead of the United States and Canada, with far faster speeds and better prices, all because a government stood up to a corporate provider that preferred to overpay its executives instead of getting the job done right.

Australia had a reality check — broadband is a utility service necessary for every citizen who wants it.  Just as electrification and universal phone service became ubiquitous in the last century, broadband will also join those services in the years ahead as commonplace in nearly every home.

If only the strength and conviction that is fueling Australia’s broadband future could also be found in the United States, where too often what is urgently needed today gets frittered away into “maybe we can have it someday” compromises with big telecom and their lobbyists.  That isn’t good enough.

ABC National Radio interviewed telecom analysts about the implications of today’s deal with Telstra to retire Australia’s copper wire phone network (June 21, 2010) (4 minutes, 17 seconds)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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TV Everywhere isn’t just for the United States.  Canadian cable operators are also threatened by cable cord-cutters, although their pervasive Internet Overcharging schemes have kept TV addicts from watching too much video online.

Both Shaw Cable (serving western Canada) and Vidéotron (best known in Quebec) have this week introduced their own online video portals providing “authenticated” cable subscribers with access to on-demand movies and television programming as an extension of their cable package.  But neither company is willing to exempt its customers from Internet Overcharging schemes which apply data caps and overlimit fees to broadband accounts.

Of the two services, Shaw Cable’s is bare bones, offering a relative handful of TV shows and a movie library.  No live video is provided, and many titles carry per-viewing fees, even for cable subscribers.  Non-subscribers face even higher fees to view programming.  Vidéotron takes a different approach, offering a video portal called Illico Web that offers on-demand and live streaming feeds of a wide range of cable networks, mostly in French for its Quebec subscriber base.

Shaw positioned its video-on-demand service as an extension of its cable service.  It hopes its announced acquisition of Canwest Global, which runs the Global television network in Canada and 18 cable networks will vastly expand its offerings in the future.

Vidéotron warns its subscribers watching its service eats into monthly broadband usage allowances.

“Technology continues to evolve with the ability to watch content on multi-platforms,” said Peter Bissonnette, President, Shaw Communications. “That’s why Shaw is investing in bringing exceptional content delivered in various ways. Our new broadband VOD Player provides our customers the convenience of watching their favorite movies and television shows when and where they want to.”

Pierre Karl Péladeau, the president and chief executive officer of Vidéotron’s parent Quebecor was more abrupt when he said on Wednesday that its TV Everywhere service would offer “an alternative to piracy.”

But in Canada, there is a catch.  Neither cable provider offers subscribers unlimited broadband service.  Both employ Internet Overcharging schemes ranging from usage caps to consumption billing schemes with overlimit penalties.  Vidéotron reminds its subscribers to “keep an eye on your Internet usage.”  That’s because they don’t exempt their online viewing service from their usage limits.  Vidéotron’s video portal does eat its way through subscriber allowances.  The company provides these estimates to help guess by how much:

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Illico Web produced this video introduction to its TV Everywhere service. (French with English subtitles — 3 minutes)

An Associated Press report gave credit to Stop the Cap! for getting first official word that AT&T ended its Internet Overcharging experiment in Beaumont, Texas and Reno, Nevada.

Stop the Cap! reader Scott Eslinger managed to get an AT&T customer service representative to read aloud a confidential memo distributed by the company terminating the experiment effective April 1st.  Because AT&T never disclosed the end of the experiment to impacted customers, the coverage by the wire service should help spread the word to residents that the rationing is over:

The phone company confirmed Tuesday that it is no longer holding DSL subscribers in Reno, Nev., and Beaumont, Texas, to data consumption limits and charging them extra if they go over.

With AT&T’s retreat, no major Internet service provider is championing the idea of charging subscribers for their data usage. Time Warner Cable Inc. was a major proponent of the idea and also conducted a trial in Beaumont, but backed away last summer after its plan to expand metered billing to other cities met fierce resistance from consumers and legislators.

AT&T’s trial started in November 2008 in Reno, and was later extended to Beaumont. It ended on April 1 this year, said AT&T spokeswoman Dawn Benton.

“We’re reviewing data from the trial, and this feedback will guide us as we evaluate our next steps,” Benton said.

AT&T should carefully review feedback from customers who despise usage limits and overlimit fees.  Studies show the overwhelming majority of customers do not like their broadband usage artificially limited with arbitrary allowances and overlimit fees, and customers will dump providers who ignore their wishes.

AT&T’s experiment never saved consumers a penny — the company simply slapped allowances as low as 20 GB per month on existing speed-based tiers.  Customers already face practical usage limits from Internet providers.  Those purchasing slower speed tiers are usage limited by those speeds.  Those who pay for higher priced, faster tiers benefit from naturally greater allowances those speeds provide.  Adding a new layer of limits only discourages customers from using the service they already pay good money to receive.  Besides, as profits explode in the broadband sector, the costs (and investment) to provide the service have declined, wiping out the justification for these schemes.

Stop the Cap! opposes all of these Internet Overcharging schemes.  While many providers seek to demagogue some broadband users as “data hogs” or “pirates,” the fact is today’s “heavy user” is tomorrow’s average consumer.  High speed broadband has the potential to revolutionize education, health care, private business, and entertainment, but not if a handful of major providers decide to end innovation by rationing the service to its customers.