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Netflix Unworried About Broadband Caps
Though maybe they should be...
by Karl Bode 04:34PM Thursday Dec 09 2010
Back in July Netflix launched a streaming only video option in Canada, which immediately raised the question of how well this service would play with the low bandwidth caps and high per gig overages common to most Canadian ISPs. Given that Netflix HD streaming potentially eats bandwidth like popcorn shrimp and Canadian ISPs like Cogeco and Rogers currently charge up to $5 per extra gigabyte of usage it seems inevitable that Netflix users and low caps won't get along as usage ramps up. However, at an investor conference this week Netflix stated that so far, they aren't particularly worried about it. From an MSNBC report:
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(Netflix is) not overly concerned about tiered broadband pricing. If stateside access providers begin metering bandwidth -- something that AT&T is already doing with its smartphone data plans -- Netflix still feels that consumers will be drawn to the value proposition of streaming celluloid. Its early success in Canada, where Netflix expects to be profitable within a year of the streaming service's launch, helps validate that position given Canada's tiered Internet pricing plans.
Suggesting that Netflix's Canadian profit projections somehow "validate" Netflix's optimism is a bit of a reach. One, Netflix execs were speaking to investors at an event where bubbly optimism about future growth is par for the course. Two, Netflix has been live in Canada for all of a few months, and positive profit projections don't magically eliminate the fact that many Canadian customers find their caps punitive, costly and annoying. Three, Netflix currently operates as a supplement to traditional cable TV. As it becomes more of a replacement for cable TV, those caps are certainly going to play a bigger role.

If you're a content or service company and you're not concerned about the relentless drum beat to introduce low cap, high per gig overage pricing here in the States -- you aren't paying close enough attention.

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