Optus: Netflix speed guarantees are about collaboration

Optus is not backing down on plans to ask content providers to pay to guarantee speeds on their network, despite concerns that the practice could be in breach of net neutrality principles.

The principle of net neutrality is that all traffic, regardless of its origin, should be treated equally by network providers, so that all services offered to customers are given a level playing field to compete with one another on the internet.

The launch of Netflix has seen a dramatic impact on Australia's fixed networks. iiNet has revealed that already, 25 percent of its own network traffic is from Netflix.

Last month, Optus CEO Allen Lew said that Optus is considering a "premium" service to ensure that HD streaming video is manageable on its network.

"To ensure the best customer experience that is cheap for the user, we need to ensure that the OTT [over-the-top] providers -- whether they are Netflix or others -- understand that to preserve the network quality and to give you a HD video in the home, they need to work collaboratively with us," he said at the time.

The company has faced criticism that asking some companies to pay more would be in breach of net neutrality. Speaking to ZDNet on Thursday, Lew said it is more about what the content providers want to be able to offer to their customers.

"It's a bilateral discussion with different content providers, and what their brand positioning, and what sort of service levels they want to give to their end users," he said.

"We believe it is an opportunity for content providers who want to use our network, and want to ensure at the end of the day, end-to-end service is to the expectations of what they think their content can provide.

"Content providers moving to 4K need to have some minimum bandwidth requirements to deliver that to someone's 4K TV. That's an opportunity for a company that focuses on customer experience like us, and that content provider to work more closely together."

Optus was number two in the rankings of Australian ISPs published by Netflix earlier this week. Lew said he isn't so concerned about the rankings. He also said that unlike iiNet, he doesn't believe that Netflix traffic accounts for 25 percent of Optus' total network traffic.

"We have mobile and fixed network ... so the profile of our traffic is quite different. We do have a lot of smartphones that do use video beyond just Netflix. I wouldn't think Netflix is the same percentage of our overall data capacity," he said.

In the company's results released on Thursday, strong growth in post-paid handsets was partially offset by a continued decline in mobile broadband. Lew said this was reflective of the company's decision to bundle in multiple devices under the one mobile plan.

"A lot of the decline in mobile broadband is because of our data-share plan, and people using one contract rather than having multiple ones for different devices," he said.

"I think we're reviewing this product very seriously internally, and when we find the right opportunity, we'll come up with an offer that make sense.

"Overall mobile is growing."

Optus will get AU$1.8 billion in capital spending from parent company Singtel to extend out its mobile network, among other investments, this year.

The company is also planning a push for more small and medium-sized businesses, and Lew said that the timing of the federal Budget to include tax offsets for small businesses was perfect.

"I think overall, it has been a very strong Budget. The government has put an incentive for small and medium businesses to invest, and that is an opportunity for us," Lew said.

"Obviously, it starts to position Australia where it is starting to move away from an economy based on raw materials, to where it is a service-led economy.

"It's a big opportunity for our small and medium business. We are tripling our efforts in this market, particularly with the new tax depreciation ruling."

The government also allocated AU$131 million for the telecommunications industry to prepare systems to store the data of all their customers for access by law-enforcement agencies without a warrant.

Optus' vice president of corporate and regulatory affairs David Epstein said that while the costs were roughly what the larger telcos had expected to receive, he believes it might be difficult for some of the smaller players to comply with the legislation with the current funding levels.

"Where the uncertainty lies is how it is spread across the industry. The further you move away from us and Telstra, and to some degree Vodafone ... the more uncertain the model becomes, because there is a wide range of capabilities, there is a wide range of customer segmentations, and to some degree there are some who may ... choose to, in effect, take a telco-in-a-box approach, and contract to a major provider or wholesaler," he said.

"It is quite uncertain where that section of the industry will go, and that makes it a little harder to make a judgment on the overall capex that has been provided for in the Budget."

He said that while Optus has systems in place to store the data already, there will be many telcos that have no capability, and will need to build it up.

"The issue for them is how they extract the defined data set out of their overall IT back room, basically."