We'll grow by 10 times post NBN: Quickflix

Online DVD rental company Quickflix expects its subscriber base to expand 10 times once the National Broadband Network (NBN) is in place, a Macquarie Telecom Access Economics survey into business sentiment around the NBN has revealed.

A Quickflix DVD envelope (100_1940 image by Miles Goodhew, CC BY-SA 2.0)

Quickflix currently operates by having users choose the DVDs they wish to rent online and having the DVD mailed to them. The subscription costs vary depending on the amount a user wishes to rent out at any one time. The company has yet to move into digital film downloads such as those offered by iTunes or BigPond Movies because the company says current internet availability in Australia makes it unlikely.

"Current [network] infrastructure does not support quality of delivery," Quickflix executive director Stephen Langsford said in the report.

Access Economics director Ric Simes told reporters in Sydney today that Quickflix estimates Australia to be at least three years behind the United States in moving to digital movie downloads.

Quickflix stated in the report that when the NBN is operational, it believes it will be able to get products to consumers between five and 10 times faster than it can now and it expects it will be able to increase its subscriber base from 100,000 to around 1 million under the NBN.

Based on the US and European rental markets, Quickflix estimated that its market share will increase from less than 2 per cent to around 20 per cent, at the expense of existing bricks and mortar retail DVD rental outlets.

The Access Economics report surveyed chief technology officers, chief information officers, finance and human resources representatives in over 540 businesses representing 17 different sectors looking at business expectations for the NBN.

Macquarie Telecom executive for regulatory and government Matt Healy said the company commissioned the report because much of the debate around the NBN had focused on the impact for the average consumer, not on businesses.

"The focus to date has been on the residential space and what it means for residential users and we're only just now coming into the discussion for what it means for business," Healy told reporters in Sydney today.

NBN and business sentiment

Despite being a champion of the project, Healy said there was "no direct benefit" to Macquarie Telecom from the NBN.

"Not one dollar of taxpayer money comes our way. From our point of view ... it levels the playing field for competition. We all buy off NBN at similar prices. It's a good thing for customers as well because there'll be more competitors."

Macquarie Telecom CEO David Tudehope said the greatest benefit was the structural separation of Telstra's wholesale and retail arms, which is set to go ahead after legislation passed on Monday.

"It removes that ridiculous vertical integration of Telstra, which is the most vertically integrated company in the world."

Tudehope admitted that as the NBN rolls out, some of Macquarie's existing infrastructure will become stranded by the project.

"We've got existing assets, some of which will have a life beyond the NBN, some of which will be replaced by the NBN commercially," he said. "Realistically, you can't really have this sort of step change and investment in the country without the reality of some of your assets not being of value going forward."

Tudehope said that telcos which had predicted compensation claims of millions of dollars arising from the NBN roll-out were overvaluing their infrastructure.

"These investments have been made over many years. So you argue over the value. A lot of telcos who argue their infrastructure investments are worth a lot of money is because they're priced as the day they were built 10 years ago rather than their value today," he said. "The reality is, industries change. A lot of that investment is a lot older now."

Should we have a cost-benefit analysis?

Simes said it would be difficult for the Productivity Commission to conduct an accurate cost-benefit analysis on the NBN at this stage of the roll-out.

"The starting point is the cost side. You can get a lot of information, the business plan does that," he said. "On the benefits side, the benefits are very disperse and will take some time to get a handle on. More information is always good but you're making a decision here and you're going to make a decision without knowing the nature or the scale of the benefits."