Optus wants Netflix to pay for speed guarantees

Optus CEO Allen Lew has said that the telco giant is considering a "premium" charge for the traffic of over-the-top services like Netflix to guarantee higher speeds for those services.

Since the launch of Netflix in Australia in March, both iiNet and Optus have not counted the data used accessing the service to their customers' monthly data allowance on the fixed networks.

Netflix has since expressed regret over that decision, stating that it goes against the company's strong stance on net neutrality.

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 in competing 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.

Lew told the CommsDay Summit conference on Monday that Optus is considering a "premium" service to ensure that HD streaming video is manageable on the network.

"We will continue to preserve net neutrality, but we're talking about the possibility, for example, for specifically a premium service that we, as a network provider, can ensure to an OTT [over-the-top] provider if they pay for it," he said.

"To ensure the best customer experience that is cheap for the user, we need to ensure that the OTT 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."

Lew said that ISPs bear the blame if a video service isn't up to standard.

"Today, the provider's CDN comes to the edge of our network and then we are responsible for ensuring the customer experience is good, and if the customer experience is not good, they end up calling us -- not Netflix, or not Presto, or not Stan," he said.

Netflix has battled to ensure net neutrality in the United States, where most recently the Federal Communications Commission ruled that internet access should be treated like a utility, prohibiting broadband providers from slowing down or blocking certain types of legal traffic.

This is designed to prevent ISPs from charging companies like Netflix a premium for the traffic.

The debate has not been as much of an issue in Australia, due in large part to the previous lack of streaming services available. Australian ISPs feeling the heat from Netflix traffic demands are likely to be looking for ways to cope with that demand.

Netflix makes up one quarter of iiNet traffic

iiNet chief technology officer Mark Dioguardi told the summit that before the launch of Netflix in March, the total Netflix traffic on the iiNet network was around 3 percent. As of 15 days ago, it was 15 percent, but has since boosted again, to 25 percent.

"We wanted to roll out the red carpet for Netflix.. we rolled it out and people are just storming down," he said.

"Twenty five percent of traffic is a lot. For us, it's not substitutional. We've seen hardly any change in the absolute volumes of other CDN [content distribution network] storage."

Most iiNet customers are getting HD streams of Netflix, with 80 percent of all traffic being HD or better. There are 40 times more people streaming from iOS devices than Android, and five times more traffic is coming from Apple TV than from Chromecast.

Apple TV and iPad each account for 13 percent of all Netflix streaming, Dioguardi said, while 10 times more users are streaming Netflix on the PS4 than on Xbox.

Despite reports of capacity issues on the iiNet network as a result of Netflix, Dioguardi said the telco had been prepared for the rise in traffic.

"We saw Netflix coming. It wasn't a surprise to us. We ramped up our core network a lot. We probably put about double the capacity in it over the last 12 months," he said.

"About 70 to 80 percent of our customers are on our own dark fibre, our own fibre backhaul. Not a lot has had to be done there."

There are "dozens" of exchanges where traffic is an issue, he admitted.

"Out of that 1,800 [exchanges] or so, there are a dozen or so that run on a managed platform that we buy through others. We're the first to admit ... we've had some issues with those, and they are being mopped up week by week," he said.

"I'm not thinking any more than a couple of dozen, but I want to drive that down to zero, and that's what is happening at the moment. I think we're going to continue to grow capacity."

iiNet has no plans to stop unmetering Netflix traffic, Dioguardi said, but declined to disclose any agreement iiNet has entered into with Netflix to secure unmetered traffic.

Communications Minister Malcolm Turnbull said that the capacity issues associated with the launch of Netflix do not prove the need for a full fibre rollout for the NBN.