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Telstra not committing to premium charges for Netflix

Telstra has no plans to charge over-the-top players like Netflix to ensure the delivery of their traffic, according to chief operations officer Kate McKenzie.
Written by Josh Taylor, Contributor on

Telstra has not ruled out charging a premium for Netflix to deliver video content to customers over its network, but has said that it has no immediate plans to introduce a product.

Since the launch of streaming video service Netflix in Australia, telcos have seen a dramatic increase in traffic on their networks, with iiNet reporting that 25 percent of its traffic is now customers watching Netflix.

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

"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 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."

Speaking at the CommsDay Summit in Sydney on Tuesday, Telstra's chief operations officer Kate McKenzie said that Telstra had been managing its own network traffic for the arrival of Netflix and other streaming services, including Presto and Stan, but admitted that the company would need to think of "new business models" to repay investments made in networks to cope with video demand.

"Rapid growth in the quantity and quality of video means investment to meet that increasing demand," she said.

"We will need product offers and business models that manage what customers want."

McKenzie denied that this would be a premium service similar to that flagged by Optus.

"We're fine for the time being, but we'll continue to have discussions with our partners," she said.

iiNet's chief technology officer Mark Dioguardi on Monday called for NBN Co to reconsider its capacity charge known as the connectivity virtual circuit (CVC) charge. The CVC charge has been an issue for the industry over the past four years, with telcos charged AU$17.50 per 1Mbps each month.

This represents a massive charge on telcos, with high-bandwidth services such as Netflix demanding more bandwidth over time. Dioguardi said this would be a AU$26 per month surcharge for customers wanting to stream HD video every second night, but AU$60 per month more for customers wanting to stream in 4K every night.

Dioguardi said it is time for NBN Co to reassess this charge.

"It is now time ... to deliver a signal to the market that a major step change is to be delivered on dimension pricing," he said.

Dioguardi has said that as retail service providers take up more bandwidth, the overall pricing per 1Mbps should rapidly decline.

Dioguardi's call was echoed by McKenzie, and Superloop founder Bevan Slattery.

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