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Canadian Government to Netflix's Rescue Over Web Fees

Federal government to review regulatory ruling that forces smaller ISPs to introduce usage-based billing.

TORONTO – Netflix has an unlikely friend in Ottawa as local cable and phone giants look to thwart the U.S. subscription streaming giant by imposing web usage caps.

Federal industry minister Tony Clement is to review a CRTC decision to force smaller Internet service providers (ISPs) to introduce the same usage-based billing as larger players Rogers Communications, BCE Inc. and Shaw Communications.

“As Canada’s industry minister, it is my job to encourage an innovative and competitive marketplace and to ensure that Canadian consumers have real choices in the services they purchase,” Clement said in a statement.

The feds’ intervention follows Netflix last week revealing Canadian ISPs are driving the U.S. video streaming giant to early profitability north of the border, but that download caps imposed by Rogers, BCE and Shaw threaten to slow its Canadian expansion.

“Netflix favors the unlimited up-to-a-large-cap model. The marginal cost to deliver a marginal gigabyte over a wired network is less than a penny, but Canadians would be paying much more than that,” Netflix said in an online blog of usage penalties to be paid if Canadian Internet users exceed their data consumption caps.

Netflix last September expanded into Canada with a $7.99 a-month pure streaming service, in competition with local broadcasters, cable and satellite TV operators.

A Credit Suisse report that measured the cost of consuming the Netflix Canada service for one month over a Rogers Communications connection recently concluded Canadians pay a steep premium to use the U.S. video streaming service.

To offset the extra charge from usage-based billing, the Credit Suisse report predicted Canadians will be forced to “trade down” to lower cost cable or satellite TV packages.

Federal minister Clement insisted the recent CRTC ruling that stops smaller ISPs from offering unlimited data usage packages stifles competition. “Increased competition can lead to more choice, lower prices and better quality services for Canadians,” Clement said.