As reported by David Buckingham, the iiNet founder, it seems like Netflix, Inc. the online streaming giant, has the potential to disrupt the market for pay TV and free to air service. Apart from that, it has the ability to shape the business model for NBN.
The chief executive at ISP has given an interview to Fairfax Media, claiming that the popularity of Netflix is resulting in the unsustainability of the broadband plan for NBN, where the prices need to be trimmed now.
According to Mr. Buckingham, the growth of data accelerated over the six weeks’ period after the company launched its services in March. This will allow them to benefit from the 6 to 12 month growth.
The company was then blindfolded and was urged to get a hold on extra capacity, as they had to deal with a slowdown in terms of data streams since everyone started to stream movies on the online streaming platform.
“Nobody can forecast that. This is an unprecedented shift in the market that no one anticipated,” Birmingham mentioned to Fairfax.
Some ISPs, which includes iiNET, TPG, and Optus, are giving unlimited download offerings through Netflix, which is a part of their marketing campaign. The only problem that Mr. David Birmingham highlighted is that NBM will face difficulty in attracting consumers on the current pricing mechanism, since most of the consumers at this point want to watch Orange is the New Black and House of Cards.
The cut by NBN in its wholesale pricing was done by 12.5% but that was before the entry of streaming service into this market. The chief technical officer at iiNet, Mr. Mark Dioguardi, has already coined the expected costs to be a Netflix tax. According to him, it is likely to work out at almost $26 for moderate High Definition streaming. On the other hand, $60 will be good enough for Ultra High Definition 4K streaming.
The addition on costs resulted in the tradeoff of the commercial advantage of the streaming service, such as Presto, Netflix, and Stan, which have a $10 monthly fees that give tough time to rival, Foxtel.
“The CVC construct before Netflix turned up in this country was significant multiples higher than the cost-base we’re experiencing on our own networks or even under Telstra”, he stated.
At this point, it seems like NBN has been successful in making its presence heard and disrupting the industry with its service.