Allow free exchange of Internet traffic: Netflix

NETFLIX, which is on a global expansion spree, has urged the Singapore authorities to re-look their earlier proposal to allow major telcos here to continue to charge interconnection fees to reach local broadband users.

Market observers note that this could be the strongest indication yet of the video-streaming service provider's interest in entering Singapore, following its expansion into Australia and New Zealand in March.

In its feedback to the Infocomm Development Authority's (IDA) public consultation, which ended last month, United States-based Netflix said that major telcos can use interconnection fees to limit competition.

Some Internet service providers (ISPs) in overseas markets have exercised market power to impose "unwarranted fees" on Netflix, it said.

For instance, it was made to pay US ISPs Comcast, Verizon, AT&T and Timer Warner access fees to let broadband users have unfettered access to Netflix's content.

"These fees tilt the level playing field, cement the dominant retail providers' positions and cause higher prices for consumers," said Netflix director of global public policy Colin Bortner in consultation documents.

"In the case of video services like Netflix, dominant ISPs would want to protect their affiliated video businesses by driving up... competitors' costs," he added.

In February, the IDA had proposed that there would be no need to regulate the fees that Singtel and StarHub charge smaller ISPs and content providers to reach the two telcos' broadband subscribers and the websites they host.

Netflix did not reply to a query from The Straits Times on whether it has plans to offer video services here, but analysts said this is a possible sign that it is evaluating the Singapore market.

Even though Netflix does not have a direct presence here, local Internet users have been able to stream its content using "backdoor" methods.

Singtel and StarHub, which also offer pay-TV services, command about two-thirds of the broadband user base, or more than one million broadband subscribers, in Singapore.

Smaller ISPs have complained for years that local interconnection fees cost two to three times more than the fees charged by international telcos.

Despite this, Singapore has not mandated "peering" - or the free exchange of Internet traffic among local ISPs - that is practised in Hong Kong.

In its latest feedback to IDA, M1 said that the local traffic charges imposed by Singtel and StarHub are not on a "cost-recovery basis".

In its feedback to IDA, StarHub said: "As evidenced by the term, peering is a meeting between 'peers', who exchange traffic on a mutually beneficial basis. StarHub is, therefore, always open to peer with other parties, where there is a commercial incentive to do so."

Singtel, on the other hand, said that regulation of peering - which is rare and limited - could serve as a "disincentive" for the telco to make significant investments in infrastructure and innovative services.

"In particular, there is a concern that mandating multilateral peering between all ISPs would enable smaller ISPs to free-ride off investments in infrastructure and facilities made by larger ISPs," it said.

This article was first published on May 18, 2015.
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