SA net neutrality rules 'could boost Netflix'

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Netflix website. (Duncan Alfreds, Fin24)
Netflix website. (Duncan Alfreds, Fin24)

Cape Town - A local net neutrality policy could boost the market dominance of international streaming providers such as Netflix, says an expert.

Net neutrality is the concept of treating all web traffic equally. It further involves website owners and consumers not having to pay extra for a fast lane on the internet.

The South African government has previously highlighted the importance of an open, equitable internet as part of a review of national information and communication technology (ICT) policy.

"Everything has to be done at a policy level to ensure that a new digital divide is not created," Joe Mjwara, of the department of telecommunications and postal services, said in parliament earlier this year.

But Denmark-based research firm Strand Consult has found that an equitable internet has unintended consequences.

“We find in countries with hard net neutrality rules that Netflix maintains a top position as a most favoured app," vice president of Strand Consult, Roslyn Layton, told Fin24.

"No local or other competitor threatens their position.

"Even companies that try to zero-rate their video app don't touch Netflix's dominance,” said Layton.

Online streaming provider Netflix is intent on expanding its market and rumours are circulating that the company will officially enter SA next year.

Local players such as Times Media Group's Vidi, Naspers' ShowMax and MTN's FrontRow have launched streaming services in a bid to preempt a Netflix launch in SA.

Last month, Hong Kong firm PCCW also launched a streaming product dubbed ONTAPtv.com in South Africa while Orange Horizons revealed to Fin24 that it plans to launch a video on demand service in 2016.

Fast lanes

Fast internet lanes, though, could be of benefit to smaller video on demand players such as Vidi, ShowMax, FrontRow and ONTAPtv, said Strand Consult.

“Theoretically a fast lane, if it existed, would be of greatest benefit to the small startup," said Layton.

"If you want to compete with Netflix with 65 million customers in 50 countries, there is no way a startup can invest in such a distribution system - especially the cost of licensing the content,” said Layton.

“But if all a startup would have to do is pay for a better, faster carriage, then it could compete with Netflix. It's counter-intuitive, but so it is,” she added.

In January, streaming video giant Netflix said it planned to expand its global reach by over 150 countries in the next two years.

Outside of the US, Netflix has moved into markets such as Australia while reports have indicated that Hong Kong, Singapore, South Korea, and Taiwan are next on its radar.

- Follow Duncan on Twitter

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