Not just network speeds

The announcement that Netflix is coming to Canada helps crystalize some thoughts I have had since a family trip last month.

While driving  to Vermont, we stopped at a post office near Albany so that I could send a backpack filled with goodies out to my son. While we were looking for a box to fit, the postal clerk said that we could just tape up the plastic bag, throw an address sticker on it and send it as it was: $10.75 for 2 day express delivery. This was on a Friday morning. On Monday, the package arrived at his school on the other side of the country.

This experience struck me as being very different from Canada, where CD sized cushioned envelops are considered to be “oversized” and it seems everything has surcharges. At the time, I wondered to what extent our post office has been an inhibitor for the adoption of e-commerce.

Having access to low cost, flexible, reliable, and speedy distribution networks needs to be considered a key enabler for a digital economy, but too often, our focus seems to be on broadband, not the fulfillment of orders. The postal network may not be as sexy as telecommunications, but it is an important enabler.

That experience came to mind when I read that Netflix was only planning to offer Canadians its streaming video service, not its popular DVD rental by mail service. Why?

The other thought had to do with the impact of Netflix on residential broadband networks. Increasing streaming video will increase demand for higher monthly download caps. Some consumers may opt for higher speed offerings from the cable companies, which generally include higher download caps. The telephone companies have two options: accelerate their fibre to the home / fibre to the node investments; or, increase the download caps.

Current speeds are adequate for streaming movies to the average home; Netflix could help trigger a battle for competing offers for greater throughput.