A Netflix briefing paper
2021
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A cooperative approach
to content delivery
companies like Disney and NBCUniversal are
investing in their own streaming services, as
are Amazon and Apple, in order to compete
with providers of user generated content, video
games, and other online services for a share of
consumers’ time and spending.
Creating demand
for faster broadband
Video - and in particular higher definition
video - prompts consumers to upgrade their
broadband connection, generating incremental
revenue for ISPs. The FTTH Council, for
instance, has seen video growth as a driver of
fibre to the home (FTTH) adoption.
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Ofcom,
the UK’s communications regulator, has found
that:
The main drivers of residential demand
for higher speeds have been an increase in the
use of video-on-demand and gaming, and the
simultaneous use in a home of multiple devices.
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A report for BEREC (the association of
European regulators) made a direct link to
revenue:
Content developers and providers
of Over The Top (OTT) services such as the
various third-party video streaming services ...
are important [in] driving increased demand for
bandwidth but are not typically directly involved
in the delivery of that bandwidth, but ... could
certainly influence the operators’ ARPU.
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And operators quite explicitly use video
streaming to persuade customers to take
higher speed plans, as the examples on
the next page show.
There is empirical evidence that broadband
customers who use Netflix, for example, are more
likely to be on higher speed (more expensive)
connections. A study of broadband users in
Italy in 2017 found that of those on ADSL
connections, 12% were Netflix users, while for
those with FTTH, 18% were
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. (Note that there
was no material difference between ADSL and
FTTH usage rates for YouTube, suggesting
that it is not simply streaming video that drives
purchase of higher speed connections, but rather
HD and UHD video like that provided by Netflix).
In the UK, 77% of those with standard broadband
were users of subscription video-on-demand
services (such as Netflix), compared to 86%
and 90% respectively of those with superfast
and ultrafast broadband.
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Thus video on demand, in common with other
forms of entertainment (such as gaming and
streaming live sports) is a key driver of demand
for higher speed broadband.
Encouraging broadband uptake
and broadband deployment
In markets where broadband adoption has not
reached saturation, video streaming services
can help to encourage uptake, with benefits
to domestic users (who can now interact
with the new users) and to businesses (who
can implement new processes). According
to the Commonwealth Telecommunications
Organisation:
OTT applications stimulate
broadband adoption and thus economic
growth and tax receipts.
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IDATE for FTTH, FTTH Forecast for EUROPE, March 2019.
Ofcom, Promoting competition and investment in fibre
networks: Wholesale Fixed Telecoms Market Review 2021-
26. Volume 2: Market assessment, 8 January 2020
Decision Analysis, SPC Network, Strategy Dynamics &
Greenwood Strategic Advisors for BEREC, Study on the
determinants of investment in VHCN – a System Dynamics
approach. Volume 1: Technical Report, November 2019
Those using Netflix at least once per week. Trevisan, Martino
et al., Five years at the edge: watching internet from the ISP
network, April 2020.
Ofcom, Technology Tracker 2021, 17 December 2020.
Survey participants were asked which of these fixed
broadband services does your household have: standard
broadband (download speed of less than 30 Mbps);
superfast broadband (download speed is 30 Mbps or
higher and less than 300 Mbps); ultrafast broad broadband
(download speed is 300 Mbps or higher).
CTO, Over The Top (OTT) Applications & the Internet Value
Chain, 22 May 2020.
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