Telus says Netflix, video services are driving more broadband usage

Telus is not afraid of Netflix (NASDAQ: NFLX) eating away at its growing Optik IPTV business, but rather sees it as a complement and a way to drive further broadband growth.

Speaking during the TD Securities Telecom and Media Forum, Dave Fuller, EVP and president for consumer and small business solutions at Telus, told investors that customers that subscribe to Netflix have a pay-TV service.

"The vast majority of customers that are interested in over the top video are also interested in pay-TV," said Fuller. "If you look at Netflix subscribers in Canada, they massively over-index into having a pay-TV subscription since, if you like Netflix, the odds are you like watching video as opposed to sitting at home and reading a book or reading the paper."

Telus estimates that of the heavy video watchers in its Optik pay-TV customer base, the Netflix penetration rate is about 48 percent. Alternatively, Netflix penetration throughout the rest of Canada is around 30 percent.

One of the reasons why Telus sees Netflix as an opportunity is that Telus was one of the first pay-TV providers in North America to embed Netflix into its Optik TV offering. Customers can access the application from any room in their house.

"The reason we view Netflix as an opportunity, we were one of the first carriers in North America to launch a Netflix app inside our IPTV offering," Fuller said. "If you had Optik TV, you can actually launch an Netflix application within Optik TV and it rides over our set-top box and was something a number of our customers asked for."

At the same time, Telus is seeing wireline broadband usage is rising due to more customers accessing Netflix and other streaming video services.

"Broadband residential usage mostly driven on video usage is accelerating dramatically," Fuller said. "That's driving costs into our core network and into our access network that have to be monetized."

Video service overall has been a big driver of consumers adopting dual and triple play service bundles. Having better functionality on its video service has helped drive up broadband subscriber counts.

"TV service has actually been a Godsend for us and provided a pull through effect on things like Internet," Fuller said. "We have done very well in Internet growth, but that's been driven of our penetration in TV because something like 98 percent of our subscribers get TV also have Internet with or decided to get Internet with us so it has been a big driver of double and triple play gross adds for us."

For more:
- hear the webcast (reg req.)

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