In essence Netflix is trading the appeal of higher video quality for a reduction of churn from disgruntled customers who unknowingly breach their monthly data consumption quotas. It is an interesting gamble for the company as video quality is a very important "stickiness" factor for long-form video consumption as IHS Screen Digest established in a survey of major US and European premium online video services in 2010.

IHS Screen Digest believes that Netflix's decision to proactively cap quality was partially precipitated by the relative lack of competition on the Canadian broadband market at the national level. This means that Canadian ISPs have one of the lowest monthly data allowances in the Western markets. Bell Canada's standard broadband packages, for example, come with just 25GB of monthly data (the cap goes up to 50 to 70 GB on premium packages). Netflix suggested that under the old unrestricted video bitrate viewing 30 hours of Netflix content a month would typically consume 30GB of data - under the new default bitrate settings such consumption will now require less than 9GB of data. By way of a comparison the new Netflix bitrate is lower than that of an average YouTube video, which is now encoded an about 750 kbit/s, up from 300 kbit/s in 2007. But the major difference here it the length of time viewed: compared to 9GB per month on with Netflix's new settings IHS Screen Digest estimates that on average a Canadian broadband household has consumed just under 2.5GB of YouTube data a month in 2010.

With Netflix's subscriber base expanding beyond early adapters who are likely to have premium ISP packages and into mainstream consumer market, managing default data consumption stands to become one of the most important operational questions for the company in Canada. By contrast, in Australia, where ISPs also impose data caps on consumption but the market is more competitive on the national level, ISP iiNET decided to offer its subscribers unmetered consumption of Apple iTunes downloads and viewing on ABC iView (the online catch-up service of Australia's public broadcaster) in a bid to differentiate its broadband packages. In less competitive markets such as Canada, where the need for package differentiation is less pronounced, offering unmetered consumption of certain entertainment services could lend itself to potential double-monetisation of traffic as ISPs could charge the service providers to "subsidize" unmetered consumption. Such monetisation could potentially circumvent some issues of net neutrality as the deal would only adjust the data quotas with no traffic shaping or bandwidth guarantees involved.