A Netflix customer demonstrates the online Netflix movie service last year. The online video giant announced Monday it is launching its service in Canada. (Paul Sakuma/Associated Press)

U.S. online video giant Netflix, Inc., is launching a subscription service in Canada to stream movies and TV episodes over the internet to customers' TVs and computers.

Canadian customers will pay a monthly fee to get unlimited video-on-demand starting this fall, Netflix announced Monday. The Los Gatos, Calif.-based company did not specify what that fee will be, but it currently charges $8.99 a month in the U.S.

Initially, the Canadian service will be available in English only, but the company plans to add French language capability "over time."

In order to stream videos to their TVs, customers will have to use intermediary devices such as current generation video game consoles, certain Blu-ray disc players, internet TVs, digital video players or Apple's iPad.

Unlike Netflix's U.S. service, which allows subscribers to receive DVDs by mail, the Canadian service will be streaming only.

This will be the first time Netflix has offered its services outside the U.S., where it has 13 million members.

Zip.ca eyes fall launch too

Ottawa-based Zip.ca, which currently offers a DVD-by-mail service similar to the one offered by Netflix in the U.S., has been talking about offering online video streaming subscriptions to TVs and computers in Canada for some time.

CEO Scott Richards of Zip.ca said Monday that the launch is currently scheduled for the fall, in both French and English, and that subscribers will also still be able to receive their videos as DVDs by mail or from retail kiosks.

Zip.ca was expecting competition from Netflix, Richards said.

"We've known they were coming for some time now," he said. "We see a large marketplace here for this. I'm sure Netflix will do well. I know we will. It's a fast-growing marketplace."

He said he sees the announcement as support for Zip.ca's business model.

"Consumers are choosing to move away from brick and mortar and towards more convenient options."

The company has been negotiating with content providers and makers of the hardware devices needed to support the service, and will release its pricing plans in the fall.

Other Canadian companies have already launched a spate of on-demand streaming online video options in recent months. Rogers officially made its On Demand Online service available to its cable TV, high-speed internet, home phone and wireless customers in May. The available content includes television shows, movies, and exclusive web-only content. Digital cable subscribers can also view the specialty channels they subscribe to online.

Last Friday, Vidéotron launched its internet television service illico web. The service, which is available to customers who subscribe to both Vidéotron's digital TV and internet services, provides access online to 32 television channels, along with TV episodes, movies, digital radio, concerts and karaoke.

No proven model in Canada

But so far, no competitors have launched the model that Netflix is planning to launch in Canada, said Jayanth Angl, senior research analyst at Info-Tech research group.

"What those competitors would have in their favour is there isn't a clear winner. There isn't a clear proven model that works in Canada," he said. "I think a lot of it is still up for grabs."

Angl said on one hand, Netflix is a strong brand that most Canadians have heard of. But he said the company faces challenges in the Canadian market.

For one thing, its pool of customers will be restricted by the fact that it will not offer DVDs by mail service in Canada and its service requires high-speed internet.

"It's not a service that would be probably feasible on lower tier broadband services, given the bandwidth requirements, given the capacity and overall usage that someone would incur by streaming several of these movies every month," Angl said.

To make matters worse, internet service providers in Canada cap customers' internet usage at lower limits than U.S. providers, Angl added. Full-length, high-resolution movies require a huge amount of bandwidth to stream.

"And Netflix may run into issues in that users aren't able to view the content without exceeding those limits."

He said it remains to be seen whether broadband providers will adjust their plans to accommodate services like Netflix or whether users will be willing to pay more to their broadband provider in order to access such services.

While the company is the market leader in its sector in the U.S., Angl said, "there's no guarantee that their model and service is going to have the same success in Canada."

Nevertheless, it makes a lot of sense for Netflix to expand beyond the U.S., and he thinks the move in Canada is just the beginning.

"I think they certainly want to expand beyond North America and certainly Europe is probably a much bigger market."