Net neutrality rears its head in Austraila

The major Australian ISP Bigpond, which is run by the by-far largest telco Telstra, recently gave a clear indication of their future directions by suggesting that “a day of reckoning” would arrive for sites such as YouTube who had a “free ride” on telecommunications infrastructure, stating that this was an unsustainable business model.

As a way of context, Telstra (which as I mentioned owns Bigpond) is the formerly Australian-government owned telco which has been steadily divested by the Australian government over the last 10 years. It has been suggested by Telstra competitors that any talk of “free rides” is a bit rich coming from Telstra, who have inherited a wide-scale telecommunications infrastructure paid for by the taxpayers, which is more than any other telco in the country can claim.

Milne’s reported comments echo those made by telcos in the United States when arguing against “net neutrality”. Net neutrality is the idea that all traffic on the internet should be given equal priority on the networks, rather than traffic being shaped based on the nature of the traffic eg giving priority on a network to “real-time” services like VoIP or gaming or conversely slowing or otherwise restricting traffic from competing services (eg a telco like Telstra/Bigpond deliberately giving a lower priority to Skype traffic).

There is an argument that the internet in its current form is not neutral anyway because it favours file transfer over real time data transmission because of the way that packets are handled by the TCP/IP protocols (at least, that's impression I got from the article. If I'm way off base, please let me know. I got a bit tired reading it and may have missed the point. I'm known to do that from time to time.) For example, TCP provides a reliable service that retransmits TCP segments that go missing, as well as being able to function quite well at variable rates of transmission This introduces a level of overhead that can impact on “real time” applications that require fixed rates of transmission, leading to lower quality data transmission. There are workarounds for this, such as Quality of Service, but this in itself requires a shaping of traffic in some way. However, in general net neutrality is an argument for maintaining the status quo.

Telco companies in the US are starting to loudly proclaim that content providers are getting free rides on their infrastructure. Particular targets of the telcos are content providers that deliver bandwidth intensive products such as video (eg YouTube), audio (eg iTunes store) and VoIP (eg Skype). Telcos claim that these products are clogging their bandwidth which has a negative impact on their own customers. They argue that it is their right to throttle traffic coming from these areas and that if the content providers do not wish to be throttled, they can pay extra to have their service maintained at a normal speed. This extra money could then be used to upgrade infrastructure, creating more bandwidth for everyone to use.

One problem with this argument is that the telcos are already charging the consumers to access the network in the first place, either through charging other ISPs for access to the network (a cost that is then passed on to their customers) or through their own ISPs. A counterargument has been that consumers are sucking down as much data as they possibly can from the content providers, which is why the infrastructure is clogged. The only reason this counterargument even gets any currency is because in the US, internet plans very rarely have download quotas and the price structure is tiered based on speed alone.

The Australian market works quite differently. Most broadband internet plans come complete with download quotas (some of which are ridiculously small). Users are largely paying based on how much they download. In reality, the average user is probably paying for more than they download as the lower volume user cross-subsidises the higher-volume user, but I have no problem with that as a standard business practice. In my own experience, I have yet to even reach my monthly download quota, yet alone exceed it, but it’s nice to have it in case I need it. Therefore, if as a telco you find that your network is clogged, either you have too many customers for your infrastructure or you’re not charging your high-volume downloaders enough.

Milne’s comments about Telstra and Bigpond could indicate one of a number of things:
1.Bigpond has over-extended its infrastructure and has more customers than it can handle
2.Bigpond isn’t charging its high-volume downloaders enough (which I find very hard to believe when you look at the low level of their quotas and the punitive “excess usage” charge regimes)
3.They’re trying to take advantage of a trend in a different market in order to attempt to charge at both ends for a single service.
4.They’ve completely missed the point of net neutrality and think that it applies to the Australian market.

My personal view is that it’s number 3. Given that Telstra has the entire Australian copper network to play with, I don’t think they’ve over extended. Given Bigpond’s low download quotas and high excess usage charges, I don’t think they even have any high volume downloaders, yet alone not charging them enough. Telstra’s a smart company that has been in the telco game, earning billions in profits, so I don’t think they are stupid enough for number 4. That leaves number 3, and I think it fits their methods of operation nicely.

Watch this space. I think it will hinge on how the net neutrality battle turns out on the US front as to how far Telstra think they can push it here.