NZ Broadband Pricing and Network Neutrality

September 28, 2008 – 9:45 pm

In this Ziff-Davis Australia article, the leaders of Australia’s three largest ISPs declare network neutrality to be an American problem and explain why. It’s an interesting argument, but I think there are some key elements unstated in the article.

In America, largely for historical reasons, residential customers have “all you can eat” plans. Buffet bandwidth is the order of the day, every day. As the number of people online continues to grow, and they do more bandwidth-intensive things (YouTube movies vs all-text web pages), telcos must buy new hardware. “How do they pay for it?” the article asks, and offers up three solutions: charge heavy consumers more (the Australian and New Zealand “metered Internet” solution); charge the people serving lots of data rather than we who consume it (which pisses Google off and starts a “network neutrality” war); or just suck up the costs themselves.

One element missing from this discussion is that every year brings more demand for bandwidth. Over time, we build more sophisticated applications that gain wider use:, Skype, YouTube, video chat, BitTorrent. To pick a number and say “this amount of traffic is reasonable use and will incur a reasonable charge” is to prevent the uptake of new applications that would drive the network use past the “reasonable” point. Unfettered, I’d expect to see this natural growth in our bandwidth use year on year. However, fetters are exactly what the ISPs have put in place to keep that down.

I suspect that the current ISP charging model is really: “3% of users take 50% of the traffic, so if we just price them out we’ll be able to get twice as many customers without having to buy any more hardware!”. The longer they can keep down our demands for bandwidth, the more customers they can “serve” without having to invest in new hardware.

But capital outlay is what growth is all about. If you want to double the number of customers, you should expect to have to double your bandwidth. One of the ISP CEOs said “I don’t subscribe to the view that network capacity is finite at all …. Optical fibre basically doesn’t run out of capacity, it’s just a question of how fast you blink the bits at each end.” Well if it’s not about capacity, mate, what’s left?

It certainly feels like you want your cake and you want to eat it: you want new customers without having to put in new hardware to increase your capacity, and you want existing customers to stay at their current levels so you won’t have to put in new hardware to increase capacity.

And if that’s not rorting your customers because you’re a greedy bastard, I don’t know what is.

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