Net neutrality: An American problem?
This story was written by Brett Winterford and Julian Hill.
The leaders of three of Australia's largest ISP's have declared the Net neutrality debate as solely a U.S. problem--and further, that the nation that pioneered the Internet might want to study the Australian market for clues as to how to solve the dilemma.
Net neutrality is a term coined by Internet users who oppose the increasing tendency among network owners (telecommunications companies) to tier or prioritize certain content on the network.
The debate was sparked after several American and British service providers offered to charge a premium to prioritize traffic connecting with some sites over others. These service providers claim the Internet is "running out of capacity" due to excessive use of rich content like video and file-sharing traffic. The only model with which capacity can be expanded, they argue, is to charge large media companies to prioritize traffic to and from their sites.
But Simon Hackett, the managing director of Adelaide-based ISP Internode, argues that it is ridiculous to suggest bandwidth is "running out."
"I don't subscribe to the view that network capacity is finite at all... Optical fiber basically doesn't run out of capacity, it's just a question of how fast you blink the bits at each end," he said in a recent interview with ZDNet.com.au.
ZDNet Australia video
"The (Net neutrality) problem isn't about running out of capacity. It's a business model that's about to explode due to stress. The problem, in my opinion, is the U.S. business model," said Hackett.
"The U.S. have got a problem," weighed in Justin Milne, group managing director for Telstra Media and former chief of Australia's largest ISP, BigPond. "Their problem is that unlike Australia, they (offer) truly unlimited plans."
The problem with an unlimited-access plan, explains Hackett, is that it "devalues what a megabyte is worth." American customers have never been able to put much of a dollar value on traffic, as historically, U.S. ISPs have "had it very easy" in terms of bandwidth costs. The United States invented the Internet and developed the first content for it, and the rest of the world essentially subsidized the U.S. to connect to that content.
"It was quite rational to charge (users) a fixed amount of money for access (in the U.S) because the actual downloads per month were trivial," said Hackett.
Today, there is as much local traffic floating around the rest of the world as there is in the United States, and America is as much a consumer of the world's content as it is a distributor of content to the world. In addition, the traffic being carried is far richer in terms of content, so the cost of feeding capacity to the YouTube generation is considerably higher.
"Now everybody file-shares and sends video all around the place," said Milne, "and the problem for the telcos in the U.S. is they are having to expand their networks as they go, but they are not getting paid any more money."
Who pays?
American ISPs are thus faced with a choice as to whom to charge in order to build out their networks to accommodate the increased traffic.
The first choice is to absorb the costs themselves, the status quo to date, which is less than desirable as a business model. The second choice is to cease to offer unlimited plans, which passes the cost of excessive bandwidth use onto those users that consume the most.
The final choice, says Michael Malone, CEO of ASX-listed ISP iiNet, is to charge content providers, the model that has stirred up controversy.
"The attempt is being made certainly in the U.K. but also in the U.S. to push that cost onto the content owner by saying, you pay, and we'll prioritize your traffic," he said. "(And) if you don't pay, your traffic will be really crap."
American ISPs are hesitant to take the option of charging customers for excessive use, Milne says, because they will "probably all knick off and go to my competitors who are not charging them." Instead, they plan to "charge the guys who are putting big gobs of video traffic into my network--which would be people like Microsoft and YouTube and Google etc."
"Those guys say, you're kidding, what about Net neutrality? The Net is supposed to be free, man! You can't charge us for putting traffic in there because that's denying the natural rights of Americans! I think the argument is thin but nevertheless Congress seems to be picking it up."
Lessons from Down Under
The right choice, all three Australian ISP leaders agree, is to put the onus on the user, a model that has worked well in Australia.
As an Australian ISP, around 60 percent to 70 percent of traffic comes from overseas. "You've got to haul the traffic," explains Milne. "All of that traffic is volumetrically charged--the more traffic you haul from overseas, the more you pay.
"So all ISPs in Australia, because of our unique geography, have got used to pay-as-you-go and have handed those pay-as-you-go principles on to their customers."
Malone says that when users are offered truly unlimited access to download as much as they want, 3 percent of customers use over 50 percent of all the downloads. Download quotas can eradicate that problem if they are set at such a level that it affects this 3 percent, while having zero affect on the majority.
Quotas, Malone says, aren't designed to be punitive.
"Quotas are meant to be able to say that for 95 percent of customers, this (much data) is enough...This is an effectively unlimited connection for most people.
"From my point of view, (Net neutrality is) an artificial problem created out of fear of modifying the business model," says Hackett. "The idea that the entire population can subsidize a minority with an extremely high download quantity actually isn't necessarily the only way to live," said Malone.
The Australian model gives ISPs predictability about income and network costs, explains Hackett.
"If a user uses much more stuff, they wind up on higher plans, so we can actually afford to bring in more (network equipment and capacity)," he said. "So it's kind of self-correcting. In the U.S., an ISP is visibly afraid of the idea of customers pulling video 24/7. (Whereas) if our users use more traffic, it doesn't actually scare us. You get the sense that it actually does scare (U.S. ISP) Comcast."
Milne says a number of U.S. cable companies have taken the hint and started charging "volumetrically."
"I think that's actually where things will finish up," he says. "Be it electricity, travel, petrol, we as humans have got used to the idea that the more you use the more you pay, albeit with a discount. The Net in the U.S. just magically decided to avoid that, and now I think they'll have to come back to reality."
"You can't just keep on building these networks forever for free. You can build them bigger and bigger and bigger, but somebody has to pay for it. There has to be a business model by which the network is paid for," added Milne.
Brett Winterford and Julian Hill of ZDNet Australia reported from London.






If it was necessary to start charging again for usage or online time (the old AOL model), it should be reasonable. We're used to unlimited, within reason. It should be very well visible for the user how far away they are from their cap. Often, the user doesn't have a clue how much traffic is going through. And with botnet virusses running wild, the victim can be victimized for a second time by the ISP. Here's a business model: the ISP buying into a botnet, so they run the customers over their limits and can charge an arm and a leg.
<American ISPs are hesitant to take the option of charging customers for excessive use, Milne says, because they will "probably all knick off and go to my competitors who are not charging them.">
Is not really what it's about.
The costs of providing bandwidth is getting cheaper not more expensive.. and there is little question that investing in the infrastructure will pan out, the demand is limitless.
The ISPs already have near monopolies. They're already making huge money, charging more per bandwidth than other countries. And for MOST consumers, there really aren't competitors to "run off too". The big boys have been pretty successful (so far) at keeping competition at bay.
In my town (of 2.5 million) there's really only one choice for most consumers.
But the real reasons for the anti-net neutrality is where it gets so sticky.
The absence of net neutrality will allow the big boys to effect political influence.
It will give unprecedented power by allowing control over the flow of information.
..Don't like the message on that "liberal" site ?.. throttle the bandwidth so they can barely podcast.
And these companies (like AT&T and COMCAST) have already demonstrated their willingness to peddle political agendas.
(Look at Fox news, the real life manifestation of media turned shameless ideological force.)
They have been all too willing to cooperate with an administration that has not been shy about controlling and monitoring the flow of information in America.
And what THEY get in return are access to to write their own regulations, FCC influence, laws that give them "immunity", laws that forbid competitors to operate in their domains (like municipal wireless networks), laws that grant them all kinds of favor ... and a chance to have a very strong hand at shaping the political landscape as they desire.
It's definitely and American Problem.
And that's why we NEED net-neutrality.
Then providers can have users pay for what they use (if need be), can face some competition, and users can have some choice.. that IS what we need.
anyway.. </rant>
Australian internet users have been held hostage by these people for far too long.
Comcast gets a VERY sweet deal on 500GB's of bandwidth: 5 dollars a month..... so they are basically making a 1000% profit on their service! I don't see the 'doom and gloom' that these idiots in Australia, who have gotten fat and lazy over governmentally high prices, are pushing.
As an individual, I pay quite a bit for my piece of the net. I am willing to bet that per megabyte it is far more than most businesses out there. Much of the time the connection is idle when I am at work or asleep. Apply the per megabyte charge evenly to everyone on the net and watch the big guys scream in pain. I bet my cost goes down.
Australia has 40GB-60GB quotas. That is a huge problem for the distribution of HD content and other media. What about the future of content distribution. Streaming of HD video. Australia is severely handicapped here because of the quotas. it is a huge disincentive to be an early adopter. And basically leaves that role to American consumers.
After all it's not like water, megabytes don't actually cost anything, we're only paying for the pipes. The problem is ISP's have oversubscribed their networks.
B. There is NOT enough competition...yet. When LTE and WiMax goes live, fiber landlines will have to compete with wireless...how much speed do you want? That will be the true method for pricing competition.
C. Concept of Net Neutrality is about equal access/speed to content. Caps are just part of the whole issue of equal access. There is an interesting future question that will need to be asked: Does a company like Google have the right to charge different ad rates to different firms for the same amount of ad exposure? It will eventually come up in the distant future, and firms will be asking why they have to pay more for placing ads while others don't.
A Gb costs nothing but the network hardware that carries it does. Now I honestly don't know if we are running out of network capcity, (I seriously doubt it and that's the ISP's problem.), but like everything, nothing is free and someone has to pay to build and maintain the 'pipes'.
The issue is how much you pay for that service. ( And I object to paying a 1st class rate for an Economy service, as we do in Australia.)
(And to those ranting on about the US leading the way - please remember the US is a part of the world, not the world and none of have it right yet.)
I hope you learn from the past.
In a truly communistic society the farmer gets far more fuel than the average citizen, for the same cost (free).
In a capitalistic society, those who use more fuel have to pay more money.
As a general guideline, charging those who consume more resources more money is a good idea. Charging a flat fee regardless of consumption can promote some very inefficient and wasteful behavior.
And let us call a spade a spade - a lot of this bandwidth hogging is either commercial enterprises who profit from selling stuff, and downloads of pirate material - everything from music and video to software.
We suffer from a mentality of some that there really is such a thing as a free lunch, and those people exploit the business models set up in the 1990's because the cost of their traffic comes out of my pocket and the pockets of the 95% of Internet users who are not bandwidth hogs. Let the user pay!
They see companies like Google and Yahoo making Billions and they want some of the Pie. They see internet TV coming were you chose the TV stations you want and there no kick backs for getting on there networks in bundles . More to it than just Pirates and youtube junkies. It easier to go after the end user who got a contract with them than After youtube Google and TV- Web servers . Guy who wants to see News from his home country It about magic Jack and paying 19.00 a year for unlimited calling from a central server. Big picture the money . Net flick Central Server Myth unbuntu Video training Online college lectures they want peace of all there pies but easier to tag the end user for the money
Consider Tivo... it records TV shows you tell it to.... it records TV shows it thinks you might like. On my Tivo, on a typical day I record 8 hours of stuff, 2 to 3 of which I actually watch. What happens when systems like this are operating over the network? EVERYONE is downloading 40 Gb a day (in HD), half or more of which they never actually watch? For cable, the Tivo system is great. I'm not burdening anyway else by my behavior. For the network, this sort of behavior is going to cripple applications that require something approaching "real time." People who use these applications are not going to be happy, companies who rely on them for their income are going to go out of business.
I have no problem with paying based on bandwidth used.
The whole idea of neutrality came from the railroads. Laws were passed so that the railroads had to charge the same amount for freight regardless of customer. This did not mean they didn't charge more for heavier or larger packages!!!! It just means that if two customers wanted to ship an identical package, the railroad couldn't give one favorable pricing while gouging the other (a practice that was all too common).
But seriously, as an international student in Australia, the only thing that makes me miss home more and more is the traffic cap. My dorm allocated each of the resident 200MB per week, charging us $10 for extra 100MB. I find this ridiculous as I can download more than 3GB a night back in Thailand, a country recognized by many Australians as a Third-World Underdeveloped Country.
Thanks for the excellent synopsis of the U.S. broadband market. We literally only have two real choices for high speed broadband in America; cable or DSL. I don't consider satellite broadband an option due to its higher cost and slower speeds, especially upload speeds. The ISP's must be making a killing since if only 3% of their customers are abusing the system then that leaves 97% under-utilizing bandwidth. It makes sense that when these companies price their "unlimited" services they price them to make a profit based on the majority of subscribers "abusing" the system. This means that the majority of customers are over-charged; not fair by along shot!
@infernalman7,
As an American living in Thailand most of each year for the past three years, I can tell you that Thai broadband is crappy. There are only two "high speed" ISP's here; TOT (government owned) and TT&T (private owned). Both oversell their bandwidth capacity so that even on the best days you're not going to get full speed. TOT has the worst infra-structure, customer service, and attitude. TT&T has gotten better, but both still throttle bandwidth, although upper tier TT&T service is not too bad, just expensive.
Don't consider those 3 ****ed up companies. (TOT, CAT and TT&T). Use TRUE or any other privately owned brand that offers cable. And another thing you have to understand that internet in Thailand is FULL SPEED locally. This is an important thing to consider. You're an American living in Thailand then of-course most of the content you use would be from abroad. That is the reason why you find internet to be crappy.
As for Americans, most of the contents are also local (within the U.S.) that is the reason why people are complaining! Local connection being capped and slow? That's just bad. Korean and Japanese internet ARE NOT THAT FAST if you try to connect to websites located in Australia or Europe. They are all 1Gbps LOCALLY! (The U.S. being an exception because they have an extensive link to North America).
If you are a Thai, most of the contents you download of-course will be from within Thailand. That's why not many people are complaining. And I'm pretty sure most of the ISPs in Thailand have a really good connection to any Thai websites.
- by Renegade Knight September 29, 2008 7:16 AM PDT
- Given the complaints we hear in the USA from consumers in Australia about their ISP's I'm not sure the executives have a clue about how to solve much of anything.
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- by averagejoe11 September 29, 2008 2:37 PM PDT
- @Renegade Knight
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- by drfrost September 30, 2008 9:49 AM PDT
- Unlimited access just doesn't make sense when 95% of capacity is being used by 3% of the customers. Not only are we "paying for the pipe" but we also have to cover the cost of "maintaining" the pipe... and the bigger the pipe, the bigger that cost. Why should everyone pay equally for that when some people are literally just using email while others are continuously streaming video?
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Showing 1 of 2 pages (45 Comments)There are two kinds of bandwidth limits. You can limit the amount of data. 250 GB a month. Or you can limit the connection speed. 3mbs. Unlimited traditionaly meand "all the data you can slurp via the connection speed you purchase" which of course has a cap. Now folks want to superpimpose both. "Great conneciton speeed, just don't use it" and call that progress.
Thank you!! I used to pay for Comcasts 12Mb service for a hefty price. I started noticing that damn near all streaming video content was going slower and slower (biggest one was youtube). So whats the point in paying a premium for throttled service? Add to that the monthly cap and you're getting double charged.
You're right that you pay for the connection, the pipe. If I decide to use that pipe day and night, then that's the pipe I payed for. If they impose a monthly cap then they should have no problem with giving everyone a large pipe to use. Of course, if they do this, then all those people that used to under utilize their connection may start using it more because of faster speeds. Then an average users monthly gig usage will go up now that everything is so fast. They still won't go above cap, but their total usage will increase. The end result is the 95% 'average users' usage will increase while the 5% will decrease. So what will have the larger impact?
I absolutely against throttling data based on it's origin. This is exactly what net neutrality should guard against.
I'm NOT against throttling data based on it's type, volume, etc. If Comcast wants to prioritize data in some way that treats data equally regardless of origin, then I generally don't have an issue with that.
Consider this, what if Netflix, Blockbuster, Apple, etc., all start renting movies over the net (many of whom have already started) and the business really takes off. Suddenly, the internet is USELESS for anything that needs to be "real time." Not really fair for Vonage, online MMO games, etc.... These companies would go out of business because their products are no longer usable. Where's the "fairness" in that?
Three percent of the users shouldn't be able to make the net CRAWL for the rest of us. And we shouldn't have to pay to upgrade their pipes.
My 2 cents...