Looking beneath the net neutrality surface

commentary Telstra Media group managing director Justin Milne has used the net neutrality argument several times to assert that the free ride of online ventures using carriers' services would no longer be acceptable.

IBRS advisor Guy Cranswick
(Credit: IBRS)

In this view, traffic from YouTube, Skype and other online content suppliers without infrastructure would be throttled, but Telstra's traffic in movies and music and, naturally, landline telephone, would be unaffected. It is an argument the original Postmaster-General could have proposed, but it is not the full picture.

Net neutrality is not a precise term, not even technically, and may mean different things to different people. Telstra's CTO Hugh Bradlow defined it on the company's Now We Are Talking site, at least in an emblematic way for Australian users, in the following terms:

" ... it [net neutrality] started was with the announcement by US telcos that in order to provide TV, telephony and internet services over the broadband pipe into the home, they will need to provide Quality of Service (QoS) for services such as telephony and TV. Without QoS, users will experience the phenomenon I talked about in my last blog, where your TV signal or telephone call can be interrupted by someone else in your house (or in the street) doing some bandwidth intensive application."

It is worth staying with this explanation, from a technologist, because BigPond may implement it at some stage. Bradlow characterises the broadband market in which the subscriber's connection to an ADSL service is via a copper line between home and an exchange as electronically divided into two — one part is for the phone service and the other is used for the high-speed internet service. He goes on to explain that:

"in the future [as if it were foregone and by implication something that will occur in Australia] is that maybe, instead of dividing up the copper in the frequency domain, it will be divided in the IP domain (the technology used by the internet — not the internet itself, which is an important distinction) using QoS."

Bradlow implies that the principle of QoS will be applied by force majeure and he states that explicitly with this reason: "This is necessary to maintain the voice quality that we have all grown used to from our fixed phone service, or to prevent your TV signal being interrupted by the antics of others in your neighbourhood."

To support the argument, he says that people may believe:

"[they] buy a 'broadband service' which is a fallacy. They buy an internet service, and a TV service, and a telephone service, which are distinctly different things. Today there is no debate because they are delivered over different networks, but in the future they will come through one broadband pipe into the home. The second misconception is the illogical conclusion that offering QoS on the broadband pipe to those services that need it, is the same as 'throttling' other services. That makes no sense because, as I have said, the high-speed internet service is not changed by this proposal."

For most consumers in Australia (notwithstanding Telstra CTOs) access to the internet is via a telco, and/or their ISP, and consumers pay for this network access. The net neutrality argument claims that consumers download too much data from content providers, and the infrastructure cannot cope with that; consequently users must pay more. In the US, broadband plans, unlike Australia, rarely have download quotas and the cost of access is based on speed. Therefore the equivalence of the argument is no longer valid.

In fact, the argument above is deceptive and misleading primarily because it does not acknowledge that the Australian market is different from the US. Broadband plans in Australia are packaged with download quotas. That is how BigPond and Optus avoid the capital outlay by throttling high usage at inception of usage, or by selection of the person taking the service. They will also police usage by reprimanding users who download too much within a time period, so the Telstra CTO does not know that the QoS issue is being dealt with already, though not in a technical manner.

Within an ISP, not across the entire national network, the low user is probably paying for far more than they download, as the lower volume user cross-subsidises the higher-volume user. Economically that would make sense in the same way as someone with a persistent monthly credit card debt subsidises the punctual payer without one. Standard pricing is sensible marketing and simple for consumers to choose a plan.

But if a telco has to stipulate QoS, or some other throttling technique, it implies the network is incapable of managing the load, or there are too many customers, or the high-volume downloaders are not paying their share. In the case of all Tier One broadband ISPs, none of those conditions is prevalent.

The conditions described above do not mean that monitoring traffic does not occur. For instance, Exetel, probably amongst others, shapes traffic from peer-to-peer applications and restricts traffic by about 50 per cent of its maximum speed. Peer-to-peer traffic is expected to keep growing rapidly and is one reason why some ISPs want to shape traffic to ensure service and reduce their own costs.

Alternatively, they could insert it as a condition in their contracts that such services will not be accessible; but how much monitoring is acceptable in an open society? Another ISP, Internode, does not agree with the policy applied generally but uses the technique to guarantee quality of its VoIP service, during periods of peak network congestion.

Advocates of net neutrality are pleading a case based on the following propositions:

1. Infrastructure overload and capital cost is incapable of dealing with customer usage (this is false because BigPond has enunciated how it deals with bandwidth greed by individual users)
   
2. BigPond, amongst the leading ISPs, has not imposed limits on downloaders; which again is unlikely as Whirlpool's annual results makes clear, BigPond and Optus users are generally light downloaders, gamers etc.
   
3. The tier one ISPs are positioning for an advantage in a fast-moving market to attempt to charge users at both ends for a single service.
   
4. Proponents of net neutrality are using it to confuse regulators and policy makers with an argument and case that does not apply to the Australian market

Proponents of net neutrality underpin the argument on the premise that Telstra's shareholders have invested capital for the benefit of other companies, but the current Telstra network was not borne by current shareholders; they and many other ISPs and telcos, have inherited an asset.

The use of net neutrality is an aggressive manoeuvre to retain market share and withhold change in the telecommunications market. If imposed widely by telcos, net neutrality contracts may divide users into those that afford it, and those that cannot.

Guy Cranswick is an IBRS advisor who specialises in marketing communications, media platforms and channel strategy, including areas of business planning. Guy has worked in the UK and France as strategy manager for Initiative Media and director of European operations for Modem Media (Poppe Tyson), a web marketing and development company. In Australia, Guy was senior analyst at both Jupiter Communications and later at GartnerG2 covering business and online strategy in the Asia Pacific region.