catallaxy files

catallaxy in technical exile

Net Neutrality – YouTube's "day of reckoning"?

with 7 comments

Note: These are my personal views/opinions and do not necessarily reflect those of my employer.

One of the first posts after the most recent reincarnation of Catallaxy, was a post by Kodjo on net neutrality. As this is a pretty hot telco topic in the US, I thought I’d post a pointer to a recent speech on net neutrality by the head of Telstra’s BigPond business unit – Justin Milne.

In his speech, Milne argues that a day of reckoning is coming for companies like YouTube, MySpace and Skype, where the access providers will try to put an end to what they perceive as the free ride being enjoyed by the content providers. At the same time, access providers will also be driven to QoS and traffic prioritisation by the need to preserve quality in the new range of emerging services such as IPTV and VoIP.

For example, if I have a 10 Mbps pipe – I will use technology to partition 6 Mbps of that pipe to preserve it for video packets and then I will have 2 Mbps for Voice over IP packets and 2 Mbps for ordinary internet surfing and email packets. IPTV needs that because, without it, if you are watching a program and your children get on Voice Over IP, your screen will go black. People don’t like TV with black holes in it. Therefore I have to partition this bandwidth to ensure video packets are prioritised.

Milne’s speech was strongly criticised by Internode CEO, Simon Hackett who claimed that BigPond has “lost the plot” – misunderstood the Australian market or miscalculated its business model, because the US and Australian Internet markets are quite different.

I’m going to assume Hackett made his comments based on the media reporting of Milne’s speech (such as this), rather than the original speech, which may not have been online at the time. I say this because reading Milne’s speech in its entirety it seems clear to me that Milne is predominantly talking about the US situation – and clearly points out how the differences in the US and Australian markets give rise to a different debate here.

In the US, as indeed in Europe and Asia, the tradition has been for truly unlimited plans: Pay $29.95 – give us a hiding… The urgency of the Net Neutrality debate is less so for us in Australia because we’ve always had volumetric pricing. All Australian ISPs have always had to pay data transmission costs for about 70% of their traffic, which comes from overseas. These days about 50% of traffic that traverses Australian networks comes via a cable link from the US. Because our ISPs grew up having to ‘pay the freight’ they built that cost into their business models. In the US, however, the traffic was essentially domestic and they didn’t have to pay transmission costs to anybody else. Now what is emerging is a kind of ‘pay the piper’ thing.

What this highlights for me is that there is an alternative in the US to access providers charging for preferential treatment of certain traffic. i.e. a possible way to maintain net neutrality. It’s an alternative however that may be even more unpalatable to the mass of US consumers than giving up net neutrality. That alternative is to introduce usage based charging of end users.

I’ll wrap up here and open it up to the floor for comments.

Written by Admin

November 30, 2006 at 6:27 pm

Posted in Uncategorized

7 Responses

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  1. If Big Pond tries this stunt, Google should just send them a bill for “Providing content to Big Pond subscribers” and then block Bigpond from Google until they pay.

    My guess is that Big Pond will scrap the idea within 1 hour of the first customer screaming that they “can’t search the interwebs”.


    November 30, 2006 at 7:45 pm

  2. I know you work for them Heath, but there are times when I really hate Telecom, whoops… Telstra.


    November 30, 2006 at 8:06 pm

  3. John/SL,

    I’ll obviously be restricting myself to commenting on the US situation rather than making any comment on what might happen here.

    Access providers in the US have started touting the idea of charging content providers for (prioritised) access as a way of generating extra revenue to fund network expansion. In a competitive market, all providers are probably reluctant to simply up their access pricing in order to raise the cash they need.

    Extracting a payment for carriage from a content provider, in return for providing a higher QoS, is one way to generate the money that’s needed without pushing up end user pricing across the board.

    As I hinted at the end of my post however, there is an alternative – usage based pricing. Under usage based pricing, entry level pricing can be kept low by offering plans with lower volumes of included usage, whilst heavy users make a greater contribution, reflecting the increased load they place on the network.

    Usage based pricing may also moderatre bandwidth demand. Under flat-rate pricing, the marginal cost of usage to the end user is zero, so it shouldn’t be a surprise if some peoples usage is pretty low value activity (downloading videos they may never watch, leaving internt radio streams running while they are out, etc).

    Introducing usage based pricing, even if the price of an additional unit of usage is low, may discourage some of this kind of behaviour, thus also helping to manage the bandwidth situation.

    … of course another option in the future may be to let end users pay for prioritisation of their service, or charge end users for the ability to get QoS on certain types of data or applications. However these are probably more complex technically – so usage based pricing is probably the more realistic alternative for those who want to ensure ‘net neatrality’.


    November 30, 2006 at 8:28 pm

  4. QoS is inevitable unless we want to continue living in the dark ages. We already do it on ADSL lines by carrying the voice call in a dedicated (and historical) out of band frequency. And the cable service I have from Optus puts the video for pay TV in a dedicated set of frequency channels whilst internet is run on a separate set of channels. If we really want convergence of TV type video, telephone type voice and internet type media we need to move from best effort networks based on IP4 running along side and separate to traditional real time communications technology to a truely convergent network based on QoS on IP6. Those that argue against it are either ignorant of the technological issues involved, pushing a vested interest or happy to just live with the limitations and high costs of doing thing the way they are done today. We have a lot of innovation driven by the content providers (ie the application layer) however that does not mean we can do without innovation at the network layer. And ultimately it is the archaic nature of current IP technology that will inhibit the really serious content innovations that we deserve.

    In short I think the Telstra dude is spot on.


    December 1, 2006 at 10:03 am

  5. heathg – I’m a bit confused. Are you saying that in OZ we already have “usage based charges” and USA doesn’t?

    Anyway I’ll be in at Telstra Rialto monday.

    Francis X Holden

    December 1, 2006 at 12:55 pm

  6. FXH,

    Yes – most broadband ISP’s in Australia have usage based charging for end users. e.g. you will pay a different price for 200MB of usage to 2GB of usage. In most cases – once you hit that limit you will be shaped (speedd slowed) back to something liek dial-up speed (suaulyl 64kbps)

    Some providers charge a per MB rate for excess usage over your quota, and some use a hybrid apporach, charges for excess up to a cap, and then shaping.


    December 1, 2006 at 3:04 pm

  7. What is lacking is a price differential for real time verses best effort transmission of data (eg IP telephony versus email). However that is probably because there is still a general inability to offer an end to end real time service between the user and the content provider.


    December 4, 2006 at 1:08 pm

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