Net neutrality is an 'American problem'

Net neutrality is an 'American problem'

Summary: The leaders of three of Australia's largest ISP's have declared the Net neutrality debate as solely a US 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.


The leaders of three of Australia's largest ISP's have declared the Net neutrality debate as solely a US 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 (telcos) to tier or prioritise certain content on the network.

The debate was sparked after several American and British service providers offered to charge a premium to prioritise 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 prioritise traffic to and from their sites.

[America's] problem is that unlike Australia, they [offer] truly unlimited plans.

Justin Milne, group MD, Telstra Media

However, 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 fibre 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

"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 US business model," said Hackett.

"The US 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, US ISPs have "had it very easy" in terms of bandwidth costs. The United States invented the internet, developed the first content for it, and the rest of the world essentially subsidised the US to connect to that content.

[Net neutrality] ... is a business model that's about to explode due to stress.

Simon Hackett, Internode

"It was quite rational to charge [users] a fixed amount of money for access [in the US] because the actual downloads per month were trivial," comments 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," says Milne, "and the problem for the telcos in the US 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 who 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 more you use the more you pay ... the internet in the US just magically decided to avoid that.

Justin Milne, group MD, Telstra Media

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 UK but also in the US to push that cost onto the content owner by saying, you pay, and we'll prioritise your traffic," he said. "[And] if you don't pay, your traffic will be really crap."

American ISP's 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."

Learn from Down Under
The right choice, agree all three Australian ISP leaders, is to put the onus on the user, a model that has worked well in Australia.

As an Australian ISP, around 60 to 70 per cent 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, three per cent of customers use over 50 per cent of all the downloads. Download quotas can eradicate that problem if they are set at such a level that it affects this three per cent, 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 per cent of customers, this [much data] is enough... This is an effectively unlimited connection for most people.

[Net neutrality is] an artificial problem created out of fear of modifying the business model.

Simon Hackett, Internode

"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 subsidise a minority with an extremely high download quantity actually isn't necessarily the only way to live," said Malone.

The Australian model gives ISP's 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 US, 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 [US ISP] Comcast."

Milne says a number of US 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 US just magically decided to avoid that, and now I think they'll have to come back to reality."

"Yes, 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.

Topics: Telcos, Broadband, Networking, Telstra

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  • Australian, US vs European Model

    I disagree with the view to slap Australian customers with hefty pricing.

    European internet users would be downloading overseas contents but they pay one third of AUS price � UNLIMITED. It's a government commitment to make information as accessible to its citizens as possible.
  • Large isp

    Is an isp wihth over 200 thousand people i dont think internode is near that , so how can they be classed as large. By classing internode as a large isp destroys any creditability in this article
  • ABS says it is

    The ABS classifies Internode as being a "Very Large" ISP, based on more than 100k subscribers. It's hardly a tinpot operation, as much as the knockers would love to paint it that way.

    So I suppose you're going to call into question the credibility of the ABS now?
  • Sure, let the big companies pay

    Why not? I mean, Gooogle could pay ISPs for most of their bandwidth, and then any site other than Google would be slow as hell. It's a brilliant way of making people use your services over your competitor's.

    Seriously though, this is such a bad idea, however I'm sure the Americans will end up doing it anyway. I mean, ISPs have the power, and they don't want to alienate their customers who pay them money, they'd rather charge someone else more money.
  • ABS

    Because the ABS is right? right?

    It must be, just ask them!
  • If google provides soo much content...

    .. then why not just sell them the internet and let them work it all out.
  • too late

    They already tried that, and the US made it illegal for them to try again.

    Good luck with that point of view.

    The problem was that the ISPs were going to intentionally slow down traffic from sites like youtube unless they were paid. In theory its not a huge problem but in practice it would be used as a threat to extort money from large web companies like google and yahoo.
  • The Australian Model makes sense

    The model we have here is the best way to go about things - even if the pricing of the plans is probably a tad too high.

    The model we use in Australia suits Australia because of our geographic location. A totally unlimited would fail - and the past has proven that. This is why you don't see totally unlimited plans in Australia. They just don't work.

    However, I think proper international debate should take place over why we actually charge for data? Why does it cost $x/MB to send data from Australia to the US and back again?

    If the business model of the backbone changes from charging per MB to charging for link speed or some other type of option only then can ISPs change their current business models of data caps, etc.
  • Australian model becomes American?

    Just a thought. Even though the Australian model is better - pay as you go - If the American's do change and allow their major uploaders to be billed, you can guarantee Australian's will follow suit and charge both the Customer and the content providers.

    ISPs are business out there to make money... so why not?
    The Net Neutrality problem will affect Aussies too. If American content providers do not pay up, then Aussies will not have as much access to their content either.. not just Americans.

    I think it is in the whole world's best interests to ensure that ISPs cannot be charge for prioritising traffic in America or in any country.
  • Already non-neutral

    Internet usage has always been the 'fill-the-gaps' component in the communication landscape, where premium services (non-internet) have effectively subsidised it and we have to put up with periodic choking because it would cost us a lot more otherwise.

    However, out of all the possible models, a simplified user pays one is probably the most equitable. If someone wants unlimited, then they should really pay for it. It IS unfair to expect others to.

    Charging content providers in Australia would just force more content to be provided from overseas. Some ISPs do not charge for uploads to encourage this, though with more symmetric usage (such as VoIP), this is less tempting for them.

    Australians though, genrally pay too much for communication services. SMSs are an extremely low-bandwidth, extremely overpriced example. Given the actual amount of bandwidth required for them, they should be much less than a cent, notwithstanding that they are close to instant. As ISPs move closer to becoming bandwidth providers, all services should get cheaper. And VoIP should start hacking into mobile charges. 3 has to be given credit for leading that charge.
  • Upstream is charged by port speed

    Transit, peering and backhaul links are already charged on a port speed basis - as far as I am aware this has always been the case.

    This means that Aussie ISP's take the cost of their upstream and work out how much their user base can utilise each month, including peak times, and charge accordingly. This is how they manage to offer off-peak extra's - while the links are under less load, there is no issue with the userbase increasing their usage.
  • Volumetirc

    I think that volumetric charging for internet traffic is unethical.
    I know at least several people who have had excess internet bills beyond $300.
  • Meaning of net neutrality

    This article is inacurrate.
    Net neutrality does not mean "everyone pays the same, regardless of how much they use" - not even close. It means all types of traffic on the net are treated equally, without any prejudice.
    It doesn't clash at all with the "pay for what you use" model.
    Also, the term was not coined by activists, it was coined by the scientists and engineers who helped make the net what it is today.
  • Internode "Very Large"?

    Then why does Simon Crackpot run around crying thay he is a small ISP just trying to survive?
  • And the point is...

    They didn't choose the correct plan for their needs and have no idea of the terms and conditions when they signed up.
  • agreed

    when ARPANET was created, the boffins behind it created it so each individual packet was treated the same, and the pioneers of the internet intended it to stay that way, it didnt matter if the traffic was from a poor man or a rich man (or woman, not biased here, lol >.<) and i sincerly hope it stays that way
  • How big is Internode?

    As a private company, Internode's size and success isn't covered as regularly as a public company.

    Best information i can find on the web:

    1/9/08 - Reporting 2007-08 revenues of $116 million

    23/4/07 - 100,000th Broadband Customer, 20,000 dial and 10,000 Voice
  • Yeah, look at us

    Suggesting that overseas markets look to Australia as a beacon of sanity or as a good model is a laugh! Internet access in Australia is over-priced, under-speed and under-capacity. Is it any wonder that these three guys are espousing the status quo as the best solution?
  • re: Yeah, look at us

    Useful though, as this all explains their inaction for so many years.
  • Australian Prices

    The reason Australian prices for Internet is so high is that:

    1. The majority of content is offshore

    2. We are a large continent and our major cities are quite a distance away from one another meaning more cable through sparsely populated areas with no cost benefit in between.

    3. Our homes are not packed in close to one another. Lay 200m of cable in Japan and you've got yourself quite a profitable number of subscribers, in Australia you'd get maybe 2 or 3.

    Building an infrastructure over our large landmass and sparsely populated areas is expensive to do, as well as being expensive to maintain. It has nothing to do with greed (perhaps with Telstra), or a bad business model, it's just the reality of the situation. ISP's must charge what they do to remain profitable.

    What the article is discussing "does" relate to Net-Neutrality because America is viewing the Australian business model as an alternative solution to net-neutrality to solve their bandwidth/ costing woes.