Broadband bytes users

Kate Mackenzie, Broadband bytes users, November 19, 2002, The Australian

Australia is one of the few countries with internet download limits, and the controversy continues, reports Kate Mackenzie

IN a radical move to stave off internet piracy, several Hollywood studios last week launched a service that would make popular movies available — legally — to internet users.

Known as Movielink, its prices range from $US1.99 ($3.55) per film.

Movielink is not available outside the US, but even if it was, it’s doubtful many Australians would use it.

Online films are large files that require downloads of at least 500Mb, and at 11c to 20c a megabyte, that would be an expensive film — one movie could cost far more than taking an average-sized family to the cinema, complete with popcorn and choctops.

In most other countries, download limits are not an issue. Australia, it seems, is the only country that has virtually industry-wide internet download limits.

It wasn’t always that way — early broadband offerings from both Telstra and Optus did not have download limits or excess charges.

Today, though, limits are ubiquitous in broadband, and widespread even for unlimited dial-up connections.

Australia’s bandwidth pricing regime has its supporters in the industry, and very vocal detractors among the broadband user base.

Take a glance at the heavily trafficked broadband community website, Whirlpool, and the problem seems massive.

Download caps introduced by Telstra last year and Optus this year have been one of the most-discussed issues among Whirlpool’s 7000 members.

“Essentially, all the industry is offering is fast dial-up services — the ability for consumers to view web pages and check their email quickly,” says Whirlpool editor Dan Warne.

Australian Consumer Association communications spokesman Charles Britton also says the caps mean broadband in Australia has simply become “the next step after dial-up”.

“It doesn’t give you a great deal more than dial-up — which I don’t have a problem with, particularly, but it’s not the brave new world of broadband as discussed in politics and policy,” he says.

Larger ISPs such as Optus and Telstra BigPond say most of their customers use less than 3Gb a month, and many want broadband simply for its always-on nature rather than for streaming media or playing games.

It’s difficult to determine how much of a problem download limits are for the average broadband user — or would-be user — but Telstra analyst Shara Evans says there is much anecdotal evidence that download charges are a frightening prospect for mums and dads who aren’t sure exactly how much a megabyte is.

Telstra, which was the first to begin capping downloads on its broadband accounts, says it had to be done.

“If we hadn’t changed our business model, we wouldn’t have had a sustainable business,” says Telstra retail spokeswoman Kerrina Lawrence.

Australia’s practice of volume-charging for data has its roots in the early days of internet connectivity for the country.

Telstra chief internet scientist Geoff Huston, one of Australia’s internet pioneers, was around at that time.

Australia’s early connections to the internet were through a network of universities called Australian Academic Research Network (AARNet).

Huston says AARNet originally charged universities according to the amount of funding they received. Prices were in the realm of tens of thousands of dollars for a single 64Kb connection.

Later, Huston says, when CSIRO joined AARNet, that organisation’s funding had to be calculated on a different basis because CSIRO had different funding arrangements.

In short, a decision had to be made on how to charge for the scarce resource of international bandwidth, and a decision was made to charge a flat rate per megabyte.

“The setting of the tariff by Telstra was to ensure that the revenue being raised was in proportion to the cost — as you would do with any normal business,” Huston says.

This was not so much an issue when most people were on dial-up, he says, but with broadband speeds, the difference between low-end and high-end users becomes more dramatic.

US ISPs have long been blamed for the relatively high price of data in Australia, although recent changes mean this is less a problem than it once was.

The accepted wisdom is that Australia pays the price for being so far away from the US, but having a large appetite for US content.

Current estimates are that 70 per cent of data downloaded in Australia comes from overseas, and at a market update on broadband in July, Telstra retail chief Ted Pretty said international bandwidth costs made up “more than half the cost of providing broadband services”.

Telstra launched a concerted effort in the late 1990s to gain government and international support to get the International Telecommunications Union to force the US to change its charging.

Telstra’s view of the current importance of international interconnect disputes seems to vary from department to department.

The official line from parts of Telstra is that it is still very much a question that’s under discussion.

However, several well-placed sources within Telstra say the joint venture with backbone company PCCW, known as Reach, has reduced the problem considerably.

The combined buying power of the telcos has given them more power to bargain equitable terms with the US telcos.

Bandwidth prices have also fallen worldwide as more and more capacity has been lit up.

“The price drop has made it less an issue, and therefore efforts are being directed elsewhere,” says John Hibbard, who was Telstra’s global wholesale operations manager from 1994 to 2001 and now works as a consultant.

Hibbard says telcos in other countries are envious of the Australian volume-charging regime because it makes commercial sense, but “no-one wants to be first to introduce it”.

Richard Thwaites works at Australia’s National Office of the Information Economy.

He is also chair of the International Telecommunications Union’s Study Group 3, which is looking at international tariffs. He says the US interconnect charges still discriminate against Australia, and the cause is also being addressed in all other parts of the world.

However, he says “there are mixed views in Europe, due to the fact that several European carriers have made substantial investments in US backbone networks and thus want to protect the profitability of those investments”.

“This also applies to NTT of Japan and to some extent to Telstra, whose joint venture in the Hong Kong-based Reach is a play in the global backbone market.”

Telstra’s problems with US interconnect pricing do not explain why Optus decided to follow suit with end-user volume-based pricing for its cable service earlier this year.

Optus owns 40 per cent of Southern Cross Cable, which connects the region to the US.

Optus’s owner, SingTel, offers some volume-charged DSL accounts, but even those have upper limits on the amount to be paid. For example, after usage fees reach $US95 per month, the rest is free.

“If you charged $50 toll on a freeway, you could travel on it at 200km/h because no-one could afford to use it,” says Lloyd Ernst, chief executive of Australia’s largest web-hosting company WebCentral.

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