For years, US Internet service providers have been offering their users unlimited access to the web, creating high expectations among customers who have never had to think before accessing content. As that content has shifted from text to music to video, however, ISPs have found that living up to the promise of "all-you-can-eat" broadband can be expensive in a nation of gluttons.
One symptom of this problem is the industry's opposition to net neutrality, which would prevent ISPs from profiting on specific services or content, or degrading and blocking others. In the midst of this fight, the executives of several ISPs in Australia have weighed in, suggesting that they've solved this problem already and that their US counterparts should pay attention to their model.
Bandwidth caps: Australian for "Internet access"
As we've described in detail, the Internet backbone is ready to handle the growth of the traffic it carries. The problem comes in delivering that traffic to end users. Here, the equipment upgrades needed to support unlimited use of high-bandwidth connections can get expensive (especially on upstream links that see heavy P2P usage), and that expense falls on the shoulders of ISPs. Those ISPs are finding that peak use hours may produce situations where local access to the backbone becomes a bottleneck, resulting in service problems.
In response, ISPs are experimenting with everything from traffic-throttling hardware to hard caps on usage and tiered service plans. They're also resisting anything that might take future options off the table, which has meant a strong pushback against net neutrality efforts. This has raised user fears about more draconian future restrictions, and content provider worries that ISPs will turn to them in an effort to raise revenues.
But, if you believe Australian ISPs, all of this is an "American problem," one that's been solved for years in their market. In a set of interviews conducted by ZDNET Australia, the heads of these companies describe how unlimited data plans are a "problem," and that business models based on them are ready to collapse.
The business model of Australian ISPs, a pay-per-usage structure, is being considered by a number of US ISPs. But, as correctly noted by one of the executives interviewed, the move runs the risk of sending the customers into the arms of competitors who are able to keep the unlimited buffet option open. Unfortunately, this is probably the high point of the analysis; the remainder of it appears to blur cause and effect.
Australians, as well as other users of pay-per-usage schemes, have indeed grown accustomed to keeping their usage within limits lest they face painful fees. But being accustomed to it and being happy about it are two very different things, as my own conversations with users of these systems have readily made clear.
Australia also finds itself in a unique situation, since a tremendous amount of its "content" traffic (as opposed to e-mails, for instance) has to pass across undersea cables in order to reach the US and Asia. This sort of bandwidth is far more expensive than traffic that remains on one's own network or that stays in-country, and thus the all-you-can eat model becomes prohibitively expensive for reasons that US ISPs don't have to worry about nearly as much.
More generally, use of these schemes can be profoundly inhibiting. A clear strength of the unlimited Internet is that its users can follow up on any information they find interesting, regardless of whether it's text or video. Someone watching the clock or bandwidth usage meter doesn't have that luxury, and these capped systems tend to make it hard for new but "non-necessary" innovations like Hulu to get off the ground.
The executives say that they're happy with this as a business model. But even that take on the situation is beginning to look interesting, as Verizon's FiOS is winning over some of its initial skeptics in the financial world, who are beginning to recognize that building massive capacity may save the company from the cost of regular network upgrades in future and offer a competitive advantage now.
And finally, the ISPs have a vested interest in disparaging net neutrality: they're already giving their customers a non-neutral net. Companies like Telstra offer metered broadband systems, but then create lists of unmetered partner sites that can be used on an unlimited basis. These sites include music and movie stores, which would be much like a US ISP making sure that visits to the iTunes Store or Hulu used up large amounts of monthly bandwidth but that its own music store and preferred video streaming partnerdid not. Which would you start using in that situation?
It's hard not to detect a fair degree of smugness emanating from the executives. They have found a model that works well for Australian ISPs, but that's hardly an indication that they've found something that is working well for Australia, or that will apply to other markets. Net neutrality may not be a problem for them, but that's not exactly evidence that their system is problem free.
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