Get real on data caps, peering and Sky TV dominance, says Canadian professor

Carleton University professor tells ComCom conference the high concentration of market power is inhibiting broadband use

New Zealand is viewing its telco market through “rose tinted glasses” and needs to get real about data caps, peering issues and the dominance of Sky TV, says a visiting Canadian academic.

Carleton University professor Dwayne Winseck told the Commerce Commission’s conference on the demand side of the fast fibre networks yesterday that there is a high concentration of market power, with four ISPs (Telecom, TelstraClear, Vodafone and Orcon) dominating 80 percent of the market. This has led to data caps, which inhibit broadband use, he says.

Winseck warns that “the entrenched position of incumbents threatens viability of Ultra Fast Broadband, not just as an economic project but one that speaks to the public and personal life in the ‘digital age’.”

Winseck says New Zealand needs to take off the “rose tinted glasses”.

“The independent ISPs have not thrived,” he says. “There were 140 a decade ago, now there are 60, with four firms dominating the market.”

Winseck gave his presentation on the same day that celebrity Stephen Fry tweeted to almost four million followers that he was disgusted with New Zealand’s broadband. Fry had exceeded the data cap on his host's Telecom plan and so the telco had throttled his service.

“Comcast style throttling”

“I think Comcast style throttling is... for the economy it’s disastrous,” tweeted Fry yesterday.

Fry may have been referring to a decision made by the FCC and Department of Justice in the US following the consolidation of the Comcast NBC-Universal last year. Winseck says FCC was concerned that the merger would unduly favour competing video programmers, so it put in place rules which ensure Comcast must offer TV and film content to other video distributors such as Netflix, Hulu and Apple TV.

In addition Comcast must “not treat affiliated network traffic differently from unaffiliated network traffic”.

Move as a flock

Winseck says when there is a small group of dominant players, they “tend to move as a flock” on key issues such as “peering and throttling, bandwidth caps, (and) agreements with Sky to be entertainment resellers versus competitors with one another, against Sky.”

Winseck points out that Australia, Canada, Iceland and New Zealand are the only markets in the OECD to have data caps. “If bandwidth caps were such a good thing all the top performing countries would use them,” he says.

Instead of trying to cater to excess demand, telcos in countries where there are data caps are trying to “beat it down”. He says that data caps are anti-competitive, discriminatory and are justified by flawed economics.

Peering

Contrary to a paper released by the Commission prior to the conference, Winseck says he has spoken to people in New Zealand who claim peering is a real issue. He told the story of one affected ISP.

“Around five or six years ago, Telstra de-peered in Australia, setting up a new arrangement with the three other large telcos and ignoring all the smaller ISPs and telcos. Telstra de-peered in New Zealand and convinced NZ Telecom to also de-peer. So what had been a … level playing field for all turned into a major disaster.”

Winseck said the ISP explained that major content providers such as TradeMe were forced to buy web services offshore and “allow their Telecom and Telstra customers traffic to trombone out of NZ before coming ‘back home’ again.”

Eventually Telecom re-peered, “with a slightly odd arrangement that is mostly workable, and still Telstra … remain de-peered. They… continue to drive the entire industry to distraction.”


Unregulated agreements between SkyTV and ISPs

Winseck noted that there are a number of unregulated agreements between Sky TV and all the major ISPs – except Orcon. “It’s another example that big telecom-ISPs move as a flock,” he says.

Although these agreements are commercially sensitive he suggests that it is possible they include preferential clauses such as that data caps be lifted for all Sky’s services (that is zero-rated data), and that packaging and presentation of Sky content is likely to remain under Sky control.

Telco Commissioner responds

Winseck told Computerworld after his presentation that there doesn’t need to be a convergence of regulation between telecommunications and broadcasting, before the telecommunications commissioner can act. “I know his remit’s tight, but he has that capacity to say that, if you are going to use the network you are not allowed to discriminate between third-party traffic. He doesn’t have to say broadcasting, it's third-party traffic of any kind. If you are going to use the meter you apply it equally to all.”

Telecommunication commissioner Ross Patterson told a panel discussion following Winseck’s presentation that he wasn’t “disheartened by the level of concentration” in the ISP market.

Later Computerworld asked him why.

“I don’t think it’s the problem that he (Winseck) paints it to be because the size of the New Zealand market with four million consumers, to access five ISPs because he missed out CallPlus/Slingshot,” Patterson says.

“The real issue is how effective are those players in competing. But there are issues where they are ‘flying in flocks’”.

Does the telecommunications commissioner have the power to demand to see those contracts between Sky and the ISPs, Computerworld asked.

“It would have to be a matter that related to something within the Telecommunications Act, that’s just a general proposition. But I've got no comment on anything relating to that particular issue.”

Is zero-rated data is a bad thing? Computerworld asked.

“I think that goes to the net neutrality debate, one of the issues always was that if you have data caps and you have some content zero-rated that it might be a good thing, or it might be a bad thing. It may have implications,” Patterson says.

“We’ve put out a discussion paper and we’ve made some observations, and we’re waiting for submissions and obviously we’ll also be informed by this conference.”