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Charging per gb to use internet is ridiculous

15 Oct 2012

New Zealand is in the thick of probably the biggest change to its tele-communications landscape in the past 50 years, yet a hangover of the old Telecom empire lingers - the internet supply industry's insistence on continuing to charge on a GB usage basis.

So much about this is fundamentally wrong. Indeed, it is anachronistic to a country moving toward prevalence of the UFB and ultra fast connectivity everywhere.

Why? First, charging for GB usage is understood and accepted on a network where your typical speeds don't exceed 10mbps of speed either up or down, and are typically slower, especially on home or business ADSL connections which have implied limits. The potential therefore for costly blow-outs is limited by the top-end speed these pipes can go.

However, if you significantly increase the speed, as is happening with the UFB, research shows that data usage increases exponentially. It isn't linear, it is literally hockey sticks. The reason for this is the increased access to all levels of service and interactivity available through the internet that we have previously been unable to delve into.

So, increase the speed, and you exponentially increase the data usage.

Second to this, understand that shifting traffic around New Zealand is essentially free. It carries very little cost, yet Telecom wants to charge smaller players in the market to hand over traffic, essentially packages changing between different couriers. Thankfully, this was stopped from occurring some time ago.

Admittedly, Telecom would have the most traffic handed over of any ISP but no ISP guarantees to receive bandwidth from any other, so I don't understand why this would ever be an issue.

It may become so, possibly in 50 years when connectivity reaches obscene scaling proportions, but we are several technological leaps from there. Hence, when ISPs say we don't get charged to view New Zealand sites or we get "unlimited access" to the likes of Sky TV, we should all recognise this as the misnomer it is.

However, national transit isn't the issue. The issue is internationally shifting traffic.

Typical New Zealand businesses have 85 per cent-plus of all internet traffic usage as international usage and residential usage is even higher. Consider every time you go to Google as an example of international transit.

There is only one way out of New Zealand for international transit - via the Southern Cross cable network - and bear in mind this is still very much controlled and largely owned by Telecom.

Now, that poses some problems when you consider the ramifications of competitive pricing in the marketplace.

However, probably the most interesting thing is that we, as ISPs, do not buy international traffic in GB usage amounts. We buy it in speed. How much data you try to put down the pipe at one time is completely up to you and is known as your "contention ratio". Hence why charging for GB usage is just a commercial construct for maximising profit.

So, what's the alternative?

Some suppliers allow you to buy "dedicated" unlimited international bandwidth, but again this is largely unaffordable and a dumb idea in my mind. Why have a 50mbps national pipe but have a 2mbps international breakout - especially when most of your transit is going internationally as is typical?

The right option is to have a guaranteed commitment on the amount of inter-national transit you receive and then the ability to "burst" into the maximum speed of your pipe through a shared pool system with rankings based on the base amount of international transit you buy.

So, in the aforementioned example if you buy 2mb international guarantee, you get that no matter what, but then you can also access a shared pool to burst into the headroom remaining on your 50mbps pipe.

What dictates how fast you go will be determined only by the contention ratio on that shared pool and who in the rankings is trying to access traffic at the same time as you are.

Now, that is truly a high-speed, unlimited, fair internet model and I hope New Zealand ISPs follow suit and get on board. That way, we all benefit from the investment we are making in building a high-speed national network. Without it, we are heading for big bills and bugger all effective change in speed.

Patrick Kershaw is founding director of One Fibre, New Zealand's largest UFB provider, with Chorus exclusively servicing the commercial sector.

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