Tough year ahead for New Zealand ISPs
This year, 2011, was always going to be challenging one to be an Internet Service Provider (ISP) in New Zealand.
We knew the world was going to change drastically in 2011. IPv4 was going to run out, some sort of new copyright legislation would emerge and Ultra-Fast Broadband will be deployed any day now.
Add to that a series of amendments and variation requests from Telecom on its operational separation, a reworking of the lawful intercept legislation on the cards, increasing demand for Internet across the board and it is clear that this kind of change is not superficial or incremental, but a deep-rooted transformational change to the sector.
It is in fact the kind of stuff that wakes you up at two in the morning thinking in earthy Anglo-Saxon. The challenges raised are significant and the way we confront them will shape the New Zealand Internet for years to come.
All of these challenges are likely to in some way cause conflict with the underlying principles of the Internet, namely those that say that things are open and freely available, that people can access and use the works of others with the minimum of external control.
These conflicts are found in copyright, to balance and determine the rights of the consumer to acquire and use material versus the rights of the owner to exploit their creative work; between the status of ISPs as "common carrier" and the legitimate needs of law enforcement to intercept criminal activity; between the business models of incumbents and the desire of consumers to produce and consume more and more digital data.
Before digital production and subsequent dissemination via the Internet, we knew how to deal with the economics of scarcity in a world where we had to make and ship and pay for physical things.
In a digital, interconnected world, we have abundance. Making a digital copy of something and transferring data across vast distances is a marginal cost.
We now do sharing, copying and deriving new ideas from others without thinking twice about it.
We need new models to deal with abundance over scarcity and the constantly increasing demand to download new things.
If there is a disincentive to use then individuals will either find ways around it, or simply not engage. This is not a desirable outcome as disengaged consumers are a disaster for a digital economy.
Online businesses need to understand that the only economic rule that really applies on the Internet is "willing buyer, willing seller". If nobody will buy your product at the price you would like, then you either have to give it away or find a more amenable business model.
This new law will pose some major challenges not to mention costs to ISPs, and I would encourage everyone in the industry to make submissions on a discussion document to determine how exactly the process of notice-and-notice will work.
The document also asks how the Copyright Tribunal will operate and what costs ISPs will incur to enforce the new regime and it's vital that Internet providers' voices are heard.
Next up this year, the government's Ultra-Fast Broadband project promises abundance in the form of widely-available, high-speed connectivity within New Zealand.
The UFB intends to deliver network access at speeds the legacy copper infrastructure can't deliver and makes it possible for new entrants into the ISP market to differentiate themselves on service.
For ISPs, this is great news but there will be some hurdles to climb as providers figure out how to cope with the increased demand that comes from lower barriers to use and abundant digital content such as high definition video.
There are some concerns about the ability of the national peering exchange infrastructure to cope with this additional high traffic and there are definite limitations on the ability of the international connections to service the demand at low cost.
We may end up with a situation where national traffic is cheap but international speeds/costs do not change much - certainly a problem when the majority of Internet demand in New Zealand is for international content.
The clearest conflict between scarcity and abundance is the widespread presence of data caps across New Zealand ISPs. Data caps with most providers tend to be relatively small (10-40GB) and overage charges relatively high ($1-$2/GB).
While the origins of the data cap (see the "poison from New Zealand") are in the costs of international provision, there is a weaker argument for preserving them for national traffic. It could be said that having data caps for national traffic is a form of artificial scarcity.
Zero-rating or unmetering national traffic would be a step forward to encourage the growth of innovative content industries within New Zealand and to bring back many of the content providers who host overseas due to reasons of cost of delivering national traffic.
Artificial scarcity can also be found in the transition from IPv4 to IPv6. APNIC annnounced in April that it was moving to the final policy phase of IPv4 allocation. Members can now only get one small IPv4 allocation (/22 or 1024 addresses) and must use this to transition to IPv6.
While we are on the edge of an abundant address space, the cost of the transition remains high.
Organisations that need IPv4 space will engage in questionable activities such as routing unused space, trading surplus address space and similar. The grey or black markets are emerging and represent a threat to the integrity of the current Internet.
Uptake of IPv6 is slow - less than one per cent of current Internet traffic is IPv6 - and there will always be a point at which a user wants material which is only hosted on IPv4 accessible servers.
The mantra in the industry seems to be "there can be no IPv6 until we are all IPv6" and wide-scale deployment remains a major problem.
Those are some of the challenges facing New Zealand ISPs - constrained infrastructure, a couple of external threats and a tension between the costs of providing service and the demands of consumers.
Do we get to abundance this year? I don't think so, but the journey will be fun.
Stu Fleming is Managing Director and Chief Technical Officer of WIC NZ Ltd, Dunedin-based wireless ISP and creator of Wicked Networks free wireless Internet service
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