It took a visiting celebrity to remind us what we already know. Broadband in New Zealand sucks. Stephen Fry wasn't alone.
The Daily Reckoning managing editor Joel Bowman had a similar experience last week. "We hope you enjoy today's issue of The Daily Reckoning, dear reader," wrote Bowman. "It's costing us a fortune to produce; NZ$0.68 per minute (up to NZ$29.90 for 24 hours), to be exact."
That's what his hotel was charging him for accessing the internet. Strange. Especially considering the hotel gave him such an excellent breakfast. "When we're overfed and slow to compute, they slam us for thirty bucks for a day worth of something Starbucks outlets around the world give away for nothing. And it's limited data! How are we supposed to reckon when we can't stream our favourite Justin Bieber songs straight into our headphones?"
Good point. For nearly two decades we've lived under the choking effect of internet on a meter. It's been happening for so long that we think it is normal - like peasants grateful for the crumbs from the Telecom banqueting table. Just three other OECD countries - Canada, Australia and Iceland - employ the restrictive use of monthly data caps to their internet populations. The rest of the world doesn't, or has caps so large - 250GB - that no one notices. New Zealand internet providers typically charge $2 per GB for excess usage, but the cost to produce a GB is about $0.08
These are just some of the facts in a paper delivered by Canada's Carleton University professor of journalism and communication Dwayne Winseck. He was speaking at the New Zealand Commerce Commission's "The Future with High-Speed Broadband Conference" which coincided with Fry's grumpy rant about our hopeless broadband in the present.
It's a superb piece of research showing clearly why our Commerce Commission should act now to prevent a looming light-handed regulation catastrophe - the unchecked monopolisation of the market by Sky. Which we peasants know has about as much chance of getting fixed as pigs getting airborne.
But while we know our government and Commerce Commission remain captured by free market ideology which means they'll always favour big business over the public good, you have to wonder how long they can keep the fiction going.
Winseck: "As Nicholl (2002) observed, during the free market fantasy years between 1989 and 2006 Telecom's monopoly remained largely unscathed, the regulator weak, unbundling rules dormant, no overarching policy framework for telecoms, broadcasting and internet adopted and broadband networks remained badly under-developed and over-priced ."
Winseck is quoting from Light-Handed Regulation of Telecommunications - the Unfortunate Experiment which shows just how detrimental this approach to the telecommunications market was. In 2002 New Zealand was at the bottom of the pack for broadband connections (26th out of 32 OECD countries), with roughly one connection per 100 people, compared to an OECD average more that four times that level and nearly seven connections per 100 in the US, 8.5 in Iceland and Denmark and just over 11 in Canada. Meanwhile Korea was way out in front with 22 connections per 100.
Fast forward to the latest data, and despite the eventual introduction of regulation which showed positive effects for New Zealand internet users in 2008, by 2010 we are still at the bottom of the heap. New Zealand's broadband conditions relative to other countries, (weighted averages for broadband penetration, price and speed) show we have slipped from 21st to 28th (out of 34 countries).
"This reflects the fact that other countries are also pushing similar initiatives, too, seemingly faster than New Zealand," says Winseck.
So while the government continues to trumpet its ultrafast broadband initiative as the answer to all our problems, the reality is we are so far behind that by the time anyone gets fibre to the home, the world will have moved on again, and New Zealand will continue to languish at the bottom of the heap. Especially if we continue to choke use with data caps.
Depressingly Winseck highlights yet another blunder that our Commerce Commission is tiptoeing around - Sky's unbridled dominance in the market to the detriment of users.
Suddenly internet providers all over New Zealand are providing unmetered plans for Sky's video content. That's right - download all you can eat, unlimited data - as long as it's Sky. Vodafone and almost all major internet providers have entered into such unmetered deals. Telecom has a similar exclusive arrangement in place with its Tivo service, also providing unlimited, un-metered video content. Datacaps can be overlooked in favour of lucrative contracts with pay-content services.
The obvious question is what the...? How is it, when we've been told for decades that unlimited internet plans are unsustainable and too expensive, that they are now not a problem? Such arrangements are worthy of scrutiny because they give Sky privileged access to the internet subscribers of Vodafone, Orcon and others that is denied to other content providers.
What this situation creates is an uneven playing field. Internet providers waiving datacaps in some cases, but not others. And one content provider getting no data-cap while others are throttled. By treating internet traffic differently, Sky's exclusive deals have the effect of preventing other contracts to provide online audiovisual content that compete against Sky. If it's Sky traffic it can be un-metered. If it's anybody else's it can't. In other words the deals discriminates on the basis of affiliation, not on the basis of service-based pricing.
In his paper for the Commission - Competition in Digital Media Markets: Implications of Audiovisual Content Distribution on Broadband Networks - Victoria University lecturer Peter Thompson addresses the wider issue. "It is well recognised in industry circles that the nature of certain contractual undertakings between pay-TV and telecommunication providers has compromised the 'common carrier' or 'net neutrality' principle of telecommunication services and restricted opportunities for new entrants to the market for online distribution of televisual content services."
Our Commerce Commission ought to be looking at such arrangements, especially to determine if there are other lock-out clauses in the contracts, such as Sky prohibiting other video providers offering content to the internet providers' subscribers.
"The arrangements cement Sky's place at the cross-roads of every distribution platform for TV and entertainment media in New Zealand, except Freeview," says Winseck. In entering into such deals he says the internet providers have fortified Sky's stronghold over content rights markets in New Zealand, and the region. "The telecom-ISPs appear to have been defanged as effective competitors in both distribution and television markets."
You have to admire Sky's foresight - locking up video content deals on the net before anyone else can get a look in. In effect Sky is leveraging off data caps - removing them for its own content and saying to New Zealand internet users "sure you can have video content, as long as it's ours". But Sky's cleverness is only possible in the absence of regulation and a because of a Commerce Commission blind to the damaging effects of monopoly power - just as it was during "the unfortunate experiment", with its light handed regulation of the Telecom monopoly.
If the government is actually serious about improving New Zealand's woeful internet service and getting something back on its $1.5 billion ultrafast broadband investment, then it needs to look at Sky's control of content. Winseck points out the new fibre network, which will supposedly usher in a new era of internet connectivity here, is wisely based on "open systems integration" architecture.
Fundamental to the seven-layer model is openness across all layers - "from the physical hardware buried in the ground and at the bottom of the 'stack', through to the software and protocol layers in the middle of the network, up to the things we do with the network and the content services that run over-the-top (hence OTT television)." Making sure the top layer - content - remains open to all comers on equal terms is crucial to ensure that the new network doesn't end up being monopolised and stunted like the internet we have now.
Winseck says Sky's overwhelming dominance of New Zealand's small media economy coupled with a restrictive copyright regime is "turning internet access providers into gatekeepers who do more to regulate what people can and cannot do with internet media than to facilitate the widest range of uses possible."
It's good that the Commerce Commission is at least inviting discussion on these issues. But is telecommunications commissioner Ross Patterson free to act in an area where broadcasting and telecommunications collide? At the moment he's in an invidious position. He is no doubt being lobbied heavily by Sky. His tenure is up for renewal. And he knows the government will not welcome any recommendation for an inquiry or regulatory intervention. But when there is a problem related to market competition, it's his duty to raise the matter with the Commission.
Will he? Or will the Commission simply repeat the mistakes of the past?