KEY POINTS:
It isn't just our groaning, overburdened infrastructure and stifled competitive environment that have been throttling New Zealanders' internet experience.
Another aspect contributing to our failure to get the most out of the internet relates to a concept called peering and a three-year standoff involving the two largest providers
of internet services.
Internet peering is all about the efficient exchange of data between service providers. It is an important concept because the internet is essentially a huge network designed to funnel information around the globe.
The system is designed to be robust to a nuclear war-resistant level. If one connection between two points in the network is out of action, data traffic will take another route to reach its destination.
That said, the fastest, cheapest and most efficient connection between two users is the most direct route. An email sent from Wellington to the Hutt Valley should not go via Auckland or, worse, the US. Unfortunately this is exactly what has been happening.
While there are peering exchanges in main centres which act as clearing houses to "keep local traffic local" industry heavyweights Telecom and TelstraClear both "de-peered" about three years ago and don't use them.
By refusing to play any more, snatching up their internet infrastructure toys and going home, the two big boys have made the system a lot less efficient and more expensive for everyone, including themselves.
Across-town traffic has indeed ended up travelling over expensive connections to the US and back.
Telecom and TelstraClear have a valid economic gripe behind their decision to de-peer. Peering is about sharing - the free exchange of data is to everyone's benefit. The big guys argued that as the two dominant infrastructure owners, responsible for pumping the majority of internet data around the country, peering for them meant giving the smaller internet service providers (ISPs) a free ride.
But times have changed. In the new era of an operationally-separated Telecom, the company's newly-independent wholesale division is bending over backwards to be nice to its customers, the country's other ISPs. Peering is back on the agenda, with Telecom Wholesale proposing a solution to the issue and initiating discussions with the industry on how it should be implemented.
They have given the issue a different name: "local interconnect".
"We didn't want nine different views of what peering might or might not be to colour the discussion and just end up with a big argument about what it is or it isn't," says Gerard Linstrom, Telecom Wholesale's industry consultation manager.
"[We wanted to] just focus on what is the problem people want to solve, which is keeping local traffic local."
Linstrom's industry consultation role is a new senior position within Telecom Wholesale, the creation of which is itself an example of how the division, under the leadership of general manager Matt Crockett, is morphing into the more inclusive operation it needed to become.
The industry appears to be cautiously welcoming of the local interconnect proposal and Telecom Wholesale's other consolatory overtures. It is early days, however, and the industry is waiting to see how Wholesale manages to deliver on its rhetoric.
While Crockett appears to be doing a good job building bridges, not surprisingly tensions remain between Telecom and its competitors.
TelstraClear chief executive Allan Freeth accused Telecom this week of giving the Government and consumers a "two-finger salute" after Crockett's comments that local loop unbundling was 16 months away.
Will TestraClear change its stance on peering as a result of Telecom's latest move? Crockett says TelstraClear is one of the key parties with whom Telecom Wholesale will be consulting.
"We think this [local interconnect proposal] is a workable model," Crockett says.
"It's not dissimilar to interconnection models we have around calling, for example. I'm looking forward to more detailed discussions with them around it but we do think this is a model that addresses the core problems that it is trying to solve."
TelstraClear spokesman Mathew Bolland says since the company de-peered and began charging a commercial rate for the use of its network, internet performance had improved for its customers.
"We'll watch Telecom's proposal with interest, but we will continue to operate on the basis that we deliver a good service for customers and achieve a commercial return for use of our assets," he says.
InternetNZ president Colin Jackson says he hopes TelstraClear does change its stance.
"TelstraClear has lost customers in Wellington over peering because people who are providing content in Wellington don't particularly want their traffic shipped offshore just to connect to the third-party ISPs in New Zealand," Jackson says.
