InternetNZ considers barriers to increasing data caps

Report asks why New Zealand's data caps remain lowest in the world

Over the past year, Australian ISPs have lifted their data caps “significantly”, says a new InternetNZ report, as a result of a competitive “data cap war” among ISPs. “Terabyte caps are now common there,” it says, “but New Zealand’s caps remain among the lowest in the world.”

InternetNZ commissioned the report from independent consultant – and former InternetNZ president – Colin Jackson, aiming to stimulate discussion on the stance the organisation should take in attempting to influence future policy on caps, in an era of more efficient and plentiful domestic broadband.

The title, Barriers to Unmetered Domestic Internet Traffic, signals one possible strategy.

High cost and limited supply of international bandwidth is often said to be the leading reason for ISPs to impose low caps. However, the cost of international bandwidth to both Australian and New Zealand ISPs has been dropping, Jackson says, yet this has not been reflected in higher caps and/or lower retail pricing here, as it has in Australia.

The other evident reason for continuing low data caps, the report says, is Telecom’s incumbency in the local loop market. This position is clearly likely to change with the arrival of open access ultrafast broadband (UFB).

“Some ISPs do not appear to have thought about the impact and have not considered that data caps may be forced to rise,” the report says. This may give an advantage to ISPs who have strategised for the arrival of UFB, and hence bring a “shakeout” in the local ISP industry.

If international traffic costs are a material factor in the capping of data volumes (and the vast majority of New Zealanders’ use of the internet involves international links) then there should be room to differentiate between domestic and international traffic, reducing the price of the former, or even zero-rating it.

Some ISPs have experimented with this, Between the first and final versions of his report, Jackson says:

“Slingshot has again begun promoting an all-you-can-eat (uncapped) plan

“Snap Internet removed all data metering for a weekend

“Actrix doubled data caps for some of its customers (although the increased cap has to be consumed off peak; i.e. after 2am).”

One justification cited by ISPs for not zero-rating domestic traffic is a “tragedy of the commons” argument – that some people will become very heavy users of capacity, reducing levels of service to more modest users.

“There is a third position between unmetered domestic and all traffic treated the same, which is to zero-rate some identifiable traffic, usually a list of websites,” the report points out. Again there have been some trials of this concept, such as Orcon’s O-zone.

Asked about the barriers to zero-rating domestic content, 44 percent of ISPs said it would create customer confusion and potential disputes because it is not clear to the user what is domestic content and what international, particularly as caching operations bring some overseas content onshore, but this “varies item by item and from hour top hour”

Some ISPs cited the cost of the domestic network (33 percent) and technical difficulties (30 percent) as the main barriers.

However, 30 percent also cited “lack of commercial pressure”. “ISPs don’t perceive a demand,” Jackson says “If some started not to meter domestic traffic and this became a successful selling point, other would be forced to follow suit.”

Asked about the effect of UFB on data caps ISPs reacted differently from other market players interviewed.

“Content providers and network builders, for instance, all say that data caps are going to need to be removed or dramatically increased for UFB to be a viable service. Some ISPs believe that UFB won’t change things for them or their customers or have not yet considered what changes might occur, although many of the larger ISPs have stated that they are ready to offer larger caps on UFB as it becomes more widely available.”

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