Over the next two days the Commerce Commission will hold a conference in Auckland entitled Future with High Speed Broadband. ICT lawyer Michael Wigley, in the following opinion piece, urges stakeholders to get in early with their concerns.
The Commission has made some initial conclusions – in three issues papers - on key regulatory issues which seem unfounded and therefore potentially incorrect.
As this study is likely to lead to regulation - or no regulation - and the issues are so important, stakeholders should consider engaging before it is too late. Or they will be left behind with negative outcomes. A cardinal rule for regulatory and policy issues is to engage as early as possible.
None of this is a criticism of the Commission. Indeed it is to be congratulated for going out on a limb to do the study and conference. This is highly charged and controversial space, with potential impacts on parties like Sky. The Commission could have ducked this.
The topics are wide ranging and complex, so it’s hard to avoid a relatively light approach initially. Also, it is very difficult to cover these areas in this controversial environment while stitching together short and easy-to-read material. But it needs to be clearly recognised that a light approach has being taken by the Commission in the three issues papers it has released.
In my experience, the Commission often takes this approach of throwing out ideas for comment and later refinement. It starts with a light approach, and moves to the detail. So while we critique the approach so far, we are not at all being negative about the approach. But unless people engage, things can remain unchanged from the starting position.
Following the conference there will be more detailed draft report, on which the Commission will consult before producing the final report.
The point is - get in now to provide feedback, before it is too late, especially where the Commission has set out initial conclusions.
For example, there is the issue of data caps and data charges - certainly a hot topic on which many have concerns. Yet the Commission concludes, in its first issues paper, that there don’t appear to be problems for high speed broadband (speeds of at least 50 Mbps) assuming the current trends of increased data caps and reduced data charges continue.
The conclusion relies heavily on a consumer survey showing there are no particular consumer concerns and on data cap and price trends.
Both those points are close to irrelevant. Current consumer understanding and expectation in a ‘Mb world’ is largely irrelevant. Consumers don’t know what they don’t know as to a high speed broadband environment that has yet to arrive. That’s a point the Commission makes well in its third issues paper, but doesn’t stitch that together with the approach to data caps in the first issues paper.
It’s also an untenably big stretch to conclude that data caps and price trends in a ‘Mb world’ point to similar trends in a ‘GB world’.
That is particularly so given the likely continuation of bottlenecks in the network, such as with international connectivity. Lack of international capacity (currently a largely monopoly position in the hands of Southern Cross) drives down data caps and drives up data pricing. While there are a number of resellers creating some sort of competition, ultimately they are all price takers from the monopoly. So competition is very limited as one party drives pricing. The Commission doesn’t mention this when noting the competition in the market due to resellers. Nor does it mention that a second cable to the US is unlikely to change pricing substantially. A duopoly rarely drives down prices significantly - we only need to look at the market conditions for mobile in New Zealand, with two networks, before 2degrees arrived, to see that.
Ironically a shorter cable to Australia is more likely to engender healthy competition - lower priced services –as the cable costs less and will reach the more competitive cable market out of Australia to the rest of the world. The net effect is to push international prices downwards as this is not a duopoly solution, but rather a different solution.
It’s a big ask to get a second cable up and running to the US, but even if that happens it is hard to see how that significantly improves market prices.
Those international connectivity issues need to be addressed and debated. It may be that, with one or even two cables to the US, the only solution is to regulate the services to ensure economically efficient outcomes.
I haven’t yet heard anyone mention this as an option, yet it clearly must be considered. I’m not saying that regulation is the best solution. Rather, it should be considered as there are signs there will be on-going problems even with two US cables
None of that is mentioned in the international connectivity part of the first issues paper, let alone in the section on data caps. Yet these concerns point firmly to issues with data caps and pricing in a GB world.
On data caps and data pricing, there is a big elephant in the room and it is not mentioned by the Commission. That is so, even though an example – Netflix - used by the Commission – in the third issues paper - illustrates the point. Netflix could provide great services and competition in the New Zealand market if it came here. But it won’t. The Commission notes two of the three reasons why Netflix say they are not coming here. The third reason they aren’t, which is not mentioned by the Commission even though it is noted in the Computerworld article it quotes, is high data pricing and low data caps.
Surely that tells us there are big issues to look at carefully on data caps and pricing when it comes down to high speed broadband (with Netflix downloads measured in the GB not the Mb)?
One of the biggest players in the world is not coming here due to data caps and pricing.
Closing on another hot topic, there’s net neutrality. In less than two pages the Commission largely concludes that, if the ISPs are transparent in their treatment of traffic, there shouldn’t be problems, in part because the general competition law helps protect the position. Leaving aside the fact that few commentators, including the Commission, regard the relevant parts of the general competition law as anything but broken and ineffectual following 0867, etc, net neutrality and all it entails involve key issues for New Zealand, when other countries and consultants have covered the subject extensively.
So stakeholders should seek change early on. It’s hard later to turn back worked-up conclusions. The study and the conference open up an exciting opportunity for debate.
The Future with High Speed Broadband conference, is being held at Sky City, in Auckland. A webcast of the conference is being live streamed on www.futurebroadband.co.nz.
* Michael Wigley is a Telco and IT lawyer. Disclosure: he acts for Kordia and other providers.