De-peering is costing New Zealand dearly

Infrastructure is now a commodity and has to come at commodity prices for our digital economy to flourish

Some may have been surprised to see Rod Drury buying into the broadband debate recently.

They shouldn’t have been. Drury is a high-tech entrepreneur and a software developer and for such people and their companies’ first-class infrastructure is vitally important.

It isn’t just about the quality either. Infrastructure is now a commodity and has to come at commodity prices for our digital economy to flourish.

Drury wrote a discussion paper called “Securing Our Digital Trade Routes” which can be found at his blog, www.drury.net.nz. He introduces the paper expressing his frustration at the lack of action over broadband access and says it is intended to “spur thought and debate and challenge the status quo”. It has certainly done that, gaining more than a few column inches in the press and drawing an immediate response from the internet service providers’ association, ISPANZ, but more on that later.

In particular, Drury focuses on the emerging debate around peering, where different networks exchange IP traffic locally at peering exchanges. The lack of peering in New Zealand since 2004, he says, is costing us dearly. He says Trade Me’s internet charges increased ten-fold in 2005 when Telecom and Telstra de-peered and much local traffic now travels via Australia.

He then goes on to give an example of his own, with his start-up company AfterMail:

“Email software company AfterMail (now Quest) subscribed in 2006 to a US internet service that provided US phone numbers, conference facilities and capped calling of $US35 per month, for anywhere in North America. While the call savings were useful, the real benefit was appearing closer to US customers. “However, the service was found to be unusable from New Zealand, so AfterMail had to revert to New Zealand phone numbers, making it more difficult to sell and support its product. Voice over-IP services such as this use only a small amount of traffic. It is disturbing that richer internet communications such as desktop video conferencing and high resolution multi-screen conferencing have little chance of adoption in New Zealand.”

He talks about Radio New Zealand providing streaming and hosting it from both New Zealand and the US. Even though 70% of the US traffic is bound back to New Zealand it is still cheaper than paying for domestic transit. The result: “an unnecessary import component to a strong content export story”.

Drury concludes that it does not make sense for one company, solely focused on delivering value to shareholders, should be responsible for our telecommunications infrastructure.

His proposed solution is, among other things, a government-owned fibre network open to all parties and charged on a cost-plus basis. Peering would be managed by a carrier-neutral body.

In the wake of Drury’s paper, ISPANZ called for immediate moves, by the government, to fix the peering issue and suggests government buyers of telco services mandate that their providers peer. The ISPANZ paper provides several such interesting suggestions and then says:

“There is a temptation to consider regulation in favour of peering, but while there might be benefits, ISPANZ prefers self-regulatory models.”

We all prefer self-regulatory models, but there comes a time when you have to stand back and ask whether that approach has delivered. In the case of telecommunications it hasn’t. I’m with Drury.

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