Is net neutrality about to reach end of the road?

MIKE O'DONNELL
Last updated 05:00 16/08/2014

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OPINION: I'm cleaning out my desk at Trade Me, both figuratively and literally. After 10 years of rollercoaster riding at New Zealand's largest website, it's time to have a lash at something else. Hopefully at a place where I'll no longer be the oldest employee.

It's funny what you find clearing out desks. Among my detritus is one of the remote control toy cars we used for the launch of Trade Me Motors back in 2003, a copy of the media pack Fairfax produced when it bought the company in 2006 and an ink stamp that Sam Morgan had made up, which says simply: "Woo Hoo! Sam."

Another note I came across from Sam was one reminding us to keep our webpages "skinny", so they would load well on the dial-up web access that still accounted for about half the people accessing Trade Me in 2005. Broadband was switched on in New Zealand by Telecom in 1999, and only became the "normal" way to access the web in early 2007. Until then it was very much a two-speed internet: A fast lane for the rich and well-connected, and a slow lane for the poor and ill-equipped.

Right now a battle is waging in North America over the very same issue, but in a different context as the US Federal Communications Commission (FCC) closes its public consultation on whether the US Government should approve new internet rules. These look set to deliver higher speed internet for those able to pay for it - and congestion for those who can't.

Critics - including Google, Reddit and Amazon - say it will deliver a two-tier internet and move control of the web to deep-pocketed ISP and cable companies like Verizon and Comcast. Protests have been long and loud, including a series of pavement-squatting rallies similar to the "Occupy Wall Street" protests. The catch cry has been "Save the internet" and the public outcry made the FCC extend its deadline for submissions by two months.

The core concept here is net neutrality and specifically the end of it. Net neutrality is a simple concept. The internet is essentially a massive set of pipes which deliver data packages (be they voice, image, text or numbers). Net neutrality says that all data needs to be treated and transported equally, no matter who sends it. The proposal being looked at by the FCC means some companies can buy their way into the fast lane, leaving others in the slow lane.

There is real potential for that speed differential to be used to deliver market dominance. If I wish to launch an online firm challenging an incumbent, but can't afford to pay the higher rate the incumbent is able to pay, there's every chance I'll never be able to compete effectively. The opposite is also a possibility.

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President Barack Obama hasn't exactly hosed down concerns by appointing Tom Wheeler, the lead lobbyist for the cable and wireless industry, as chairman of the FCC. This looks very much like hiring the chief poacher to regulate game-keeping. By the time consultation closed at the end of July, the FCC had received about a million submissions.

It's likely to be next year before a final call is made, and the FCC decides whether to side with the small group of big ISP companies or the big group of small internet users. It also begs the question around what exists to stop the same thing happening here in Godzone.

What would happen for instance if Sky TV bought Orcon to launch a video on demand service, and gave this service access to a fast lane but forced competitors to take the slow lane? Likewise what if the newly branded Spark limited the rate at which Quickflix operated across the Spark network by congesting the interconnection, launched a competing service and then sought rent to relieve the congestion? Or if Slingshot chose to fully harness the "traffic prioritisation" policy buried in its terms and conditions.

First and foremost we have the Commerce Act, which protects against practices likely to substantially lessen competition in the market, and either of these certainly would. And unlike the US, our telecommunications ombudsman isn't a former industry lobbyist. We also have a pretty free and open market when it comes to ISPs, with more than 70 to choose from (unlike the US, where Verizon and Comcast enjoy heavily consolidated market power).

Then there is the crap customer-experience protection. If a provider started throttling back a free but loved online service like YouTube or Wikipedia, it would run the very real risk of losing customers. Brand would also take a hit. Dear old Simon Moutter is investing around $20 million to rebrand Telecom as Spark, in part to bury the company's historical reputation for price gouging and autocratic behaviour. He'd be a mug to risk digging up that carcass.

Meanwhile back in the States, the pundits will wait for smoke signals from the FCC - and those pundits include the disruptors and the start-up community.

Sam created Trade Me in 1999, but it took five years for it to get a real head of steam. If one of the (then) local internet giants like Xtra/MSN or ACP had been able to divert us to the slow lane, while giving a leg up to their own ventures, the rollercoaster ride would have been pretty short-lived.

Mike "MOD" O'Donnell was Trade Me's COO. His Twitter handle is modsta. He's currently unemployed and looking forward to fitting side draft Webbers to a 1984 Ford Capri.

- BusinessDay

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