Congestion slows superhighway

WOOD FOR THE TREES: Netflix's arrival and falling wholesale copper broadband prices could spell years of frustration for ...
ROSS GIBLIN/Fairfax NZ

WOOD FOR THE TREES: Netflix's arrival and falling wholesale copper broadband prices could spell years of frustration for home-based internet businesses, such as Steve Galyer's.

Wainuiomata businessman Steve Galyer has a problem shared by many broadband users and he expects Netflix's launch in New Zealand next March will make matters worse.

During the day, the performance of his copper ADSL broadband service trucks along at 5 to 6 megabits per second. However, at peak times, like after the kids come home from school until late evening, download speeds plummet to a lowly 200 kilobits.

Galyer runs a software business, Forest Production Systems, from his home office. His program helps forestry companies work out how much they need to pay contractors, such as logging truck drivers, after woods are felled.

He has picked up a contract with a customer in Uruguay, but sometimes struggles to provide online training to them during the evenings when the network slows.

Vodafone, his broadband retailer, has said there's little it can do.

"Congestion at the node seems to be the root cause of Mr Galyer's slower-than-normal broadband, and we have asked Chorus to investigate a possible upgrade, but until this happens, unfortunately we can't improve Mr Galyer's connection speed," spokesman Brad Pogson says.

Chorus has said the connection is not faulty and exceeds the legal requirements set out by the Commerce Commission, though it accepted the performance of its network in the area could have worsened as more people moved there and used the internet for more things.

Galyer may be better off than others battling with slow peak-time broadband. According to Chorus, services in his street should get an upgrade some time between July next year and June 2016 as a result of the Rural Broadband Initiative (RBI).

For those who may never receive help through the RBI, or who are waiting for fibre connections through the ultrafast broadband (UFB) initiative, the short-term prospects aren't rosy, as there appears little prospect of an under-pressure Chorus digging into its own pocket for upgrades.

Chief executive Mark Ratcliffe announced last year that the company would be "managing for cash" and foregoing investments as a result of uncertainty over the price it will be allowed to charge for access to its copper network.

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Last month he told shareholders at the company's annual meeting that it would also reduce its spending on proactive maintenance, even though that went "against the grain of our focus on being guardians of the network".

The true extent of the pressures on Chorus should become clearer this week. Tomorrow the combined price it will able to charge companies such as Vodafone for a phone line and broadband connection will fall by 23 per cent to $34.44 a month.

But on Tuesday it will find out how much it is likely to be able to charge in the longer term, when the Commerce Commission releases its "draft final" pricing.

Forsyth Barr analyst Blair Galpin expects the price will go back up to between $37.50 and $40 a month, but notes each dollar will have a big impact, adding or subtracting a whopping $22m a year to Chorus' operating profit.

Communications Minister Amy Adams says Galyer's frustration raises the question of whether some types of internet traffic should be prioritised.

"That is where the 'net neutrality' debate has come from in the United States; the point that Netflix is gobbling up all that bandwidth at that time of night."

Netflix viewing accounts for almost 35 per cent of internet traffic in the evenings in North America, according to a report released this month by Canadian internet analytics company Sandvine.

Outside of the UFB and the RBI, the Government can't direct Chorus' investment, Adams says.

"While it is 'managing for cash', you would think it would still be a sensible decision for it to invest to grow its income base."

But she also says it is critical that regulators get the balance right with regard to the price Chorus should be allowed to charge for its network.

"If we don't get the balance right between innovation and investment and low consumer prices, consumers lose out.

"The best outcome for consumers in the long run is probably more about whether we have a market that encourages investment and diversification, upgrades and new technologies, than it is about saving $2 a month in the short term."

Telecommunications Users Association chief executive Craig Young wouldn't comment on that, saying he wanted to keep the association's powder dry till the announcement.

Galyer said he'd be content if the Commerce Commission decided that Chorus should be allowed to charge more for its copper network, but only on the condition that it also had to improve its minimum network performance to "a realistic limit".

Top of his mind, however, is whether he will have to move his office. A neighbour had to stop listening to Taiwanese radio online because of congestion, and as for Netflix: in his view it's a case of a company marketing bandwidth that it simply doesn't have.

 - Sunday Star Times

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