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Net Neutrality

Martin Krafft advocates a model of Internet access where advertisers pay for the Internet connection [1]. The first problem with this idea is the base cost of providing net access – which in most cases is wires to the premises. Every service that involves a cable to someone’s house (Cable TV, Cable/DSL net access, or phone service) has a base minimum monthly fee associated with the expense of installing and maintaining the cable and whatever hardware is at the other end of the cable. For DSL and basic phone service the pair of wires ends at an exchange and takes a share of the DSLAM or a telephone exchange. It seems that the minimum monthly cost for any wire that goes to the house in Australia is about $20. So if an advertiser makes $0.20 per click (which I believe to be higher than the average price for Google Adsense clicks) then the user would have to be clicking on adverts more than 3 times a day. This might be viable if an ISP runs a proxy that inserts adverts into all content (which technically shouldn’t be that difficult). But modifying content in-transit to introduce adverts is something that the net-discrimination crowd can only dream about.

3G net access has the lowest per-user costs. Based on current data costs it seems possible for an ISP to run a 3G service with bills for users as low as $15 per annum if they don’t transfer much data. Recouping $15 might be easy but it’s also a small enough amount of money that most users won’t mind paying it. What we really need is to have more competition in the 3G ISP business. When I investigated this issue last month I found that there are few 3G Internet providers in Australia and the cheapest is Dodo at $139 per annum with a 15G limit [2]. With a bit more competition I’m sure that someone would offer a really cheap plan for 1G or 2G of data access in a year.

Martin complains about users paying twice as “users pay to access the network (which is like paying a taxi to get to the market), so that they can visit sites where advertisers make money showing ads to the visitor”. But if the advertisers were to pay then there would be a lot of inefficiency in determining how much each advertiser should pay which would result in extra expenses – and therefore providing the service would cost more. I don’t think that paying for a taxi to get to the market is a bad thing, personally I prefer to save money and use a bus or tram. I think that the best analogy for this is comparing using your own choice of a bus, tram, taxi, etc to get to the market or having the market operator provide taxis for everyone and then make everything really expensive to cover the significant costs of doing so.

Finally there is the issue of video transfer which uses up a lot of bandwidth. According to both industry rumor and traceroute there is a significant mirror of youtube content in Australia. This means that youtube downloads will be cheap local transfers not expensive international transfers. I expect that most multi-national CDNs have nodes in Australia. So for Australia at least video transfer would not be as expensive as many people expect.

I think that to a large extent the concept of having content providers pay to host the content has been tried and found to fail. The Internet model of “you pay for your net access, I pay for mine, and then we transfer data between our computers without limit” has killed off all the closed services. Not only do I think that net-discrimination is a bad idea, I think that it would also turn out to be bad for business.

4 comments to Net Neutrality

  • The problem with the scheme is that it requires tracking users’ outgoing HTTP connections in order to allocate ISP costs to advertisers. Once the ISPs have such logs, who knows what kind of mischief they’d get into to with them?

  • etbe

    http://madduck.net/blog/2010.02.08:optimise-google/

    Don: Good point, Martin’s post about why he’s not using Google is worth reading in this context…

  • me

    I remember having free dial up with video adverts back in the early 00’s… from memory from goconnect.com.au

    You could hack the mac app with resedit (http://en.wikipedia.org/wiki/ResEdit) to basically delete the window that showed the video.

    From memory it worked well but was massively over subscribed so would take a good 1/2 hour to get a line, then the overhead of downloading video adverts would degrade the service substantially. But it complimented my ihug 300mb dial up nicely :)

    If a freebe option came to market again i would take it up and abuse the hell out of it… but it would never replace my main connection.

  • Mark Purcell

    Russell,

    I know you dismissed exetel during your first round, but I am using their WM A plan, which costs me only 1.5c / MB, ie $15 for 1Gb with no minimum spend and no monthly contract fee. Ie I only pay for what I use, so if your usage is only 1G for the year then your cost is $15.

    I use this as a great backup service for when I am away from my fixed infrastructure.

    Mark