In his most recent podcast with Niall Kennedy, Om Malik tips that the ‘Two-tier Internet‘ is going to be a massive issue to watch in 2006 and what he says makes an awful lot of sense. Especially in Australia.
Briefly, what Malik calls the ‘two-tier internet’ refers to carrier’s and ISP’s abilities to shape wide area traffic and prioritise certain traffic. You don’t have to think very hard to realise how this could massively advantage Telstra.
While Telstra’s forays into content have for the most part been lampooned, it could end up being their single biggest point-of-advantage in the carrier/ISP wars if two-tier internet is allowed to become a reality.
Consider this. I have a 1.5Mbps connection. Why? So my Gmail loads faster? No, even at 256Kbit/sec, GMail works pretty fine thankyou. Rather I upgraded my connection, specifically so I could watch streamed NRL replays and streaming horse racing. They’re both Big Pond video feeds. Now, if Telstra could offer me a competitive 512Kbit/sec plan but when I come to watch Big Pond video content, Telstra opens up a great big 6Mbit/sec pipe that lets me watch full-screen, television quality then sign me up, I’m hooked. While, I’m there, you can upsell me to your VoIP service and movies-on-demand (there’s got to be a Foxtel conflict somewhere down the road).
Meanwhile, I’m an independent content/app provider and I want to make sure my users get big fat pipes too. So, I have to pay off the carriers to ensure my traffic gets prioritised. Who’s the first carrier I’m going to fork up my payola to. Telstra, of course, because it still dominates the market. In turn, the user has more reason to subscribe to Telstra because more apps/content go faster.
To ensure this advantage, Telstra has to do its best to make sure that bandwidth doesn’t get too cheap. When basic broadband rates get up to a couple of Mbit/sec, most of your streaming services are going to start performing pretty well.
At a Christmas party last year, I was chatting to Steve Dixon, the local head of Riverbed, a networking company that specialises in optimising wide area traffic, and he claimed he was almost drowning in interest for his kit. Optimising wide area traffic is certainly shaping up as the hot area of communications in 2006 and the picture I’ve painted above gives you some indication as to the kinds of reasons why.
BTW, as this issue crops up in 2006, the ACCC is certain to look very deeply into it, but it’s going to be a tough argument to stop a carrier prioritising traffic (as opposed to limiting traffic). Recently, Mark Jones and Brett Winterford published a piece in the Australian Financial Review, where they questioned carriers as to the possibility of Skype traffic being throttled. In our Epitome review of the story, we questioned the value of the story, based on the fact that no carrrier was going to get away with throttling certain applications. Prioritising traffic is a whole ‘nother kettle of fish, though.
Filed under: Broadband