Gurstein, Michael on Thu, 3 Mar 2005 05:29:44 +0100 (CET)

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<nettime> De-Peering comes to NZ (next the world?)

New Zealand Herald: Science & Technology

Juha Saarinen: Paying the price of peer pressure


How would you like an internet where your neighbour can watch webcasts
of the latest Peter Jackson film premiere in Wellington, but you can't?

Let's imagine that you come up with a Kiwi version of online auction
site Ebay. It is a big success but you have to pay your customers'
internet provider for them to get to it.

This is already happening in New Zealand thanks to Telecom and
TelstraClear using "peering" as a business weapon.

In simple terms, peering means network operators agree to exchange data
instead of swapping cheques for bandwidth charges.

Peering usually takes place in well-connected exchanges (there are two
in New Zealand: the Auckland Peering Exchange and the Wellington
Internet Exchange) and is a cheap and effective way to boost the
performance of the internet.

As Citylink's Neil de Wit says, it's the internet equivalent of creating
a big local-call area for New Zealand instead of making everyone dial

So effective is peering that the Indian Government is building four
internet exchanges and plans to connect all providers in the country to

In New Zealand, peering is entirely voluntary, which has worked well -
until now.

Take this example. Last December, Citylink set up a webcast of The
Return of the King premiere. New Zealanders with broadband connections
could see Jackson and the Rings gang on their computer screens, live
from Wellington.

But Xtra customers could not see the webcast because Telecom didn't peer
with Citylink for it.

Likewise, popular online auction site Trademe found out the hard way
just last month how important peering is.

That's when Xtra, without warning, stopped peering at the Wellington
Internet Exchange. Trademe's bandwidth charges tripled as data went via
Auckland instead and its 200,000 subscribers with Xtra accounts were
served either slowly or not at all during the site's peak hours.

TelstraClear officially put paid to peering last week, telling customers
that it will no longer peer with them for domestic traffic from November
1. That's rich, because Clear was a driving force behind New Zealand
peering before Telstra's acquisition.

So why do TelstraClear's bean-counters want to tear down the network
connections to the peering exchanges? Because it can make more money by
de-peering, even if it means degraded performance and increased costs
for internet users.

If it had simply been a matter of paying for peering, most providers
could have worn it. But TelstraClear is quitting the peering exchanges

Instead, future peering arrangements will have to be set up elsewhere,
with providers buying expensive circuits to TelstraClear's network, plus
paying traffic charges. Providers who buy international bandwidth from
TelstraClear have to pay for national as well if they want to send data
to the telco's customers. That's the business case in a nutshell, and
the reason TelstraClear doesn't want to peer.

Playing peering games is safe, because it's quite hard for customers at
the end of networks to see what's going on with their traffic. Users are
more likely to assume the problem is with the site they are trying to
get to, and not the network connection. Guess whose help desk gets the

Some of the arguments against peering centre on "content generators"
such as Trademe and the New Zealand Herald - websites that send a lot of
traffic but don't receive anywhere near as much.

TelstraClear argues that this is equivalent to giving providers free
access to its network and that it has to spend money on expanding
capacity to accommodate the increasing incoming data.

Fair enough, it seems, except that it's TelstraClear customers who
request the data in the first place.

And TelstraClear already charges them for traffic, make no mistake about

The content generators also pay their network operators, so there is no
free ride for anyone here.

Will Telecom, never an enthusiastic peer, follow TelstraClear's example?
Tim Lusk, general manager of wholesale services, declined to give a
simple yes or no answer to that question, but spoke of "a series of
ad-hoc arrangements for the exchange of IP traffic" in New Zealand.

He said they were "proving inadequate", without explaining why. Any
changes would be implemented early next year, after discussions with
customers and a look at international practice, Lusk said.

The Trademe incident and Lusk's comments point to Telecom following
TelstraClear's example, and ditching peering at some point.

If that happens, the New Zealand-wide "local calling area" will be gone
and it will be the norm for national data charges to be passed on to
users. The fast and affordable national connectivity we're used to will
be gone, so forget about stuff such as internet radio and free

Trademe is already considering moving overseas to avoid paying the
"telco tax" and other content providers will follow it, unless they can
strike a deal to get access to TelstraClear and Telecom customers.

What can smaller providers do? Regulation is likely to be a failure.
Across the Tasman, the Australian Competition and Consumer Commission
had a go at regulating peering in 1998, but succeeded only in creating a
monopoly after it allowed the gang of four - Telstra, Optus, AAPT and
OzEmail - to exchange data with one another, but exclude everyone else.

The commission is revisiting the issue this year, and may take a more
heavyhanded approach in regulating peering.

Not content with waiting for the commission, however, smaller internet
providers in Australia have banded together and built independent
peering exchanges. These now carry more than half of the country's
internet traffic, without any involvement from the big four.

New Zealand providers may well want to take a leaf out of the Aussies'
book and start similar work now to avoid being held to ransom by the
twin-telcos. After November it will be too late.

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