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Explainer: net neutrality

Is the internet free – or a bird on the wire? David Fraiz

Net neutrality was succinctly described in a recent study as “the belief that ISPs [internet service providers] must treat all internet content equally”.

Without net neutrality we see situations such as the one in 2008 where the American ISP ComCast limited traffic on peer-to-peer file-sharing service BitTorrent.

ComCast argued this was justifiable to keep internet traffic flowing for everyone; opponents argued it was to disadvantage BitTorrent from competing with ComCast’s own cable TV business.

Last year, the US Court of Appeals for the District of Columbia ruled in favour of ComCast.

This set the precedent that any US-based ISP can throttle – limit upload and download speeds to regulate network traffic – or completely eliminate internet communication to and between its competitors.

Corporate vs consumer

Net neutrality depends in part on existing regulatory frameworks and the economic model underpinning a country’s internet provision.

A pay-for-bandwidth model, as used in most countries – including the US, Canada and Japan – places no restriction on the volume of data consumed.

With the increase in high data rate internet services such as internet television, the proliferation of peer-to-peer file-sharing and mobile applications, ISPs have argued that a degree of “prioritisation” when it comes to internet traffic is necessary for maintaining internet services.

Opponents argue this prioritisation will produce a “corporate internet” and a level of corporate censorship of the internet.

How realistic are such claims? Of course, it’s hard to know.

Some reports indicate large ISPs such as Verizon Wireless and AT&T may have engaged in activity that effectively blocked internet communication that was not in their interests.


Australia uses a pay-for-data model (sometimes called volumetric pricing) and has regulatory frameworks that prohibit anti-competitive behaviour. These frameworks also protect consumers against discrimination.

It may surprise some Australians to learn Australia is not net neutral. In 2004 the Australian Competition and Consumer Commission decided against imposing a net neutrality ruling, arguing that it would negatively affect competition in the marketplace.

Indeed the pay-for-data model encourages ISPs to transport their customers’ data as quickly as possible. Data-hungry customers can always pay for more data when their quota is exhausted.

“Free” services

As an example of non-neutrality, some Australian ISPs – see Telstra’s Bigpond Unmetered or iiNet’s Freezone – provide services, such as internet television channels from affiliated partners, that are “free” to their customers.

“Free” typically means the service will never be throttled and does not count towards customers’ monthly data usage.

Clearly, the quota-conscious customer has incentive to favour such free services over access to the rest of the internet, which is “non-free” and that does contribute to their monthly usage.

Assuming YouTube and Skype are “non-free” services, from the point of view of the ISP, customers can quickly exhaust their monthly data usage by accessing these services, and the throttling that follows in some cases will effectively prohibit use.

At this point “free” services, that may be in direct competition, have an effective competitive advantage.


Japan’s strong, long-standing net neutrality emphasis has arguably made it the leader in broadband technology, speed and pricing.

The Netherlands recently moved in favour of net neutrality and the US is in the midst of moving towards a pay-for-data model while the government vigorously debates net neutrality legislation.

Although the impact of net neutrality varies between countries, the internet is a global system. This means Australia is not immune to the policies and directions taken in other countries.

As the internet is central to the public interest it would be careless to dismiss net neutrality as some other country’s problem, or to consider only its economic impact.

Whatever course Australia takes, it is clear that we must understand the role of net neutrality for a successful internet.

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