To all NZNOG subscribers & ISOCNZ members:
This is pretty long so if you or, more particularly, your organisation have
no interest at all in international Internet connection costs please pass
by.
Last year I circulated some information to NZNOG about an APEC TEL study on
Internet costs, especially the costs of connection across the Pacific (the
concern being that non-US Internet users and ISPs are subsidising US users
and ISPs). This is stated to be because, unlike telephone charging, where
the costs are taken up by the teleco whose subscriber originates the call,
non-US ISPs have to rent circuits and thus pay for all traffic irrespective
of origin.
The study is now known as ICAIS (for: International Charging Arrangements
for Internet Services). An interim report has been prepared for the ICAIS
Task Force. The report concludes inter alia that about 90% of the costs of
Internet connection for Pacific Rim countries is due to the local loop,
about 7% is national backbone and a mere 3% is due to international link
costs (however the consultants who wrote the report consider this is still
considered sufficient to justify further work).
The Task Force is now preparing a report for the APEC TEL Ministerial
meeting which is scheduled for May. It would be fair to say that there is
much disagreement between US and Canada on the one hand and just about
everyone else on the other. Having set the ball in motion, Singapore has
been happy to let the Australian's carry the torch for reform and Japan, the
China and Chinese Taipei, Korea have all agreed with their position.
The two positions can be briefly summarised as: the reformers claim that
Internet development is being held back unfairly because everyone else
subsidises the US costs of connectivity. The opposing viewpoint (and one
that I personally hold to) is that there is no evidence of slow take up in
NZ and Australia (both are in the top 10 countries in terms of Internet use,
along with similarly 'disadvantaged' nations such as Finland, Sweden etc).
Most of the rest of the OECD group come well behind but, of course, well
ahead of the 2nd and 3rd world. Slow take up in Asia is due to other
factors, especially local connection costs and heavily regulated markets.
***************
The issue I want to raise here is: does the NZ Internet/ISP industry
perceive there to be a problem over this issue? I have asked this question
on the NZNOG list at least twice before and received essentially no
feedback. I have taken this to mean that there is not an issue for NZ
generally, and the ISPs in particular.
**************
For this reason, NZ has not advanced any particular position within the APEC
TEL but tends to side with the US and Canada. Our position is quite
different from that of Australia on this issue (although I cannot see how
they can seriously argue evidence of market failure in their case).
The brief paper below sets out a draft NZ statement for the Ministerial
meeting. I would be interested in any feedback at all (needs to be within a
few days, say Friday 14 April). We intend to snail mail a paper version to
CEOs of ISPs and other organisations but quick comment from the more
technical community would be helpful before we undertake that task. I would
emphasise that the NZ position is far from fixed at this point and no
statement has yet been made internationally.
It may be helpful to quote para 5.1.2 from the draft report as we think this
fully encompasses the NZ position (there is a reference to this statement in
para 6 below.)
5.1.2 -- Other economies consider that international charging arrangements
are only one element in the total costs and value exchange of international
Internet interconnection. They note that these international charging
arrangements have not been shown to be a significant factor in overall
costs, and that these arrangements have produced rapidly falling bandwidth
prices. They note the Internet is a new, dynamic industry where business
models are developing rapidly in response to market conditions. They see the
Internet as fundamentally different from PSTN networks, note that traffic
flows can not be used to infer which party receives the benefit from such
traffic, and believe government mandated allocation of costs based on
traffic flows potentially detrimental to the growth and functioning of the
Internet. They believe the current international Internet market to be
operating in a competitive market and note that high prices for consumers
appear to be associated with the level of competition and pricing for
consumer Internet connection in domestic markets. Therefore, consistent
with APEC's APII Principles, they believe there is no basis for government
intervention at this time, and that responses to these commercial
arrangements will be worked out most quickly if the Internet market is left
unhampered. "
I have included the full draft even though it makes reference to parts of
the Task Force report that you will not have seen... unfortunately as a
draft, the Task Force report is confidential. I would be very interested in
any comments on paras 10 & 11.
DRAFT NEW ZEALAND POSITION ON ICAIS
(for possible circulation to the ICAIS Task Force)
1 New Zealand has not taken an active role in debate at Task Force
meetings, largely because the International Internet charging regime has not
been drawn to the government's attention by New Zealand industry players or
users as a matter of concern. Therefore, there has not been a mandate for
New Zealand's TEL delegation to put forward substantive views on this.
2 Nonetheless, we have followed the discussions closely and wish to
make some comments as an input to the process of finalising a TEL position
for the TELMIN4 meeting in May.
3 We agree that the final report to Ministers should be as brief as
possible, consistent with enabling them to appreciate the range of views
held by member economies, and the valuable work undertaken by the
consultants. Any consideration of this issue also should take account of the
fact that the consultants report indicates that international connectivity
makes up a very small proportion of the total costs involved in Internet
traffic.
4 Some comment has been made about the current funding arrangements
hindering the growth of the Internet. Although we do not know what the
optimum growth of the Internet might be, there seems little if any evidence
of market failure to date.
5 Even if that were the case, there are many other factors which
impact on growth and take-up of Internet services, other than the costs of
the international element of carriage. Important among these are: the level
of the economy's domestic telecommunications market liberalisation and
competition, foreign investment restrictions, the effect of local as well as
international cost/price structures on the actual cost to end-users, the
impact of compliance/regulatory requirements on the development and
availability of the Internet, roll-out of domestic infrastructures and the
availability of bandwidth, the amount of local Internet content, consumer
confidence in the case of e-commerce, open market access for ISPs.
6 We have not entered the debate over the text on what is agreed or
not: there are already plenty of economies putting forward their views on
this: we would, however, support the US wording for para 5.1.2 (e-mail of 8
April).
7 As far as the conclusion of the report is concerned, we are not
convinced that a case has been made for substantive recommendations in terms
of the requirement to study and if appropriate to make recommendations on
the issue. We are quite attracted by the Canadian paper (TELWG/21/ICAIS/12),
as a useful way forward, except for the use of the rather subjective term
"affordable" in relation to the cost of internet access.
8 The applicability of any recommendations must also be borne in mind,
recognising APEC's voluntary nature. Any recommendations which are arrived
at would not have mandatory force.
9 However, we accept that the majority of participants seem to want to
have recommendations to put to Ministers who, in turn, are likely to be
expecting something concrete to discuss at TELMIN4.
10 The impact of Voice over Internet Protocol (VOIP) needs to be taken
into account. At this stage of technical development and with the declining
relevance of ITU SG3 recommendations on international telecommunications
traffic (accounting rates), we would not want to see any arrangements that
imposed unjustified compliance costs or that endeavoured to mandate
negotiations that would subject Internet traffic to similar costing regimes
as voice telephony (for these reasons, New Zealand has not supported active
ITU-T involvement in Internet charging arrangements either).
11 The task group must avoid any outcomes where the cost of measurement
or monitoring exceeds the cost/value involved. Unlike telephony, the
Internet is not measurable in terms of traffic flows: the flows themselves
do not indicate where the value of traffic lies, even if you could measure
it.
12 Looking at the recommendations as they stand in the latest draft
report, we would prefer that section 6.1 (Recommended international charging
arrangements for Internet services) be deleted. If it is to stay,
recommendations 6.1.1 and 6.1.2 should be prefaced by the words "Where
bilaterally agreed". It is accepted that this would leave unsaid the
approach to be taken if- as seems probable in many cases- the 2 parties
cannot agree.
13 In general, we could support the suggested APEC principles (section
6.2), except that 6.2.5 (a) should be amended to read "efficient market
principles", rather than "fair market principles".
14 Any reference to further TEL work in this area should also include
the need to continue a strong focus on the points raised in our paragraph 5
above that need to be addressed as an integral part of Internet development.
The current recommendation 6.3.1 tends to imply that there is a problem to
be addressed, and we are not convinced this is appropriate.
Frank March
Specialist Advisor, IT Policy Group
Ministry of Economic Development, PO Box 1473, Wellington, NZ
Ph: (+64 4) 474 2908; Fax: (+64 4) 471 2658
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