Could UFB sound a death knell for data caps?

Could UFB sound a death knell for data caps?
An InternetNZ paper questions our ubiquitous data caps and asks whether UFB will render them obsolete.

Data caps in New Zealand are lower than in most other countriesAn InternetNZ paper questions our ubiquitous data caps and asks whether UFB will render them obsolete.

It's fair to say the state of New Zealand broadband could do with some improvement, although the advent of UFB and Pacific Fibre's cable project are aiming to improve matters.

And our much-maligned data caps could eventually go the way of dial-up, an InternetNZ discussion paper suggests.

The organisation commissioned independent consultant Colin Jackson to interview 28 industry players, including small and medium ISPs, telcos and content providers, on why domestic traffic is metered and how the advent of UFB would change the situation.

Chief executive Vikram Kumar said low data caps were the result of many factors.

“These range from market failure, lack of concerted consumer pressure, and fears of consumer confusion. The recent increase in fixed-line broadband data caps by Telecom and Vodafone only underline how much room there is for the major ISPs to move on this issue."

However, data caps allowed ISPs to manage demand and keep retail prices low, he said.

“We believe it is important to understand the perspectives of Internet intermediaries and content providers so that a well informed discussion on addressing low data caps takes place. At the end of the day, we hope that the discussion will lead to action. Otherwise the true potential of the internet for Kiwis will remain a mirage as we fall behind other countries."

The report notes our market is unusual in that our data caps are among the lowest in the world.

"Most countries have no limit on data that can be downloaded each months. In those that do, 1 terabyte (1TB or 1000GB) is the new mark for power users."

Data limits in Australia were once similar to New Zealand, but have expanded as a result of a "data cap war" among ISPs and terabyte caps are now common.

Countries such as the US have never had caps, and although there are moves by some ISPs to introduce them the proposed limits are much greater than anything available here.

Jackson said there were two possible reasons for this: the incumbency of Telecom in the copper local loop market and the reliance on a single submarine cable for almost all international transit.

"The price paid by ISPs for international transit has been dropping significantly; therefore if data caps do not greatly increase as they have in Australia recently it is likely to be incumbency around the copper loop which is keeping them low."

Attempts to introduce uncapped plans have mainly failed due to ISPs' inability to control the behaviour of heavy users.

One ISP said it did not seem possible to create a policy both clear enough to pass muster legally and watertight enough to prevent a few heavy and inventive users from using all the available bandwidth.

"A particular point to bear in mind is that if one ISP tries an uncapped plan, it immediately attracts all the high users, but if uncapped plans were the norm there would be no reason for the heavy users all to go to the same ISP. ISPs are aware of this risk and some choose not to try uncapped plans for this reason," Jackson wrote.

Respondents said zero-rating domestic traffic would leave consumers struggling to predict which sites would result in
international traffic. The presence of caching and content distribution networks added to the difficulty of determining whether
traffic would be counted as international or not.

Jackson said there was a large discrepancy in expectations when it came to the predicted effect of UFB on the industry.

"Content providers and network builders, for instance, all say that data caps are going to need to be removed or dramatically increased for UFB to be a viable service. Some ISPs believe that UFB won’t change things for them or their customers or have not yet considered what changes might occur, although many of the larger ISPs have stated that they are ready to offer larger caps on UFB as it becomes more widely available.

He said by addressing Telecom incumbency in the local loop, there could be a substantial increase or complete removal of caps as UFB uptake spread.

"Even if this is not the case, it seems likely that competitive pressure will force ISPs to increase caps since UFB will provide consumers with the opportunity to use up caps of the current size within hours or even minutes, rendering such a service nearly useless under current caps."

InternetNZ is now calling for comments and views by August 26 on what goals can be set in the area of data caps.

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