NBN Co floats its own 'Netflix tax'

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NBN Co floats its own 'Netflix tax'

Proposes extra charges for video streaming.

NBN Co has raised the prospect of treating streaming video differently from other traffic types on its network, with users charged extra for the privilege of using Netflix and similar services.

The proposal is currently before NBN Co’s top 50 retail service providers (RSPs). Its existence was first reported by subscription telecommunications title CommsDay.

“Would your organisation support the development of a price response whereby charging of streaming video could be differentiated from the charging of other traffic/services? Would your organisation be likely to productise such a mechanism if developed by NBN?” the question in NBN Co's new wholesale pricing review states.

In a statement to iTnews on Tuesday afternoon, NBN Co did not completely dismiss the idea that its "price response" could result in an extra levy; it simply suggested it had limited to no control over what occurred at a retail level.

"Our consultation is geared towards internal pricing mechanisms between NBN Co and RSPs," an NBN Co spokesperson said.

"We are not working towards any pre-defined outcomes, and the process is not about levying additional charges on customers."

The proposal was met with alarm from many RSPs and industry insiders approached by iTnews over the past week.

Any move to carve out certain types of traffic and charge extra for it could also be unpopular with users, given that streaming is included in current plans at no extra charge.

Decisions on traffic prioritisation and shaping have traditionally been left up to RSPs. 

Many operate network equipment that helps them manage traffic flows between their network and the NBN.

NBN Co is effectively proposing to take decisions about traffic prioritisation out of RSPs’ hands, and to charge them for the privilege. 

That also raises questions about how much NBN Co should know about the contents of packets running across its network.

“If I send NBN Co a packet, I kind of expect them to carry it unmolested to my consumer,” said John Lindsay, a former CTO of iiNet. (In commenting for this article, Lindsay noted he “is not speaking for any of the telecommunication organisations he is currently a director of”).

“There is absolutely no justification for NBN Co to be artificially throttling traffic to extract more money for passing video traffic that should be carried as part of the fundamental base service of connectivity,” agreed Internet Australia chair Paul Brooks. 

“NBN is a Layer 2 network - a simple pipe between customer and ISP - and should never be looking deeper into the packets to see or care what form of content is being passed through."

NBN Co is already artificially constraining its network throughput in the fixed wireless and satellite footprints. This was at least understandable, Brooks said. 

“The radio network and the satellite network are shared, bandwidth-constrained access networks so there's an argument for slowing down users for traffic smoothing, but not to extract further revenue,” Brooks said. 

“But there is no argument for doing that in the fixed line parts of the network - there should be no bandwidth constraint there."

Differentiating video streaming from other traffic types could see NBN Co operate at Layer 4 or above, depending on the technical solution used. An analysis by iTnews has identified four possible options.

Industry are worried about where this might lead.

Video streaming could be a test case for treating many types of traffic on the NBN differently for the purposes of monetisation; that is, getting customers paying more, based on specific usage profiles.

Then there’s the question of whether the Australian Competition and Consumer Commission (ACCC) would find this acceptable.

The ACCC is yet to publicly comment and did not respond to questions from iTnews by the time of publication.

If NBN Co succeeds in its bid to charge differently for video streaming, Australians could wind up paying a big price in more ways than one.

“It would make Australia even more the laughing stock of the planet,” Brooks said.

NBN Co declares modelling 'confidential'

NBN Co stayed tight-lipped on the proposal prior to publication of this article and refused to reveal any preliminary work it might have done around modelling how traffic differentiation on the NBN side might be implemented. 

“We are engaging with the industry in a confidential consultation process and will not be commenting,” an NBN Co spokesperson told iTnews.

NBN Co has released details of some proposals but not others from its wholesale pricing review, including an idea to create a cut-price 100Mbps service.

The 100Mbps product isn’t particularly controversial. However, given it is now clear that the wholesale pricing review is canvassing more controversial proposals behind closed doors, there are calls for NBN Co to be more transparent in its consultation.

Brooks believed NBN Co should make the consultation paper public. 

“This is a public network paid for through taxpayers funds,” he said.

“We should all have visibility for what they're proposing. They should immediately make the consultation paper public, and allow customers and the rest of the industry who are not directly-connected RSPs to comment on the proposal.”

Telstra and Optus recently accused NBN Co of not listening to RSP feedback in similarly-run closed-door consultation processes.

RSPs have also separately complained about having little input into commercial negotiations with NBN Co.

If nothing else, this raises questions on the extent to which feedback collected in the wholesale pricing review will be acted upon, particularly if traffic differentiation by NBN Co is as unpopular as it so far appears to be.

How this might work

iTnews has spent the past week exploring how NBN Co might be able to structure and implement its traffic differentiation proposal.

Nominally, there appear to be four possible models.

  • Replicating the construct NBN Co used for Sky Muster Plus to the fixed line footprint ie. introducing Layer 3 capabilities to 'meter' them differently
  • To set video up as a new Traffic Class on the NBN;
  • To use some form of deep packet inspection (DPI) technology, which could see NBN Co operate at up to Layer 7;
  • To have video traffic run over its own CVC, physically separating streaming traffic from other types of traffic. Two CVC components would make up a single retail service - a CVC for video and a CVC for 'everything else'.

Lindsay believed a new traffic class for video streaming traffic was the most likely option.

“When you start saying ‘we're going to carry traffic at different priorities’, NBN Co have a mechanism for that already with the traffic classes,” he said.

“I think the only way that you really could do it would be as a differentiated traffic class, which you would do by using DSCP [Differentiated Services Code Point] markings on the Ethernet frames that are being sent to NBN Co. 

“That all kind of makes sense. NBN Co do it today for differentiating between existing traffic classes, DHCP traffic and other administrative traffic.”

Lindsay said running video traffic in its own CVC would be inefficient and likely to deter RSPs. 

Some RSPs have already had to split NBN traffic between two CVCs because it is the way NBN Co differentiates between users on old and new pricing models.

“If it's a separate CVC, unless it's being delivered over the same port and VLAN at the customer end, you've just created a support nightmare for the retail service provider and they'll never bother using it,” Lindsay said.

“Hopefully, they would at least make it something where we're inside the same CVC, inside the same delivery path and headend to the consumer, where you can simply pay a premium for a certain amount of video bandwidth. 

“And then you would have to assume there would be some kind of policing of that inside NBN Co's network.”

Aussie Broadband's managing director Phillip Britt indicated a separate traffic class could also create unwanted complexity.

"Separate traffic classes would give the ability to pay different prices for different bandwidth services," he told iTnews.

"For example, if one Netflix stream uses 2MB of data, three streams in the house would use 6MB. You would end up with differentiated charging for things like quality of streaming, number of screens etc."

Britt added, "Our view is that this would discriminate against people according to their usage of the internet. It’s not how it works nearly everywhere else in the world, and we don’t believe it should happen here in Australia. 

"We have a new $51 billion dollar network that should deliver without CVC constraints – which gets back to the whole discussion about whether the CVC mechanism is the right one to be using."

Entering the RSP domain

RSPs are unhappy at the prospect of NBN Co starting to differentiate between different types of customer traffic. 

If certain packets are to be prioritised over others, they believe that should be a decision for each RSP, as it always has been.

Lindsay noted there were many reasons why, as an RSP, you might try and implement some form of prioritisation.

“You are trying to decide what are the packets that are losers and you're putting them to the end of the queue,” he said.

“It's possible that you might be picking packets that are winners and you're pulling them to the front of the queue. 

“It's possible that you might have several queues and allocate a certain amount of bandwidth to each. 

“These are all decisions that, from my perspective, ought to be the choice of the service provider, and today that is the case but then they get one pipe to send the packets to NBN Co. 

“I think NBN Co is trying to find an opportunity to generate some extra revenue off the same network by creating a platinum-class service for Netflix traffic or for streaming traffic.”

Macquarie Telecom group executive Luke Clifton also believed traffic prioritisation should remain a service provider issue.

Macquarie Telecom is unlikely to be impacted directly by any change, since it does not operate in the consumer space - although that did not necessarily allay fears that NBN Co could pursue prioritisation on a much larger scale in future.

“It does provide other insight to the thinking around NBN Co and the type of developments on their platform that they might want to expand into. I'd be nervous if that's beginning to overstep into what I would call the RSP's domain,” Clifton said.

“[Prioritisation] is my proposition I take to market. It's a layer 7 product, so the user gets to specify which particular application get priority on the network and then it's the software and the edge devices that talk to each other across the network that prioritise [one application’s traffic over others].”

Net neutrality and beyond

NBN Co’s proposal is also likely to reignite the issue of net neutrality in Australia. 

Net neutrality is a principle for treating all internet communications equally. It has been raised sporadically in industry debates over the years.

Back in 2015, Optus floated the idea of charging over-the-top content players like Netflix for a higher quality-of-service on its mobile network.

Telstra has also previously trialled de-prioritisation of peer-to-peer traffic to prevent congestion on its own network.

Telstra declined to comment on the NBN Co video streaming proposal; Optus did not return requests for comment.

The wording of NBN Co’s question makes it not completely clear if the company wants to disable or block video streaming on all regular services where a specific streaming add-on has not been purchased, or if customers would still be able to watch low-resolution or rate-limited video streams on a regular service, but be able to pay extra for higher quality-of-service (QoS) if they chose.

The consensus among industry figures polled by iTnews is that it is likely that NBN Co’s plans are to launch a higher QoS product for video streaming, but that some form of streaming in all plans would still be possible.

Brooks indicated the alternative was undesirable.

“Video traffic is an inherent part of modern internet usage, embedded in web pages and required for video-conferencing,” he said.

“It is used extensively now for families to keep in contact across vast distances, and for education. 

“It is not an optional feature that should be 'monetised' even further." 

Beyond issues of net neutrality, the video streaming market itself is currently undergoing a massive shake-up and decentralisation, with content set to become more fragmented across a wider range of streaming services, each seeking to monetise differently.

Already, content consumers report that there are limits to how many services they can afford to subscribe to. 

Fragmentation of the streaming market is likely to change its dynamics, and that could have a major impact on whether consumers are positioned to pay more to access content, and more still for it to be delivered to them at a higher quality.

Update 3.22pm: Statement from NBN Co added.

Update, 4.52pm: NBN Co sent iTnews an extended statement:

"NBN Co is building the NBN to meet the needs of Australians today as well as delivering capacity upgrades to meet growing data demands into the future, which includes the provision of additional capacity within the network to accommodate the rise of streaming services.
 
NBN Co has released an industry-wide wholesale pricing review consultation paper, which seeks RSP feedback on balancing industry economics with affordability and choice for customers.

"Our consultation is geared towards internal pricing mechanisms between NBN Co and RSPs. We are not working towards any pre-defined outcomes, and the process is not about levying additional charges on customers.
 
We are undertaking a consultation to ensure our wholesale pricing best supports RSPs and their services to customers, while balancing industry economics. 
 
As part of this consultation process we’re interested in engaging in a constructive dialogue with RSPs and the industry about any challenges and opportunities they may face. Video streaming is an important part of using broadband for many customers and a significant proportion of overall internet traffic and future traffic growth, and one of the particular areas where we are seeking feedback. 
 
We’ve noted the importance of streaming video in the response, which is why we are focused on seeking specific comments from RSPs in this area.  At this stage we are seeking input from industry on whether they believe it is an area that requires attention and, if so, we are open to possible ideas they may wish to suggest.
 
The next stage of the consultation will include draft proposals from NBN Co after considering industry feedback, and we will then re-engage with the industry and consult further on in detail before finalising and announcing outcomes in November 2019."

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