Published on the 22/06/2015 | Written by Donovan Jackson

Surge in demand doesn’t come with a business case for infrastructure providers…

With the release of its tenth annual Visual Networking Index (VNI) body of research, Cisco continues to chart the performance of New Zealand’s connectivity, contextualising it with that of the rest of the world. The bottom line is that we’re doing pretty well, with almost universal access, and speeds already comparable to those of other developed nations and set to improve with the Ultrafast Broadband rollout.

However, in an interview with iStart, country manager Geoff Lawrie said net neutrality is making business difficult for the infrastructure companies responsible for building and operating the networks fundamental for connectivity here and abroad.

Among the key facts emerging from Cisco’s research is substantial growth in consumption per user and per household. “This is a video story. We are a video gobbling nation in terms of how we run our lives. We’re seeing a 2.5 fold increase in demand and that is an enormous challenge for infrastructure providers. No other business is facing consumer demand for its product at this scale – most would be happy for single digit growth.”

Therein lies a problem. “Net neutrality removes the ability for infrastructure providers to monetise the networks they have to build,” Lawrie pointed out.

The UFB rollout provides a handy reference point for the enormous cost of establishing high speed internet networks; the price is so high that government investment is necessary, as it is difficult for private companies to create a business case and raise the necessary capital.

Net neutrality favours so-called over-the-top (OTT) service providers, which depend on the network infrastructure to provide their services. However, OTTs don’t pay for the use of that infrastructure. These services include the likes of WhatsApp, Youtube, Netflix or almost any other service provider which depends on networks for service delivery.

The alternative to net neutrality is allowing network providers to charge for and/or prioritise certain types of traffic.

However, net neutrality is an emotive issue, as the concept of the free exchange of information is widely considered a central virtue of the internet; Sir Tim Berners-Lee, credited with inventing the World Wide Web, defines net neutrality as ‘the principle that each ‘packet’ of data must be treated equally by the network’ and said there should be no restrictions based on economic motivations. A US senator, Al Franken, has described net neutrality as ‘the First Amendment of our time’. Broadly, the First Amendment to the Constitution of the Unites States of America protects freedom of speech, among other provisions.

Lawrie said care has to be taken in how net neutrality will impact those organisations which build the networks. “It’s simple economics. If there is no incentive for them to build networks, they won’t do it. While the advance of technology is delivering some help in terms of lowering the cost of extending connectivity, infrastructure provision remains very difficult, as you have to have a case for whether or not you’re going to build.”

Key figures: New Zealand’s IP Traffic

• IP traffic will grow 2.5-fold from 2014 to 2019, a compound annual growth rate of 20%
• In IP traffic will reach 267 Petabytes per month in 2019, up from 105 Petabytes per month in 2014
• In New Zealand, IP traffic will reach 56 Gigabytes per capita in 2019, up from 23 Gigabytes per capita in 2014

Speed and Traffic Evolution

• The average fixed broadband speed will grow 2.4-fold from 2014 to 2019, from 19.1 Mbps to 46 Mbps
• The average Internet user will generate 42.5 gigabytes of Internet traffic per month in 2019, up 128% from 18.6 gigabytes per month in 2014, a CAGR of 18%
• The average Internet household will generate 92.6 gigabytes of Internet traffic per month in 2019, up 126% from 40.9 gigabytes per month in 2014, a CAGR of 18%.
• In New Zealand, there will be 2 million Internet households (82.6% of all Internet households) generating more than 50 gigabytes per month in 2019, up from 486,719 in 2014.