ITP Techblog

Net neutrality continues to be undermined by US law, following a ruling by the Federal Communications Commission (FCC) to repeal regulations created under the Obama administration. In the latest setback, the California State Committee has this week voted to cut many of the protections in a bill that would have restored net neutrality in that State.

Following the FCC's change of heart under the Trump administration, advocates of net neutrality had shifted their attention to State law, so a failure in the home of Silicon Valley is a heavy blow. Net neutrality is the idea that all internet traffic is equal and that internet service providers can't favour one website over another (for example, throttling traffic to sites that they don't own or whose users haven't paid for a premium user experience).

In the same week that FCC reversed net neutrality regulation, the US District Court for the District of Columbia ruled the US$85.4 billion merger between AT&T and Time Warner could go ahead. AT&T is the largest provider of pay television, the second largest wireless provider and the third-largest home internet provider in the US.

All this is happening in the US, but could the erosion of net neutrality laws in that country influence our market, or in other words, should New Zealand be worried by threats to net neutrality? On the face of it we are in a much better position, in part because of the way the fibre network rollout has been structured and thanks to the vigilance of the Commerce Commission.

The rollout of the Ultra Fast Broadband network was deliberately engineered to ensure that New Zealand's fixed-line telco infrastructure would be structurally separated. This means the companies that own the lines - Chorus, and the Local Fibre Companies (Ultra Fast Fibre, Enable Networks and Northpower) - are not allowed to be internet service providers. If you don't own the value chain end-to-end there is no incentive, or at least it is extremely difficult, to favour the traffic on your network.

As an aside, the Telecommunications (New Regulatory Framework) Amendment Bill would allow ISPs to unbundle the network but the pricing, for now, remains in the hands of the LFCs. While Vodafone and Vocus have publicly expressed interest in unbundling the fibre network, their main competitor Spark is busy getting moving its broadband customers off copper and onto fibre and fixed wireless. Today, Spark has announced that "around 34% are now on fibre and 16% on wireless broadband (delivered over Spark's 4G and 4.5G mobile networks)."

Owning most of the value chain could be just as good as owning all of it and competition helps ensure net neutrality remains in place. The Commerce Commission declined the merger between Vodafone and SkyTV last year because of concerns about maintaining a competitive telco sector. "To clear the merger we would need to have been satisfied that it was unlikely to substantially lessen competition in any relevant market. The evidence before us suggests that the potential popularity of the merged entity's offers could result in competitors losing or failing to achieve scale to the point that they would reduce investment or innovation in broadband and mobile markets in the future."

Compared to fixed line broadband (especially fibre- based connectivity), 4G is a distant second in terms of user experience, but mobile technology advances in leaps and bounds and 5G is - we are repeatedly told - just around the corner. The two major mobile network owners in New Zealand, Spark and Vodafone, own their networks end-to-end, and changes to net neutrality laws in the US, could have potentially inspire a similar play over here. It's why competition is as critical in the mobile market as it is in fixed line, and why the Commission Commission's current study  into how this market will evolve is so necessary.