Professor Rodney Tiffen

The Sydney Morning Herald ran a piece Friday morning that had absolutely nothing nice to say about the former leadership of Telstra, Australia’s “Private Telecom Monopoly.”

Sol Trujillo was the George W. Bush of telecommunications. For both, the American way was the only way. Being the biggest meant you did not have to do diplomacy, and both were better at starting wars than finishing them. Both used patronage and punishment to ensure a like-minded leadership group that made worse decisions more harmoniously.

Australians remain unimpressed with the tumbleweeds that routinely blow across the Land Down Under’s broadband superhighway — the result of a combination of failed government leadership, special-interest dominated public policies which put the interests of private companies ahead of their own citizens, and the predictable emergence of greedy telecommunications providers delivering the least possible service at the highest possible price for millions of Australians.

Rodney Tiffen, professor of government at the University of Sydney, calls out a succession of Australian governments which have repeatedly dropped the broadband ball, and have left the country with comparatively overpriced service with ludicrous Internet Overcharging schemes that punish citizens with usage caps, outrageous reductions in their broadband speeds or, worse, overlimit fees and penalties:

Australian consumers suffered particularly from the stringent caps placed on downloads and the high expense of exceeding the cap. While in nine of the countries no explicit caps were placed on broadband subscriptions, Australia was one of only four countries (with New Zealand, Canada and Belgium) where all survey offers included caps, and among these four was by far the most expensive when the caps were exceeded – an average of 11 cents per megabyte compared with 1 cent for the others.

Tiffen rejects the argument that Australians have to pay more because Australia has low population density.

“It should also be remembered Australia has a higher percentage of people living in large cities (defined as those with more than three-quarters of a million people) than any of the other countries (measured by the Organization for Economic Co-operation and Development),” Tiffen writes.

The key policy issue Tiffen identifies is: what is a natural monopoly and when does competition produce more dynamism and responsiveness to consumers? Since telecommunications reform came on to the public agenda about two decades ago, there had been a bipartisan failure to address this central question.

Tiffen wants Australia to recognize the mistakes America made dealing with its cable television industry — “replete with cases where a company controlling the delivery platform has favoured its own company’s channels over its competitors.”

“Indeed a private monopoly at a key gate-keeping point often leads to less competition in services than there would be with a publicly owned or regulated infrastructure,” Tiffen argues.

When One Giant ISP Goes Down, An Entire Country Will Notice

Millions of Australians were completely cut off from the global Internet Thursday when Telstra, Australia’s primary Internet Service Provider, lost connectivity to all websites hosted outside of the country.

The outage – which occurred between 7:43am and 8:50am – affected all Telstra home and business ADSL broadband, cable and mobile internet customers nationwide, the company said.

A Telstra spokesman said a planned change in the hardware that controls the ebb and flow of its international internet traffic was the cause of yesterday’s nationwide outage.  Telstra’s network service was restored by rolling back the change to its original settings and restarting the equipment.

“We’re continuing to work to understand what happened and why. What we understand from preliminary inquiries is that from 7.43am customers attempting to access websites hosted overseas, or Australian sites with content hosted overseas, received a network error,” the spokesman said.

The result was a torrent of phone calls from upset customers waiting on hold with Telstra customer service, assuming they got their call through, while sipping their morning coffee.

“We have commenced a detailed and thorough technical investigation into the incident. This may take some time to conduct to ensure we fully understand the issue and can put appropriate measures in place to maintain the integrity and operation of our network,” the spokesman said.

An investigation?  Matt in Sydney was bemused with the entire experience:  “I can’t believe the reported resolution was a restart. ‘Have you tried turning it off and on again? Is it plugged in?'”

Joshua Gans, an economics professor at Melbourne Business School, has a question.

Why are Australians still stuck with usage caps, which Gans notes are virtually non-existent around the rest of the world.

Writing for The Age, Gans notes that had the United States forced users into consumption limits and other usage-based broadband plans, online video sites like YouTube would likely have never started.  Gans called out Australian providers for usage pricing that has to be seen to be believed:

To an outsider, the Australian system seems very strange. Telstra boasts a basic package on its BigPond Cable Extreme network that, for $39.95 a month, gives 200 megabytes in usage. At Telstra’s boasted 30MB a second speeds, that amounts to a minute of high-quality video downloads. After that you pay 15¢ a megabyte. It is hard to imagine that being an option for consumers.

But even its Liberty plan, which costs $69.95 and offers 12GB a month – after which the extreme speed is slowed to the speeds of last century – only allows you 20 hours of video watching a month, provided you do nothing else. That’s about 45 minutes a night.

Gans also zeroes in on another theory why usage caps prevail — to protect incumbent cable and satellite providers’ video business models.  Australia’s largest Internet provider, Telstra, is also the majority stakeholder in Foxtel, Australia’s largest cable/satellite television provider.  Telstra is the equivalent of Bell in Canada or AT&T, before the 1980s “breakup.”  It dominates Australia’s television, mobile phone, wired phone, and broadband needs. It was privatized by the government under former Prime Minister John Howard.

Telstra is well positioned to control much of the Australian playing field competition is expected to compete on.  Competing broadband providers, particularly those using DSL, are confronted with installing their equipment in Telstra-owned phone exchanges, at Telstra pricing.  Telstra’s giant stake in Australia’s broadband also means they play a crucial role in Internet connectivity outside of the country, using undersea fiber cables to connect Australians with the rest of the global Internet.

With these types of ground rules, it’s no surprise Australia’s broadband experience is universally usage capped.  The limitations are so egregious, the Australian government launched a national broadband plan to vastly improve capacity and get the country higher in global broadband rankings.  It will take nearly eight years to complete the project.

For Gans, that’s not good enough.

We are told that the new management of Telstra is more open and ready to meet the challenges brought about by the national broadband network. The NBN will have the capacity to break through usage caps. But why wait eight years?

There is an opportunity for Telstra to demonstrate its new responsiveness and get rid of this anachronism. It could lift its Liberty plan to 100GB and likely face few additional costs if it charged 15¢ a gigabyte. It would send a strong signal to markets.

For North Americans, it’s another illustration that Re-education efforts from domestic providers pointing to Australia as a justification for Internet Overcharging is based on the false premise that customers don’t mind usage caps.  Even in the land down under, consumers want out from under Internet Overcharging’s high prices and limited service.

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A Telstra customer rants about Telstra’s inaccurate “usage meter” that resulted in $2,500 monthly broadband bills for this particular customer, and how the broadband provider holds all of the cards when they measure and bill for usage, all while attempting to hold customers to a two year contract. Viewer Warning: Strong profanity.