Last week, an Australian federal judge issued a major ruling—the first of its kind worldwide—saying that ISPs aren't required to take action against subscribers after receiving letters alleging copyright infringement. But lost in most of the discussion of the ruling is another hot topic, net neutrality. If you want a good look at what a non-neutral 'Net looks like, take a gander at Australia.

The judge's ruling discussed the business practices of Australia's third-largest ISP, iiNet, and in doing so reminded non-Aussie readers about a defining feature of Internet life Down Under: bandwidth caps. Such caps are common around the world, but Australian ISPs take the idea one step further by setting up partnerships with entertainment services and music download companies. Any data usage directed at one of these favored services doesn't count against the monthly bandwidth cap.

Here's how the judge described iiNet's version of this service: "When an iiNet user exceeds this quota they are ‘shaped’ which means the speed of their connection is slowed to reduce their ability to download because the process of downloading data takes longer. [iiNet CEO] Mr. Malone deposed that the respondent was the first ISP in Australia to introduce ‘shaping’ to control excessive downloading instead of imposing excess usage charges, whereby any downloads over quota would incur a fee per megabyte.

Life in the Freezone

"However, any data downloaded from the Freezone is not included in the monthly quota of a subscriber. In this sense, an iiNet user can consume unlimited amounts of data from the Freezone per month. Further, an iiNet user is still able to use as much data at maximum speed as is desired per month in the Freezone, even if that subscriber is otherwise shaped for that month. The respondent has made a number of agreements with various content providers to make their content available on the Freezone. For example, the respondent has made an agreement with Apple iTunes."

Telstra, one of the largest ISPs in the country, has a similar service at its BigPond ISP. "Get a huge range of entertainment which is Too Big for TV including NRL, AFL, V8 Supercars, Movies, Games, Music and more," says the company. "Plus, downloads won't count towards your usage allowance."

Such strategies aren't limited to Australia. New Zealand ISP Orcon offers customers access to the O Zone, where downloads don't count against caps. And, in a special offer that expired at the end of January 2010, YouTube content didn't count towards the quota.

The Internet with YouTube (free for a limited time)

Network nonneutrality



This is quite clearly nonneutral behavior in any sense of the term. ISPs like iiNet shape traffic when the quota is reached, meaning that all traffic to nonpartner sites is slowed dramatically, while the favored services continue at full speed. This isn't an outright "blocking" of other websites, which can be freely accessed until the cap is reached, but the effect is quite similar. How are high-bandwidth services like video streaming going to compete against those services favored by an ISP? How will new players ever gain market share?

Part of Australia's problem is that many desirable websites exist outside the country (often in the US or Europe), and transit costs over trans-Pacific cables can quickly become ruinous. Obviously, there are neutral ways to handle this situation. Straight data caps (with no exemption for partnered services) would be one. Another might be the model seen in South Africa, where ISP Imagine faces the same issue and solves it by offering a two-tier cap: the first 2GB of data can be national or international; after that, the remaining 28GB of data on a 30GB/month plan must all be national. International traffic is hardcapped.

While the debates may seem esoteric and international, they have an obvious parallel here in the US. Companies like AT&T are no longer just providers of communications services; AT&T also offers a full IPTV offering called U-Verse that is delivered over the same line as Internet access. Both services are IP-based, but AT&T runs them over separate backend networks and prioritizes U-verse traffic on the last-mile journey to the home. The result: AT&T's own IP video offering looks terrific and can handle multiple HD streams without stuttering, but competing "over-the-top" IP video services like Hulu and YouTube and Netflix are at the mercy of the Internet.

In some ways, this is much like the Australian situation in the sense that an ISP's preferred service will work much better than some service launched at the edge of the network without the ISP's blessing. The FCC's network neutrality rule-making is now trying to decide how to handle such "managed services" on US networks, and the question is hugely controversial.

Less controversial is the idea that ISPs should not be able to apply this sort of partnership prioritization on the actual Internet part of the connection (as services like voice and TV migrate to all-IP systems, this increasingly becomes a merely semantic distinction). That's why American ISPs, even those with bandwidth caps, don't have "free download" partnerships and why Comcast moved to a protocol-agnostic method for dealing with congestion.

But this is quite clearly not because ISPs prefer such an open world; as examples from around the world show, unless they are forced to open up due to competition or regulation, ISPs like creating walled gardens and striking up content partnerships. US ISPs like AT&T have been explicit about this in the past, and have only backed off based on huge public pressure and clear FCC guidance.

As the rule-making moves toward completion, it's worth remembering what a nonneutral 'Net really looks like. To those who say that net neutrality is simply a solution in search of a problem, we say: look to countries like Australia and New Zealand.