Signs Peering Deal with Optus and Changes Prices

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by Paul Montgomery, one of the big four Internet service providers in Australia, agreed to an interconnect deal with
Optus Communications, one of Australia’s telecommunications companies and one of the four major ISPs.

Connect also changed its pricing structure for its wholesale ISP
customers, including making traffic within its regional exchanges free,
according to an e-mail leaked to

A spokesman for Connect said that Optus had not wanted to sign a deal,
which would mean that the two companies would “peer,” or share data across
each other’s networks for considerably reduced prices. It is understood that the Australian Competition and Consumer Commission, the industry watchdog on anti-competitive issues, had been having talks
with both sides to ensure an agreement was reached.

The ACCC had previously pressured Telstra to peer with Optus, Connect and OzEmail, but it has been continuing to work on getting the other three to peer among themselves.

The pricing change delivers some of the benefits of the Optus deal to
Connect’s ISP customers, although the spokesman said the two moves were
unrelated as the price change had been planned for months beforehand.
Connect had previously differentiated its wholesale traffic on its source,
so that international, domestic and cached packets were charged at separate
rates per downloaded megabyte.

According to a document sent by Connect to its ISP customers, the company
will now also waive charges for traffic exchanged within nearby Points Of

The Local price will only apply to traffic within what the company calls
its six “POP zones”–geographical regions in which it has a concentration
of POPs. The document defines the zones as: Melbourne, Geelong and Hobart; Sydney,
Wollongong and Newcastle; Brisbane and the Gold Coast; Adelaide; Perth; and

This will create a regionalised form of peering at each of Connect’s POPs,
which mirrors the state-based method of peering adopted by the small
providers, notably in the grass-roots peering co-operative AusBone.

Other Connect pricing changes include a discount on traffic which the
company receives from Telstra and Optus under its peering agreements, a
withdrawal of the customer settlement program which rewarded content
providers for traffic moving out from their site, and a move by the company
into satellite content delivery, priced at the cache level.

Finally, in a surprising move, Connect told its ISP customers that, “in
light of the increasingly competitive nature of the wholesale industry,
Connect will no longer publish tariffs publicly, [instead] providing
pricing in commercial confidence, on a case by case arrangement.”

The peering and pricing moves come at a time of great upheaval in the ISP
industry in Australia, due to a flood of cheap inbound bandwidth over
satellite connections from the US.

For the first time in the Net’s history, more data is being sent from
Australia over terrestrial cables than is being taken in, according to
several industry sources. This has been caused by the satellite connections taking much of the heavy
load of mostly US content which had previously flowed through the network
of fibre-optic cables under the Pacific Ocean.

The market is struggling to adjust to the changes to revenue streams that
this has caused, particularly with the fast-growing practice of
“backchanneling.” Australian Web-using companies have been buying one-way connections for
international traffic over satellite, and using a separate provider to send
content out for free.

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