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US Federal Communication’s Commission Net Neutrality Rules raise interesting questions for the Australian market

Australia has been somewhat of a ‘content wasteland’ for many years as consumers waited patiently (or in many cases, impatiently, turning to illegal sources) for video streaming services to hit our shores. In recent times we have seen a proliferation of options become available with the long awaited arrival of Netflix joining other players such as Stan, Presto, Quickflix, Ezyflix and Foxtel Play.

In this article, the Maddocks Technology Media and Telecommunications team consider the recent net neutrality decision in the USA and its implications for the Australian market.

Tension in the air?

At the recent CommsDay Summit, Optus CEO, Allen Lew indicated in his keynote address that content players such as Netflix need to be willing to contribute to infrastructure costs if they wish to provide end-customers with a better user experience. Around the same time, Netflix’s chief executive, Reed Hasting, expressed regret at signing deals with Australian Internet Service Providers (ISPs) to enable Netflix usage to be unmetered as it goes against the company’s philosophy of supporting an open internet and net neutrality.

The comments from Optus and Netflix highlight the long standing tension between different players in the market and raise questions regarding how the net neutrality debate might play out in Australia.

So what is net neutrality?

Network neutrality is essentially the principle, internet subscribers should have access to all lawful destinations on the internet without constraints being imposed by the ISPs. In other words, all content distributed on the internet should be treated equally.

Currently, in the Australian market there are many ways in which telcos and ISPs treat content ‘unequally’. For example, telcos and ISPs have long marketed their ‘un-metered’ content and ‘exclusive’ content offerings. They may also choose to speed-up or slow down the delivery of other content. To date, in Australia, there has been very little debate about such practices.

FCC Decision

The Federal Communications Commission (FCC) in the US has released new net neutrality rules, which were registered in April 2015 (FCC Decision). It follows a previous attempt by the FCC to mandate an open internet, which ended unsuccessfully with litigation with Verizon in 2010. Whilst this decision has no direct application in Australia, it is likely to influence the debate on access to content in Australia.

The FCC Decision contrasts with practices in the Australian market where the bundling of content and un-metering has become commonplace.

The FCC Decision applies to fixed and mobile broadband on the basis end-users should be protected regardless of how they access the internet. The FCC Decision has three bright line rules:

  • no blocking – broadband providers must not block lawful content, applications, services or non-harmful devices unless it is part of reasonable network management
  • no throttling – broadband providers must not impair or degrade lawful internet traffic unless it is part of reasonable network management
  • no paid prioritisation – broadband providers must not manage network to directly or indirectly favour traffic in exchange for payment. Examples of paid prioritisation are traffic shaping, resource reservation, or other forms of preferential traffic management.

Additionally, there is a rule about enhanced transparency where broadband providers must publicly disclose accurate information regarding network management practices, performance and commercial terms.

Notably, the FCC Decision does not stop edge (or content) providers from constructing their own distribution networks that interconnect directly with the ISPs to provide end-users with enhanced access to content. The ability for edge providers to interconnect with ISPs by embedding themselves in the ISP’s network may have a similar effect to paid prioritisation on the end-user’s access to particular content.

The rationales for the FCC Decision include:

  • internet openness drives innovation and investment in broadband infrastructure
  • broadband providers have the necessary tools to deceive consumers, degrade content, or disfavour content
  • there are strong structural incentives for broadband providers to act in a way that stifles competition.

Predictably, the FCC Decision is being challenged by a number of telcos and other players in the Court.

With the Australian content market heating up, it seems only a matter of time before some difficult debate needs to take place regarding who should pay for the delivery of content and what kind of open internet environment we want in Australia.

This article is based on a presentation titled ‘The challenges of content distribution for telcos’ that Partner Brendan Coady and Senior Associate Sonia Sharma gave at the CommsDay Summit on 20 April 2015.

Authors:
BRENDAN COADY 2CM BW JPG 2015Brendan Coady | Partner
61 2 9291 6258
brendan.coady@maddocks.com.au
SONIA SHARMA 2cm 300ppi B&W jpg 2011Sonia Sharma | Senior Associate
61 2 9291 6143
sonia.sharma@maddocks.com.au
Emily Lau 1cm BW jpg 2014Emily Lau | Lawyer
61 2 9291 6141
emily.lau@maddocks.com.au
 

 

Australia has been somewhat of a ‘content wasteland’ for many years as consumers waited patiently (or in many cases, impatiently, turning to illegal sources) for video streaming services to hit our shores. In recent times we have seen a proliferation of options become available with the long awaited arrival of Netflix joining other players such as Stan, Presto, Quickflix, Ezyflix and Foxtel Play.

In this article, the Maddocks Technology Media and Telecommunications team consider the recent net neutrality decision in the USA and its implications for the Australian market.

Tension in the air?

At the recent CommsDay Summit, Optus CEO, Allen Lew indicated in his keynote address that content players such as Netflix need to be willing to contribute to infrastructure costs if they wish to provide end-customers with a better user experience. Around the same time, Netflix’s chief executive, Reed Hasting, expressed regret at signing deals with Australian Internet Service Providers (ISPs) to enable Netflix usage to be unmetered as it goes against the company’s philosophy of supporting an open internet and net neutrality.

The comments from Optus and Netflix highlight the long standing tension between different players in the market and raise questions regarding how the net neutrality debate might play out in Australia.

So what is net neutrality?

Network neutrality is essentially the principle, internet subscribers should have access to all lawful destinations on the internet without constraints being imposed by the ISPs. In other words, all content distributed on the internet should be treated equally.

Currently, in the Australian market there are many ways in which telcos and ISPs treat content ‘unequally’. For example, telcos and ISPs have long marketed their ‘un-metered’ content and ‘exclusive’ content offerings. They may also choose to speed-up or slow down the delivery of other content. To date, in Australia, there has been very little debate about such practices.

FCC Decision

The Federal Communications Commission (FCC) in the US has released new net neutrality rules, which were registered in April 2015 (FCC Decision). It follows a previous attempt by the FCC to mandate an open internet, which ended unsuccessfully with litigation with Verizon in 2010. Whilst this decision has no direct application in Australia, it is likely to influence the debate on access to content in Australia.

The FCC Decision contrasts with practices in the Australian market where the bundling of content and un-metering has become commonplace.

The FCC Decision applies to fixed and mobile broadband on the basis end-users should be protected regardless of how they access the internet. The FCC Decision has three bright line rules:

  • no blocking – broadband providers must not block lawful content, applications, services or non-harmful devices unless it is part of reasonable network management
  • no throttling – broadband providers must not impair or degrade lawful internet traffic unless it is part of reasonable network management
  • no paid prioritisation – broadband providers must not manage network to directly or indirectly favour traffic in exchange for payment. Examples of paid prioritisation are traffic shaping, resource reservation, or other forms of preferential traffic management.

Additionally, there is a rule about enhanced transparency where broadband providers must publicly disclose accurate information regarding network management practices, performance and commercial terms.

Notably, the FCC Decision does not stop edge (or content) providers from constructing their own distribution networks that interconnect directly with the ISPs to provide end-users with enhanced access to content. The ability for edge providers to interconnect with ISPs by embedding themselves in the ISP’s network may have a similar effect to paid prioritisation on the end-user’s access to particular content.

The rationales for the FCC Decision include:

  • internet openness drives innovation and investment in broadband infrastructure
  • broadband providers have the necessary tools to deceive consumers, degrade content, or disfavour content
  • there are strong structural incentives for broadband providers to act in a way that stifles competition.

Predictably, the FCC Decision is being challenged by a number of telcos and other players in the Court.

With the Australian content market heating up, it seems only a matter of time before some difficult debate needs to take place regarding who should pay for the delivery of content and what kind of open internet environment we want in Australia.

This article is based on a presentation titled ‘The challenges of content distribution for telcos’ that Partner Brendan Coady and Senior Associate Sonia Sharma gave at the CommsDay Summit on 20 April 2015.

Authors:
BRENDAN COADY 2CM BW JPG 2015Brendan Coady | Partner
61 2 9291 6258
brendan.coady@maddocks.com.au
SONIA SHARMA 2cm 300ppi B&W jpg 2011Sonia Sharma | Senior Associate
61 2 9291 6143
sonia.sharma@maddocks.com.au
Emily Lau 1cm BW jpg 2014Emily Lau | Lawyer
61 2 9291 6141
emily.lau@maddocks.com.au