CloudFlare CEO attacks ‘Telstra tax’

Web security company’s chief executive says it might seek regulatory action over transit pricing

CloudFlare’s CEO, Matthew Prince, has reiterated his company’s criticism of Telstra’s transit pricing, describing it as akin to a “Telstra tax”.

“I joke that we should make commercials that feature me sitting behind a desk with a big bald eagle on my shoulder and looking straight into the camera saying, ‘You have to forgive me, I’m an American — I didn't know that ‘Telstra’ was Australian for ‘expensive’,’” the CEO said.

“It is usurious what Telstra, and to a lesser extent Optus, are getting away with charging the Australian market, and it is not an exaggeration to say that it is more of an order of magnitude more than what any other providers in the world are charging.”

“That effective cost imposes Telstra tax on just about everything which is done across Australia,” Prince said.

CloudFlare, best known for its DDoS mitigation and CDN offerings, recently published a blog entry that took aim at “six expensive networks” around the world. It says that those networks are significantly more expensive than other bandwidth providers and have proved unwilling to discuss establishing peering arrangements. Along with Telstra and Optus, the blog entry named HiNet, Korea Telecom, Telecom Argentina and Telefonica.

“To give you a sense, these six networks represent less than 6% of the traffic but nearly 50% of our bandwidth costs,” CloudFlare’s Nitin Rao wrote. “While we’ve tried to engage all these providers to reduce their extremely high costs and ensure that even our Free customers can be served across their networks, we’ve hit an impasse.”

Telstra argued in response that CloudFlare’s figures were overstated. “IP transit prices in Australia reflect the fact we have a relatively small population that is a long distance from the major sources and destinations of data in North America and Europe,” a spokesperson for the telco said in the wake of the blog entry.

Prince said CloudFlare rejected the argument. “Why that's completely disingenuous in our case is because in the three, and soon to be four, of the largest population centres in Australia — Perth, Melbourne and Sydney, and soon Brisbane — CloudFlare has built facilities,” the CEO said.

“We bear the cost of going and getting the content from overseas, and the irony is that it’s actually less expensive for us to fetch the content over the undersea cables than it is to hand it off to Telstra or Optus even though we are literally neighbours to them in the same building and it is less than a hundred metres of fibre optic cable to connect our router to their router,” Prince said.

“For the bandwidth that is sent over that hundred metre cable — again a hundred metres, literally — we pay more than we do for the bandwidth that is sent over the 5000 kilometres or more between Australia and, let’s say, the west coast of the United States. That's just not a well-functioning market in any means.”

CloudFlare has announced that it will move customers that use its Free tier off the six transit providers it named in its blog, including Telstra and Optus.

“The next step for us might be to take out concerns some of the regulatory agencies inside Australia because now we have compelling evidence that this is anti-competitive behaviour,” Prince said.