Market Insight

Slingshot users in New Zealand now able to bypass geo-blocking

July 01, 2013

Alzbeta Fellenbaum Alzbeta Fellenbaum Manager – Research and Analysis, Service Providers & Platforms

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New Zealand ISP Slingshot has launched a new service for its broadband customers allowing them to hide their physical location from online services to access material normally restricted to users based outside their original geographic location (i.e. bypassing geo-blocking). The "Global Mode" service is a free add-on available to all Slingshot broadband subscribers and is advertised as a service that allows foreigners visiting New Zealand to access online services they subscribe to in their home country. Online video services such as Hulu or Netflix are currently blocked in New Zealand and other companies charge higher prices for certain services based on customers' New Zealand IP address. Using the add-on effectively disguises the user's IP address and makes them appear to be based in the United States or Great Britain, for example.

While the service is promoted to be used by Slingshot customers' overseas visitors, the company does not plan to verify or police how its customers use it, thus allowing its 120,000-strong customer base to circumvent geo-blocking restrictions.

Slingshot currently offers fixed line, mobile and broadband services and is the third largest telecommunications company in New Zealand (following the Vodafone acquisition of TelstraClear at the end of 2012). Slingshot offers broadband connections via LLU DSL (unbundled copper local loops) as well as its own optic fibre network in over 100 exchanges across the country. With tough competition in the New Zealand broadband market, which is dominated by the incumbent Telecom NZ with over 51 per cent market share followed by Vodafone (24 per cent), the Global Mode service is a novel way for Slingshot (10 per cent market share) to differentiate its services. Moreover, given that the company utilizes data caps on its broadband packages, Slingshot could also cash in on the extended bandwidth usage if its customers start using the previously-blocked services and their need for data increases.

Slingshot is not the first New Zealand ISP to provide a geo-blocking avoidance service. In 2012, Fyx, an alternative pay-as-you-go ISP, shortly introduced this model. It was, however, discontinued after only a couple of weeks, when Fyx's parent company, Maxnet, was bought by Australia-based telecommunications firm Vocus. Although the new management was not reportedly against the service per se, they wanted to refocus Maxnet's operations on business and data centre services.

The increasing activity in geo-blocking avoidance is in line with New Zealand's policy on intellectual property, which is pushing for a competitive and cost-effective consumer environment and sees geographical restrictions as not consumer-friendly. This seems to be the general sentiment around the combined NZ/AU region as the Australian Parliament has also been debating a law change to explicitly allow geo-blocking-avoidance services in order to fight "price gouging" - a local term for the fact that New Zealand and Australian residents may be charged up to 50 per cent more for digital services and downloadable goods than their American counterparts.

From a legal point of view, Slingshot and its customers are entering murky waters. While bypassing geo-blocking in and of itself is not illegal, it can result in users breaching the terms and conditions of the particular services, which may result in sanctions and closing of accounts. Also, some services, such as iTunes, are fixed to a credit card address in a specific area and it thus will not be possible for New Zealanders without the particular address and credit card to use these services.

Slingshot's move presents a bigger threat to TV broadcasters and local pay TV operators, such as Sky TV. The fact that users in New Zealand have to usually wait to watch the latest TV series and/or pay to watch selected sporting events has already spiked local piracy levels. Slingshot's Global Mode offers users a semi-legal option to go around the geographical restrictions. The incentives for consumers to pay for pricey pay TV packages for sporting events, films or major TV shows, would potentially decrease significantly if they had the option to watch their preferred content right away via a free (or cheaper) overseas service.

For now, major content companies and rights-owners will be watching the region cautiously. Admittedly, Slingshot's 120,000-strong customer base does not represent a great threat to the big studios and broadcasters but the product does set a dangerous precedent; especially if similar services were to be adopted on a large scale and supported by law around the region and elsewhere.

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