'No point' to new subsea cable

The cost of laying a government-subsidised submarine cable to Australia to break the Southern Cross Cable Network's near monopoly on international bandwidth to and from New Zealand may be as low as $100 million, industry experts say.

But the consortium, half-owned by Telecom, said the investment would be unnecessary because it was committed to charging the same prices for bandwidth to and from New Zealand and Australia, where growing competition is expected to drive down the price of international bandwidth.

Communications Minister David Cunliffe announced at yesterday's Digital Summit in Auckland that the Government would consider providing a part, contestable subsidy to help pay for a new submarine link to Australia.

There it could link up with a new cable being laid between Sydney and Hawaii by Telstra which will give New Zealand Internet service providers an alternative route for carrying broadband traffic to and from New Zealand and the rest of the world.

Mr Cunliffe said there was still plenty of capacity on Southern Cross.

However, the problem was the price. About $9 of a typical broadband user's monthly bill of $30 to $50 went toward buying capacity on the Southern Cross Cable.

Southern Cross Cable spokesman Ross Pfeffer said in August that the company would continue to charge New Zealand and Australian customers the same price to carry communications traffic to and from the United States.

He confirmed that commitment after Mr Cunliffe's speech.

"Southern Cross' pricing is not New Zealand specific and Australia has got multiple cables going into it. So if the point of the statement was that multiple cables creates competition then yes, that is true, but what could be achieved?"

The Southern Cross cable was built at a cost of US$1.3 billion (NZ$1.7 billion) in 1999. It provides a 240 gigabit per second Internet connection between Australia, New Zealand and the United States.

An upgrade commissioned in August will increase its capacity to 430 gbps by the end of next year.

Telstra announced in April that it would end its reliance on Southern Cross by building its 1.28 terabit cable to Hawaii, where it will link up with other subsea cables.

Contractor Alcatel-Lucent is due to finish laying the cable by mid-2008. It is understood to have cost about US$300 million.

- © Fairfax NZ News