Cable guy is ready to roll

17:00, May 24 2014
Remi Galasso
REMI GALASSO: The Queenstown-based Frenchman has big fibre-optic plans.

Remi Galasso will become an internet hero if he pulls off his plan to lay a new US$300 million fibre-optic cable between New Zealand, Australia and the United States.

Rightly or wrongly, many computer users blame New Zealand's reliance on the Southern Cross Cable, half-owned by Telecom, for the miserly data caps still offered on some broadband plans and for supposedly high prices. Few argue a second cable network would not be a welcome piece of infrastructure for "New Zealand Inc".

Galasso declared last week that his company, Hawaiki, was just a few weeks away from getting the final go-ahead for a second cable network after having secured a major New Zealand company to be its equity partner and a bank willing to lend the money. He won't name them at this stage. What remains to be done is converting letters of intent from potential customers into firm contracts.

The crunch moment is called "Coming into Force" (CIF) in cable-industry speak, and in Hawaiki's case this would be when it triggered its construction contract with US firm TE SubCom, which it selected in September to lay the 13,127 kilometre cable.

Galasso moved to Queenstown from New Caledonia in January with his Iranian-born wife, a skin doctor, and nine-year-old son. That meant putting Intelia, the Noumea technology company in which he still owns a majority shareholding, and its 40 staff in the hands of a general manager.

It could be the start of an exciting chapter in the career of the 43-year-old French telecommunications industry executive in the town he dubs the "Switzerland of the Pacific".


He raves about his son's school and living in "the best country" to watch rugby. "Even if I do support France, I really like to see the All Blacks playing."

But failure for Hawaiki would unleash a torrent of cynicism. The internet community has been led up the garden path before, most notably by Pacific Fibre, a seemingly quasi-philanthropic venture backed by industry luminaries Sir Stephen Tindall, Sam Morgan and Rod Drury, which abandoned its own bid to lay a new trans-Pacific cable in 2012.

Galasso is an unknown quantity to most New Zealanders, even within the gossipy telecommunications industry, but there are some who have faith.

Colin Mitten announced in March that he would resign as chairman of economic development agency Northland Inc next month to pursue a plan to construct a $125m data centre close by Hawaiki's New Zealand cable-landing point near Whangarei.

"Galasso understands there have been other attempts to put cables in and he has played a cool game, not over-advertising it or setting huge expectations," Mitten says. "He has done this before, whereas previous attempts to build a second cable were by people who hadn't."

IDC Research analyst Adam Dodds argues that, realistically, the business case for the data centre hinges on the cable going ahead.

David Ware, chief executive of NZX-listed TeamTalk, has also met Galasso and believes he has the credentials and personality to pull off a project Hawaiki's size. "I think he has got what it takes. He has done other projects around the islands, he knows what he is doing and he seems to have a good team around him." That team includes the former general manager of Alcatel-Lucent Submarine Networks, Georges Krebs, and legal adviser Peter Missingham, a former partner at Kensington Swan in Auckland.

Born in the south-west of France, Galasso has an almost hum-drum explanation for how he ended up travelling the world pursuing what might seem an unlikely business venture.

He graduated from a business school in Tours before joining France's premier technology multinational, Alcatel. Postings took him to the then-virgin telecommunications market of Vietnam and to Malaysia before he was appointed "country senior officer" for the Pacific islands in 2001. Travelling the world "was not a specific plan, life is like that, you know", he says.

Galasso left Alcatel in 2006, before it merged with US firm Lucent. But he stayed in Noumea to found Intelia, which distributes and installs telecommunications systems, including gear from Alcatel-Lucent rival Ericsson, across the Pacific islands. In New Caledonia he was involved in the implementation of two cable networks; the 2100km Noumea-to-Sydney cable which was completed in 2008 and the 4600km Tahiti-to-Hawaii cable (2009).

Like New Zealand's hitherto elusive second cable network, neither of those cables came about overnight, Galasso is keen to point out.

It took seven years, from concept to completion, to build the Noumea cable "and exactly the same in Tahiti", he says. "It is true we have spent a lot of time on [the Hawaiki] project, but this is the way it is. In this industry you have to be a bit patient."

It was in 2006 that Galasso had the idea of laying a subsea cable between Hawaii and New Zealand, connecting several Pacific islands. "I saw a need for the Pacific islands to be connected as most of them were still relying on satellite and I saw a need for a second cable in New Zealand". But the small populations and long distances meant the business plan for the company, called Spin, hinged on financial support from the French government which never eventuated.

Hawaiki Cable's plan, linking Australia, New Zealand and the US via Hawaii, is a "completely different strategy" and more commercial, he says.

"We believe there are five different markets in the Pacific region. Ranked in terms of demand for capacity, ‘number one' is Australia to the US. The second is Hawaii to the US west coast, the third is New Zealand to the US, the fourth is New Zealand to Australia and the fifth is Pacific islands to the US. We have designed Hawaiki to cover all five markets."

Pacific Fibre's proposal was "probably the best design for New Zealand but not for the market" as it skipped the Hawaii-to-US route.

There is speculation, too, that Hawaiki could capitalise on demand from the US Defence Department for capacity to link its growing Marines base in Darwin back to the US mainland, a potential source of income that Pacific Fibre appeared to just miss out on. "I am just not allowed to talk about it," Galasso says.

He may be patient but the clock is ticking. Brisbane-based company SubPartners, whose founder Bevan Slattery has an A$200m (NZ$215m) cable between Sydney and Guam on his resume, also wants to lay a cable connecting New Zealand and Australia to the US west coast, just as soon as it shores up support for another cable between Perth and Singapore.

Galasso believes Hawaiki's cable can coexist with, and indeed benefit from, a cable that Telecom aims to lay across the Tasman Sea in partnership with Telstra and Vodafone. But no-one believes there is immediate demand for two new trans-Pacific cables.

The need for speed may have influenced Hawaiki's plans. Its original goal was to pay for spurs to several Pacific islands, but Galasso now says its funding will only cover its trunk route. This means that if the islands want to connect to Hawaiki's cable they would need to pay up-front for spurs, or for branching units to be installed on the cable that would let them connect at a later date.

It is easy to guess the rationale. Instead of the whole cable venture potentially being held up while Pacific island governments and Hawaiki got their ducks in a row, Pacific island policy-makers would be put on the spot.

"There is something fantastic called ‘island time' but unfortunately it is not very good in this kind of project," Galasso says. "Pacific islands will have to make a decision in the very coming months to know whether or not they want to be connected." The deadline he has given them is September.

That might sound a bit brutal, but Galasso indicates that Hawaiki has to balance idealism with pragmatism. "The idea of Hawaiki, which means the original land of the Maori people, was to connect all those Polynesian people from New Zealand to Hawaii, but the main business drivers are the Australian and New Zealand markets."

Throwing down the gauntlet to Pacific islands is not the only politically-sensitive decision Galasso has had to make. It was understood that he intended to join Bermuda-based Southern Cross Cable in domiciling his venture in a tax haven, and he doesn't deny it may have crossed his mind.

But if that was the plan, it isn't now. Hawaiki, which employs eight staff in New Zealand, Australia and Noumea, has been incorporated in New Zealand and Galasso says it will pay tax here.

"I made the choice to live in New Zealand with my family and to register the company in Auckland. I could have made other choices such as registering the company in a tax haven," he says. "But I feel it is important to give back to the country that welcomes you and to pay the taxes in New Zealand."

All its existing staff will move to its Auckland head office in the next few months and Galasso says it would take on another 10 during construction.

First, however, Galasso is hoping for a little bit of taxpayer money himself; specifically the $15m the Government allocated Crown-owned research network operator Reannz to buy international bandwidth on a new cable.

"I would not like to be in the shoes of the New Zealand Government, whatever you do you are criticised. One day you don't do enough, the next you do too much," he says.

"My personal opinion is the Government perfectly understands the need for a second cable and they are committed to make it happen. I sincerely hope Hawaiki will be allowed to provide capacity to Reannz."

That, he says, is all the Government help Hawaiki hopes and expects.

"I am not saying that we are not going to do the project without it. I don't think a system fully funded by public money is a good idea because I think competition is important and it is better to have private companies doing this, and that it is feasible."

Sunday Star Times