Commerce Commission to probe cable plan

TOM PULLAR-STRECKER
Last updated 05:00 20/02/2013

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The Commerce Commission says it will consider whether Telecom, Vodafone and Telstra's plan to build a new fibre-optic communications cable between Australia and New Zealand raises "potential competition concerns".

CallPlus chief executive Mark Callender said the company expected to lodge an objection to the surprise collaboration with the regulator this week.

The $71 million cable would provide an alternative transit route to the Telecom half-owned Southern Cross Cable for internet traffic to and from New Zealand and the rest of the world.

But Callender feared it could give Vodafone and Telecom an advantage over smaller rivals in the broadband market while also undermining the business case for a more ambitious competitor to Southern Cross directly linking New Zealand and the United States.

Telecom spokesman Andrew Pirie said Telecom, Vodafone and Telstra would divide the capacity on their proposed Tasman Global Access (TGA) cable according to how much each invested.

The shareholdings had not been finalised but were expected to be roughly equal. The companies had not closed the door to additional investors but were comfortable with a three-way partnership, he said. The three investors would be able to resell some of their share if they chose.

Callender said having the "two largest retail players" own the cable meant there were obvious competition concerns.

A commission spokeswoman said it had not received any requests from the consortium seeking clearance for its investment.

"We will be considering whether this venture raises any potential competition issues."

Telecommunications Users Association chief executive Paul Brislen believed the commission would "have to have a look at the proposal" but was unsure what it could do if it had concerns.

"We have issues to sort out around wholesale access," he said.

The "extra capacity" provided by the 30-terabit cable would be welcome, but "the longer-term fear was a trans-Tasman cable made a new cable to the United States far less likely", he said.

Trade Me founder Sam Morgan, one of the backers of the now-defunct Pacific Fibre venture that aimed to lay a $400m cable between Australia, New Zealand and the US last year, tweeted the venture was great news, but a win for Telecom as the requirement for telcos to have a backup link meant Southern Cross would still control the international bandwidth price.

Mark Petrie, chief executive of Christchurch-based Snap Internet, was also doubtful the new cable would reduce broadband prices.

"With Telecom owning half of Southern Cross, it is not clear how much competitive pressure it will add. If it was a third party building a cable into New Zealand that really was going to compete with Southern Cross, I expect I'd be more ecstatic," he said.

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Communications Minister Amy Adams said the cable was "the market solution that the Government always expected would happen" and an important step in New Zealand's connectivity.

The consortium said the cable would run between Auckland and Sydney and should be completed by late next year. But it is understood it is also considering an alternative site near Raglan.

That would mitigate the risk that a calamity in Auckland could cut off New Zealand by taking out the new cable as well as both legs of the existing Southern Cross cable network.

- BusinessDay.co.nz

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