Pacific Fibre failure not all doom and gloom

TOM PULLAR-STRECKER
Last updated 10:10 02/08/2012

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OPINION: Pacific Fibre chief executive Mark Rushworth always viewed me as a bit of a "naysayer" on the likelihood of its plan to lay a trans-Pacific communications cable to compete with the Southern Cross Cable succeeding.

Nevertheless, I am somewhat disappointed by the collapse of the venture. I had hoped Vodafone's pending acquisition of TelstraClear would have helped get it over the line by creating a substantial customer for the firm.

Only "somewhat" disappointed, because the Southern Cross Cable does have enough capacity to support New Zealand's broadband needs in at least the medium term and has been blamed too much for internet providers' ungenerous data caps.

Note for instance that Christchurch internet provider Snap is offering a 550 Gb data pack on its new ultrafast broadband plans for $70 - proof that providers can profitably retail data for less than 13 cents a gigabyte.

But competition could have helped iron out some kinks in the wholesale market for international bandwidth, reduced prices further and provided extra resilience in the event of a natural disaster cutting one or (God forbid) both of Southern Cross' links.

Pacific Fibre appeared to do almost everything right, but because of the peculiar economics of the international cable market, it was still not enough.

One of the problems with building business cases for new cables is that almost all the investment is upfront and capacity on cables is effectively unlimited, meaning competition can reduce prices to zero.

It was never quite clear whether Pacific Fibre was intended to be a profit-making venture or an act of almost philanthropic nation-building.

InternetNZ chief executive Vikram Kumar may be right that the lesson to be learned is that a full-blown competitor to Southern Cross will only be possible with much greater government support.

Such an initiative is not urgent, but something the Government may need to move up the agenda if the vacancy left by Pacific Fibre's collapse is not filled by the private sector in the next couple of years.

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- BusinessDay.co.nz

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