Trans-Tasman cable plans underway

TOM PULLAR-STRECKER
Last updated 13:08 19/02/2013

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Politicians have begun squabbling over what a plan to build a new submarine communications cable between Australia and New Zealand will mean for the economy.

Telecom, Vodafone and Telstra announced this morning that they planned to jointly build a US$60million (NZ$70m) cable between Auckland and Sydney in a surprise collaboration.

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

But Green Party spokesman Gareth Hughes said it was a "small step" that would do little to improve competition or pricing.

Telecommunications Users Association chief executive Paul Brislen said the lobby group had mixed views.

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."

Brislen also said he believed regulators would "have to have a look at the proposal", given Telecom's half-ownership of the Southern Cross cable, which carried almost all traffic to and from New Zealand.

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

"But I'm not sure what [the commission] could do if it had concerns."

Pacific Fibre, a company backed by entrepreneurs Sam Morgan, Sir Stephen Tindall and Rod Drury, tried and failed to raise $400m for a new cable linking Australia, New Zealand and the United States cable last year.

Drury said today's initiative was "good" and would improve the internet in New Zealand, but heavy qualified that by saying he was sad New Zealand had not managed to put together a public-private partnership to support a new cable to the US.

"I think we have missed an opportunity to make a step change," he said.

"The Government will say the market has worked, but some bolder thinking could have created some competitive advantage for New Zealand.

"If we want to 'close the gap' with Australia, providing better broadband to the US would have been a nice way to start."

Morgan tweeted the cable 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 price of international bandwidth.

Telecom, Vodafone and Telstra said the "Tasman Global Access" (TGA) cable would significantly improve New Zealand's international connectivity and "strengthen links into fast-growing Asian markets".

Telecom chief executive Simon Moutter said it would be able to link up with four cables that ran out of Sydney - two legs of Southern Cross and two cables that ran to the US and Asia via Guam.

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IDC Research analyst Glen Saunders said that while the partnership was unexpected, Telstra's decision to "get a slice of the pie" despite selling New Zealand subsidiary TelstraClear to Vodafone for $840m last year, was not a surprise.

"It would be a leap to say it showed it was still interested in investing in New Zealand," he said.

There was speculation last year that the sale of TelstraClear could pave the way for Telstra to later launch a takeover bid for Telecom.

Telecom spokesman Andrew Pirie said the three companies would divide the capacity on TGA according to how much each invested. The shareholdings had not been finalised but were expected to be roughly equal.

The consortium itself would not wholesale capacity on the cable to other telecommunications providers, but the three companies would be able to resell some of their share if they chose, he said.

Pirie said the companies had not approached the Commerce Commission for approval but did not expect any regulatory issues.

It is understood the proposal to land TGA west of Auckland is not set in stone and the companies have been looking at an alternative site near Raglan to mitigate the risks that a major calamity in Auckland could cut off New Zealand by taking out the new cable as well as the existing cables.

There is only one high-speed fibre-optic cable across the Tasman, the Telecom half-owned Southern Cross cable, and an older Telstra-owned cable.

That means telcos could need to rely on routing traffic via Hawaii if there was an outage on Southern Cross' Auckland-Sydney leg.

Speaking at a Telecommunications Users Association meeting in Wellington last week, Moutter said that was a concern for businesses that relied on cloud computing services that were hosted on either side of the Tasman.

He also said a new cable to the US would be looking "the wrong way" given the growing importance of Asia.

Telecom, Vodafone and Telstra said they had signed a "non-binding memorandum" to invest in the new trans-Tasman cable, which they hoped to complete mid-to-late next year. Pirie said planning was already quite advanced.

Moutter and Vodafone New Zealand chief executive Russell Stanners said in joint statement today that the business case for the TGA cable was compelling.

"About 40 per cent of both Telecom and Vodafone's international internet traffic is now Australia to New Zealand, versus just 10per cent in 2000," they said.

"We are seeing increased data content being provided from Australia-based servers by global companies and being accessed by New Zealand internet users.

"An additional cable connection with Australia will strengthen the business case for international data servers to be located in New Zealand."

- © Fairfax NZ News

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