Trans-Tasman cable agreement made

Southern Cross Cable has slashed the price it charges to carry internet traffic to and from New Zealand by almost half, just hours after a controversial proposal for a rival trans-Tasman between Auckland and Sydney took a big step forward.

Marketing director Ross Pfeffer said Southern Cross had cut the price for carrying traffic to and from the United States and New Zealand and Australia by 44 per cent, to about 6 cents a gigabyte. The cut applies to capacity sold through new contracts.

Southern Cross also lowered the price of carrying traffic across the Tasman by between 22 and 41 per cent, and between Hawaii and the United States by 22 per cent.   

Pfeffer said the timing was ''totally coincidental''.

Axin and Huawei Marine - a joint venture between Chinese telecommunications equipment giant Huawei and Britain's Global Marine Systems - had just agreed a contract for a marine survey, needed before construction can start on Axin's proposed fibre-optic cable. The cable is expected to cost about US$100 million ($125 million).

Axin's cable would compete with the Southern Cross Cable, half-owned by Telecom, which has a near monopoly on internet traffic to and from New Zealand.

Axin chairman Robin Lee said the contract with Huawei Marine was worth ''at least'' a multimillion dollar sum.

Lee said media reports in September that Axin represented a firm that was majority owned by China Telecom were incorrect. The financial backers of the proposed cable were himself and other individuals investors living in New Zealand and Hong Kong.

He also said reports that Bank of China was providing financing for the cable were not correct.

A media release issued by Axin in September had stated funding for the project had been approved by Bank of China. 

Axin had reached an agreement with New Zealand state-owned enterprise Kordia which would operate the cable, he said.

Axin and Huawei Marine said in a brief statement issued in China late last night announcing the marine survey that the cable would be called Optikor - the name Kordia had given to its own initiative to build a trans-Tasman cable which it mothballed in September.

Fears have been bubbling below the surface that Chinese interests could spy on communications carried by the cable.

Larry Wortzel, a member of the influential Washington-based US-China Economic Security Review Commission, told The Dominion Post in October that the US might be concerned if the cable was used to carry intelligence, defence or scientific information.

Colonel Wortzel was assistant army attache to China at the time of the Tiananmen Square massacre in 1989. When he made the comments, it was assumed China Telecom was the ultimate backer of the project.

Axin and Huawei Marine's statement said Axin's cable would have an initial capacity of 120 gigabits per second, which could increase to 6.4 terabits per second (Tbps), and that the cable would be completed by the end of next year.

''As plans for Australia's National Broadband Network and New Zealand's ultrafast broadband initiative continue, the necessity of efficient international communications across the Tasman has become increasingly important,'' they said.

Southern Cross said it had upped the total capacity of its network, which resembles a ''figure of eight'' centred in Hawaii, from 1.4Tbps to 1.6Tbps using new electronics. It had the potential to increase that to 6Tbps by December next year.

The company said it had upgraded the cable five times and cut the price of capacity by 21 per cent on average each year since 2001.

Prior to Axin's initiative, hopes for a new cable to break Southern Cross's monopoly rested primarily with Pacific Fibre, a startup set up in 2009 by entrepreneurs Sam Morgan, Sir Stephen Tindall and Rod Drury to lay a cable between New Zealand, Australia and the United States at an estimated cost of US$400m.

Pacific Fibre chief executive Mark Rushworth said efforts to raise money for its cable were progressing well, but it was ''a bit like herding cats'' and fundraising was taking longer than it initially anticipated.  

The company had hoped to secure financing by November last year after appointing Credit Suisse and First NZ Capital to seek equity investors and ANZ Bank to arrange debt financing in April. 

Rushworth said Pacific Fibre continued to have strong support from its original investors who remained committed to the project. Vodafone, Crown-owned research network operator Reannz, and Australian internet provider iiNet have signed conditional agreements to buy capacity on Pacific Fibre's proposed cable. 

Axin has also been working with Maori to invest in fibre-optic cables within New Zealand, helping bankroll an $8.5m Maori-owned cable connecting Auckland and Whangarei.

- © Fairfax NZ News