A Govt contribution towards an international cable

September 20th, 2013 at 12:00 pm by David Farrar

Amy Adams has announced:

Communications and Information Technology Minister Amy Adams is calling for expressions of interest from companies who are considering building a new international telecommunications cable between New Zealand, Australia and the United States. 

“To ensure we have sufficient international capacity in the medium to long term, the Government is making a $15 million contribution available, and would commit to an anchor tenancy on a new cable for research and education purposes,” Ms Adams says.

This is the same commitment the Government made towards Pacific , and it is very good to see the Government make the same commitment to other companies who are seeking to build a second cable for us.

The commitment that REANZ would be an anchor tenant is probably more important than the contribution, even thought both are useful.

Some people want the Government to be directly involved in constructing a second cable, but my string preference is for the private sector to do it and I know that Hawaiki at least have a proposal out there. Their proposals includes having the cable connect a dozen or so Pacific Islands, which would be a great boost for them.

InternetNZ has commented:

InternetNZ (Internet New Zealand Inc) is delighted the Government is contributing $15 million and calling for expressions of interest for companies to build an international telecommunications cable between New Zealand, Australia and the United States.

InternetNZ Chief Executive Jordan Carter said this was an excellent move by the Government to help New Zealand’s telecommunications industry.

“Like the Ultra Fast Broadband and Rural Broadband Initiatives, we think this is a fantastic step towards ensuring New Zealand maintains our robust connectivity to the world.

We have sufficient capacity at the moment, and for the near future. But getting greater competition with international connectivity will be good for prices, and having supply meet demand.

Tags: ,

37 Responses to “A Govt contribution towards an international cable”

  1. Redbaiter (8,032 comments) says:

    Corporate welfare.

    No way.

    Vote: Thumb up 10 Thumb down 5 You need to be logged in to vote
  2. kowtow (7,955 comments) says:

    Taxpayer contribution. The government has no money of it’s own.

    Vote: Thumb up 13 Thumb down 3 You need to be logged in to vote
  3. gazzmaniac (2,319 comments) says:

    Why isn’t the option of a direct line to Asia being looked at? Or a big trans tasman connection to connect with servers in Sydney and Melbourne and piggy-back the Aussie connections to Asia.

    Vote: Thumb up 7 Thumb down 5 You need to be logged in to vote
  4. Pete Macaulay (47 comments) says:

    This shows good judgment by the government. By providing an anchor tenant and some cash, It ensures a cable provider can develop a sound model to gain funding. As DPF says we have enough capacity for the time being. My concern is less for capacity, and more for resilience.

    Vote: Thumb up 5 Thumb down 7 You need to be logged in to vote
  5. gazzmaniac (2,319 comments) says:

    Why two thumbs down for my comment? I was trying to be constructive.

    Vote: Thumb up 3 Thumb down 3 You need to be logged in to vote
  6. Redbaiter (8,032 comments) says:

    “Why two thumbs down for my comment?”

    Maybe because it skirts the issue, which is limits of government and crony capitalism.

    Vote: Thumb up 7 Thumb down 1 You need to be logged in to vote
  7. Viking2 (11,283 comments) says:

    What a fucking joke. The govt. using someone else’s money wants to do what it stopped others doing.
    Remember the stumbling block with all the other proposals was that they wanted to use Huawai gear and the USA and Australia were having none of that.
    Tell the Govt. to fuck off.

    Vote: Thumb up 7 Thumb down 3 You need to be logged in to vote
  8. Redbaiter (8,032 comments) says:

    Look, a new cable would of course be a good thing for NZ, but that “something is good for NZ” is not automatically a reason that justifies taxpayer investment.

    Vote: Thumb up 6 Thumb down 2 You need to be logged in to vote
  9. RRM (9,667 comments) says:

    New Zealand – an outcrop of civilisation so small, the Government has to pay people to build stuff that would be profitable elsewhere.

    I guess a second cable would be good for giving anonymous keyboard troll “heroes” better connections to their offshore-hosted web pages in San Fran though… there’s a silver lining to every socialist cloud :-)

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  10. Yoza (1,678 comments) says:

    Internet traffic is not going to lessen in the future, this is one of those winners the government should be picking. This is a project that will contribute to New Zealand’s strategic infrastructure and provide a future revenue stream.

    Vote: Thumb up 3 Thumb down 7 You need to be logged in to vote
  11. James Stephenson (2,096 comments) says:

    Is $15m to turn a monopoly into a duopoly good value for money?

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  12. cha (3,856 comments) says:

    Let me guess, Coliseum CEO Tim Martin has been on the phone to Key.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. davidp (3,558 comments) says:

    gazzmaniac>Why isn’t the option of a direct line to Asia being looked at? Or a big trans tasman connection to connect with servers in Sydney and Melbourne and piggy-back the Aussie connections to Asia.

    The internet tends to concentrate itself in a few global centers where multiple carriers get together to trade traffic and content. These centers tend to be close to submarine cable landing locations… Probably 90% of traffic across the Atlantic goes between NE USA and Cornwall, leading to concentrations of carriers and content in New York and in London. Across the Pacific, most tcables tend to land in Los Angeles or San Francisco and there are concentrations of content and carriers in and around these locations.

    There are considerable economies of scale in trading traffic in these global centers, so you’ll find that (say… I’m making this example up rather than looking at the actual telco contracts) if Egypt Telecom wants to trade traffic with Deutch Telecom, then they will do it in London. It makes better sense to access the concentrations of IT activity in California that to access Sydney, which is a no-where place in terms of the internet. It means NZ telcos can trade traffic with hundreds of other ISPs and telcos, and do it cheaply. It also gives us direct access to the content and services NZ consumers want to use, such as YouTube, GMail, and iTunes, and possibly with content providers like Netflix in the future.

    Almost none of our traffic goes to or from Asia, and there are no financial benefits from trading traffic there. Why would we need direct access?

    The other thing to consider is that in internet terms, the US is the backbone that everyone connects to sooner or later. With a Pacific cable we get direct access. If our traffic routes via Sydney then we become even more of a dead end. It’s almost inviting the global IT industry to treat us as a branch of Australia.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  14. JeffW (324 comments) says:

    We have to be able to download movies and TV screens without delay!

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  15. OneTrack (2,834 comments) says:

    Yoza – “Internet traffic is not going to lessen in the future, this is one of those winners the government should be picking. This is a project that will contribute to New Zealand’s strategic infrastructure and provide a future revenue stream.”

    Have you got your UFB Fibre connection yet? Or are you supporting Russel in keeping everybody on copper?

    UFB Fibre – the solution looking for a problem. And now its all going pear-shaped, the government still wants to throw more money around so people can download their facebook pages quicker.

    Crony socialism, who needs it.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  16. Jack5 (4,906 comments) says:

    Hypocrisy!

    If it’s right to sell, or partly sell, state assets that are profitable, how can it be right for the state to invest in assets private enterprise is declining to invest in?

    Cunliffe under Labour destroyed at least a billion dollars of investor capital when he restructured Telecom’s copper line monopoly. Key will also hurt investors in Telecom (half owner of the present Pacific cable), with effectively a subsidised competitor.

    Subsidies for Wellington’s film industry, now for telecommunications.

    Big Telecom players whistle and the Government barks. They, notably through their provider interest group which calls itself the Telecom USERS’ Association, pressed for fibre to the door, which is proving to be so far ahead of demand it’s a dog. Now the big telecom companies want taxpayers to help them head off any bottleneck ahead when half a million fat couch potatoes – the real market for subsidised fibre to the home – pipe in five channels of video simultaneously 12 hours a day.

    A free market government? Bullshit!

    Vote: Thumb up 2 Thumb down 1 You need to be logged in to vote
  17. SPC (5,473 comments) says:

    There is the case to up the contribution to any proposal including South Pacific islands, out of the aid and economic development budget .

    This is not corporate welfare, it is investment in modernising our economic infrastructure – on this base will come profits from which taxes derive.

    One could more validly justify financing the second cable via Kordia than spending $10B on roads to reduce travel time for commercial drivers transporting imports to retail and commuters.

    Vote: Thumb up 1 Thumb down 3 You need to be logged in to vote
  18. SPC (5,473 comments) says:

    In Redbaiters eyes,

    1. investment in basic economic infrastructure is corporate welfare (companies pay tax).
    2. doing something good for New Zealand is not what taxpayers money is for (so then what is tax money for?).

    So if we don’t use pooled economic resources to develop basic economic infrastructure, like roads/ports, phone lines/internet/cables, water and wastewater – then we would be an undeveloped country like Africa was all too recently or a perfect model like Singapore …

    Vote: Thumb up 1 Thumb down 4 You need to be logged in to vote
  19. Yoza (1,678 comments) says:

    Have you got your UFB Fibre connection yet? Or are you supporting Russel in keeping everybody on copper?

    I think there should be fibre runs out to rural areas and areas that are a reasonable distance from the exchange, copper is too prone to emf interference over long distances. Fibre doesn’t need to go all the way to the house to be effective, it can revert back to copper at a cabinet that serves a couple of hundred houses.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  20. Jack5 (4,906 comments) says:

    It’s worth noting that even the Morgan investment family, of North Korea fame, couldn’t get enough interest from investors to get a second Pacific cable.

    Did Telecom get an NZ Govt subsidy for its Pacific cable? I don’t think so.

    If Vodafone, Orcon, Snap, and their TUANZ mates want a second cable, why should they get taxpayer help when Telecom didn’t need it?

    SPC in his 8.04 post seems to argue that a second Pacific fibre cable will decide whether NZ will be like an undeveloped African country, rather than a rich state like Singapore.

    There’s a helluva lot more to Singapore’s success than broadband internet. It’s at an international shipping crossroads, has one of the world’s top three ports, one of its biggest and best airports, is a leader in petroleum processing, and is more successful than NZ in many high tech industries in which internet access is not the leading factor. Singapore has an excellent education system and a highly developed financial sector. It also has a huge sovereign investment fund, while NZ depends on capital inflows. Above all, it’s a semi-democratic, dirigiste economy, with state controls such as over its currency exchange rate, industrial development, and a fairly high level of state influence in its citizens’ lives, right down to birth rates and marriages.

    It’s ludicrous to suggest that standard of internet access is what accounts for the difference between the Singaporean economy and that of one of Africa’s poorer states.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  21. SPC (5,473 comments) says:

    Jack, cable is 21st C infrastructure. You seem to be confusing the public good, having the infrastructure required for a modern economy and a modern society, with hand outs or enabling corporates to over-charge customers.

    You seem confused as to the history of Telecom, as a monopoly it could charge whatever it liked (thus could build cables), allowing that to continue once it was no longer owned by the public was a form of oligarchy economics.

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  22. Jack5 (4,906 comments) says:

    SPC (10.04):

    1. re the public good. We already have a Pacific cable, provided by private enterprise. Your argument about the public good also extends to electricity, cellphone networks, airports, and many other facilities. All of these can be provided by utility enterprises not owned by the State. If there is demand for a second cable, private enterprise will provide it.

    2. Re the history of Telecom. It began as a state monopoly run by the Post Office. The Government (I think it was a Labour one) privatised it as the monopoly owner of the copper network. The Government of the time was happy to take investors’ money for the right to run this monopoly. Then Cunliffe in effect confiscated this property right the state had sold, when he by fiat unbundled Telecom’s rights over the copper network. The share price plunged, costing investors, most of them the traditional small mum and dad investors, at least a billion dollars. This was communist-type confiscation of property.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  23. Jack5 (4,906 comments) says:

    Telecom was at times arrogant, and paid its chief executives, some of them over rated, vastly generous salaries, but not everything it did was wrong.

    For example, it had begun rolling out a cable network in Auckland when it realised that ADSL was going to make the copper network a useful carrier of broadband. Telecom had the nous to stop the cable roll-out dead in its tracks and switch its emphasis to improving its existing copper network.

    Let’s see whether the Government and the present telecommunications leaders react as smartly to the changes in demand for broadband that have arisen with the swing towards smart phone and tablet internet access, and these devices’ use of wireless links, either cellphone networks or WiFi to modems on copper lines.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  24. SPC (5,473 comments) says:

    No, we have a cable provided by a protected monopoly established by the government. Hardly a case of private enterprise or risk capital in play.

    Telecom was NOT sold on the basis that it would remain a monopoly and the share value tripled in the decade after it was sold, yet there was little investment in upgrading or modernising the network (some was invested in Oz in AAPT) until there was pressure to do something after 1999. And even they were too tardy and thus the old protected telecommunications oligarchy was abandoned.

    I know of no country that has left the development of infrastructure to the private sector alone.

    Those who build power stations are dependent on transmission provided by the state, can you name any company that has bought land and established a new airport?

    And no demand alone does not bring private investors into play – they would require the security of public partnerships before they would risk their capital.

    For example the $10B on roading proposed would not have come from the private sector until congestion was much worse than it is now and motorists had to use their toll road (not just use it because it was quicker).

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  25. SPC (5,473 comments) says:

    Jack I think the idea that most of the investment in Telecom was by the traditional small mum and dad investors is an urban myth.

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  26. gazzmaniac (2,319 comments) says:

    Telecom was NOT sold on the basis that it would remain a monopoly and the share value tripled in the decade after it was sold, yet there was little investment in upgrading or modernising the network…

    Had the government not regulated the copper network, the private sector may have had a business case for their own fibre network. There almost certainly would have been a larger drift to 3G and 4G wireless internet (I have 4G at home since it is cheaper and faster than DSL1+mandatory phone line that is available where I live) – the private sector would have solved the problem. But Telecom was regulated and it’s all academic.

    can you name any company that has bought land and established a new airport?

    BMA (BHP-Mitsubishi Alliance) built the new Moranbah airport in the bowen basin (Queensland), completed mid 2012.

    Those who build power stations are dependent on transmission provided by the state

    Only because the government hasn’t sold the lines with the power stations. There is no reason why there couldn’t be a privately run line, and if there was ever a big private power scheme there would probably be privately run lines.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  27. SPC (5,473 comments) says:

    gazzamaniac, the point being that services for profit are built where the existing infrastructure exists. The not for profit investment is what an economy needs at its base.

    Mining companies and those bankrolling them extracting minerals from around the world make their own rules.

    Vote: Thumb up 0 Thumb down 3 You need to be logged in to vote
  28. gazzmaniac (2,319 comments) says:

    You asked for an example of a company that has built a new airport. I supplied the name of a company that has built an airport, and the name of the airport. A mining company is still a company and Moranbah Airport is a public airport served by airlines.
    Therefore, there was a market for an airport and a private company built one.

    Vote: Thumb up 2 Thumb down 2 You need to be logged in to vote
  29. gazzmaniac (2,319 comments) says:

    Mining companies build rail lines and ports in Australia too. They also build roads. All the time.

    Vote: Thumb up 2 Thumb down 1 You need to be logged in to vote
  30. SPC (5,473 comments) says:

    My point was and is that mining companies are the exception to the rule.

    There was no market, the provider of the service was the user of the service.

    Vote: Thumb up 0 Thumb down 3 You need to be logged in to vote
  31. gazzmaniac (2,319 comments) says:

    There obviously was a market otherwise they wouldn’t have built it.
    There is also no rule saying that private entities won’t build infrastructure.

    Vote: Thumb up 2 Thumb down 1 You need to be logged in to vote
  32. Jack5 (4,906 comments) says:

    SPC posted at 11.01pm:

    Jack I think the idea that most of the investment in Telecom was by the traditional small mum and dad investors is an urban myth.

    SPC, you aren’t Hooton’s secretary, are you? Or a TUANZ member? Did you ever read a Telecom annual report? By number of investors, Telecom investors were overwhelmingly what we call mum and dad investors. There were tens of thousands of them.

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  33. GJKiwi (179 comments) says:

    Question to the naysayers: Just what affect would a major outage on the current cable have on New Zealand’s economy? We very much need another cable, not for capacity, but for redundancy. Yes, you might say, why should the government pay? Great, doesn’t matter, if the cable has an outage for any reason, New Zealand’s economy would be in dire straits. Perhaps you might not be aware of the outage in the internal infrastructure, where all three trunk cables traversing the North Island were out simultaneously. A single day’s outage cost over 1 billion dollars, as all EFTPOS systems were cut off in Wellington and the South Island. So, by hook or by crook, it needs to be done. Also, it will save you money as well, as internet rates will drop yet again, as the heat goes on. As for the UFB rollout going pear shaped, that is to do with the project management company, not the Government. I should imagine that once the roll-out is finished and you are all connected, you’ll appreciate it as well as all the businesses who will have a more reliable connection to the Internet. As an end user, I really don’t give a toss whether the government builds something or a private entity, just as long as it gets built. We, the great unwashed, business leaders, business people of all shapes and sizes rely on these things being done, and it is up to the Government to ensure things happen. Somewhat like the roading. Some of you probably think that should be privatised too, though how that would work might be interesting. One of the good things about this government is their pragmatism.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  34. Jack5 (4,906 comments) says:

    Re GJKi9wi at 12.29:

    Isn’t a new cable being put through to Australia by private enterprise now?

    Re your:

    A single day’s outage cost over 1 billion dollars, as all EFTPOS systems were cut off in Wellington and the South Island

    How over a billion? What, in lost revenue that wasn’t recovered in the next day or so? That’s not really lost. I’m interested to know how the $1 billion cost of the outage cost was arrived at.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  35. SPC (5,473 comments) says:

    gazzzamaniac, you don’t know what a market is.

    When a mining company builds a port to use to export the mineral it is the sole user of the port. It is meeting its own demand for a port. Vertical integration is not a market.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  36. SPC (5,473 comments) says:

    So Jack, if you think most investment in a company is defined by the number of investors rather than the amount they hold, you sound like John Key selling off power companies mostly to foreign and local institutions.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  37. valeriusterminus (247 comments) says:

    Avoid the SPIN
    This is a post Snowden world.
    Hawaiki is a intra-Governmental initiative – so wrong.
    NTT will prevail.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote

Leave a Reply

You must be logged in to post a comment.