A second cable getting closer

May 20th, 2014 at 9:00 am by David Farrar

Stuff reports:

Southern Cross Cable’s near monopoly over international internet traffic appears to be dangling by a thread.

After years of failed ventures and dashed hopes, Hawaiki Cable chief executive Remi Galasso said his company was just a few weeks away from confirming it would build a competing US$300 million (NZ$350m) cable linking New Zealand and Australia to the United States.

The former Alcatel-Lucent executive said Hawaiki had secured a major New Zealand company to be its equity partner and an Australasian bank willing to provide debt financing.

All that remained was for Hawaiki to convert some “letters of intent” it already had from customers into firm contracts and “complete the bank process to unlock the funds”.

“This is not a piece of cake. We are dealing with large organisations, but I am confident the finishing line is a few weeks away,” Galasso said.

Hawaiki would then put into effect the contract it had with United States supplier TE SubCom to lay the the 13,127 kilometre-long cable, which should be ready by March 2016, he said. The cable would have a capacity of 6.4 terabits, sufficient to carry a million HD movie streams simultaneously.

This will be great, if they get over the line. For both competitive and security of supply reasons a second cable is desirable.

It won’t be a silver bullet. The cost of international bandwidth is much reduced from years ago, and is around 5c a GB last time I checked. However competition is the best way to get prices even lower.

Telecommunications Users Association chief executive Paul Brislen said that would be tremendous. Opinions varied on whether a new cable would reduce broadband charges for consumers or raise their data caps, he said.

“The way Southern Cross talks, the international component of any internet-provider (ISP) charge is minuscule, and the way the ISPs talk it is the one thing that stops them offering really large data caps. Time will tell who is right and who is blowing smoke.”

But a new cable was needed in case there was ever a major outage on the Southern Cross Cable, he said. The risk of anything affecting Southern Cross’ twin landing points in Auckland was low but the impact would be huge, he said. “It is very important we have a second company operating.” Southern Cross Cable is half-owned by Telecom. SingTel owns 40 per cent and US carrier Verizon 10 per cent.

It is worth noting that the Southern Cross Cable is a figure of eight so an outage in one segment won’t result in a loss of international connectivity for NZ. They would need to have two simultaneous outages for this to occur.

But again, more means less vulnerability.

Galasso did not believe success would adversely impact a separate proposal by Telecom to lay a new cable, the Trans Global Access (TGA) cable, between New Zealand and Australia in conjunction with Vodafone and Telstra. That investment, estimated at about $100m, has been awaiting head-office approval from Telecom’s joint venture partners.

Instead, he said the two cables would be complimentary, as customers could use one as a back-up. “My view is two new cables will be built, Hawaiki and the TGA cable,” he said.

I agree. As more regional data centres get located in Australia, cables to Australia will become more valuable also.

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16 Responses to “A second cable getting closer”

  1. lolitasbrother (554 comments) says:

    With my phone and Internet I get to pay Vodafone $130 per month.
    I asked them to reduce the fees so they increased them
    In Thailand I get the same for $12.
    I looked around even at Dotcoms offer but they are all ripper rip off.
    New Zealand is where the rip off moguls come to play .

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  2. jcuk (625 comments) says:

    I pay $81pm to Slingshot but don’t tell anyone as Slingshot might get overloaded? :)

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  3. anonymouse (705 comments) says:

    However competition is the best way to get prices even lower.

    But Southern Cross is already competing with 2 other cables (PIPE and Endevour), will a third actually make that much more difference? -[ Southern cross’s price to NZ and Australia is the same, so adding more cables to NZ will not actually do that much more for competition, which are determined by the Australian prices- which has much more competition)

    Also just wait until people hear about the rumored subscriber/partner of the Australian leg of the Cable, it will certainly not be welcome by some groups…..

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  4. infused (644 comments) says:

    Bandwidth isn’t data.

    It costs roughly $20 per mbit of international connectivity. No one pays for data, except you, the end customer.

    “It won’t be a silver bullet. The cost of international bandwidth is much reduced from years ago, and is around 5c a GB last time I checked. However competition is the best way to get prices even lower.”

    So that makes no sense.

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  5. Jack5 (4,763 comments) says:

    What is the name of the major company Galasso is talking about?

    If it is listed on the stock exchange, shareholders and potential investors have a right to know – now.

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  6. Fentex (898 comments) says:

    I would expect, in times like these with a great deal of economic and financial uncertainty where great stores of cash lie idle, that investors worried about what will come would quite like the idea of such a reliable and steady producer of income.

    Competition between cables should be effective, and a concern for those seeking large profits, but the utility of such, well, utilities is a decent guarantee of income albeit not overwhelming.

    I’d think pension funds and long term investors accepting the idea of a reliable though not spectacular contributor to the bottom line shouldn’t be too hard to find.

    Assuming the numbers are as I suspect, of course. What exactly are four, heading for five million net users worth?

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  7. Dave_1924 (96 comments) says:

    Good we get another connection to the large data centres in the US – but I suspect someone is going to lose some money and my bet its not Southern Cross. Hope I am wrong – hope it goes gang busters, just wondering how these guys made a business case for the cable and the Sam Morgan lead group couldn’t get a business case and committed funding together?

    Still if the new outfit goes bung in 6-7 years time there will be a cheap asset for someone to buy from bankruptcy….

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  8. tas (596 comments) says:

    $0.05/GB sounds low to me. That’s the price you pay in a US datacenter. Customers in NZ are playing marginal costs for extra data closer to $1/GB.

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  9. infused (644 comments) says:

    You don’t pay for data, how many times do I have to say this.

    You buy international and national bandwidth. You can push any amount of data over this at no cost.

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  10. ross411 (284 comments) says:

    infused (625 comments) says:
    May 20th, 2014 at 3:36 pm
    You don’t pay for data, how many times do I have to say this.

    You buy international and national bandwidth. You can push any amount of data over this at no cost.

    And yet I pay $99 for 12GB to 2degrees. Unless we’re on the new unlimited plans, we all pay for data. If there’s a point you’re trying to make, please make it.

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  11. RightNow (6,778 comments) says:

    @infused, I know what you’re trying to say but I think you’ve not made the point well by stating “you don’t pay for data”
    The thing is that most people do pay for data, as that is what is retailed to them.
    The fact that their ISP is buying bandwidth is not of importance to those paying a per GB cost.

    @anonymouse: “But Southern Cross is already competing with 2 other cables (PIPE and Endevour)”

    PIPE and Endeavour don’t reach NZ. PIPE goes between Oz and Guam, Endeavour goes between Oz and Hawaii.

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  12. wikiriwhis business (3,883 comments) says:

    Reading John Minto’s article on the NSA in the Herald this morning was spine chilling.

    Irregardless of Mr Minto’s politics the bureaucracies he described, most of us will never have heard and the naked greed of the NSA to own the internet is eye opening and especially because there is no need to doubt the US want’s to rule the world.

    As Mr Minto observes with alarm, the US is not interested in security for the world’s sake but dominance.

    The road they are paving through internet ownership, banking cartels, industrial military complex and spying through 5 eyes and GCSB is nightmare scenario. Not to mention the Patriot Act, repealing Glass Steagal so bankers could go crazy with public deposit funds investing, homeland security which takes even Americans twice as long to get through airports than anywhere else.

    Chilling.

    I would have to ask though, why it is that National or Labour do not bring up these issues as well as the coming cashless society.

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  13. wikiriwhis business (3,883 comments) says:

    “New Zealand is where the rip off moguls come to play .”

    That’s why we have the highest home prices in the OECD

    and govt lets it happen.

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  14. Jack5 (4,763 comments) says:

    Re Wikiwiri at 5.52.

    The Minto article is drivel, and the only reason that Minto isn’t out waving placards these days is because gutless MSM such as the Hooerald gives him a platform.

    The “five eyes” arrangement has been around for years. There’s been heaps of available information about the five-nation electronic security agreement in book and magazine form for yonks.

    The Left has seized on it now because they see it as a way to batter at our traditional alignment with Western allies.

    With China and Russia moving rightwards, NZ’s looney leftists now seem to be aligning themselves with the ultra-Islamicists, who ironically would top them all in a week if they ever took control of NZ. Who else is left for them to line up with?

    Meanwhile, Russians are bugging phone calls. Al Qaeda uses the Net. Chinese are into industrial as well as military espionage. It’s difficult for a rational person not to support electronic counter-intelligence.

    Technology has blown complete privacy away, unless you want to stay entirely in the snail mail world, sans internet, sans cell phone, and probably sans bank account. Technology, not world electronic counter-espionage is the change agent when it comes to privacy.

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  15. seanmaitland (465 comments) says:

    “It costs roughly $20 per mbit”

    Bullshit.

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  16. infused (644 comments) says:

    It does, because that’s what I buy it at. I have 100mbit of int/nat bandwidth

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