Trans-Tasman cable looks towards Asia

UPDATE: Commerce Commission considers competition issues

Update Wednesday

The Commerce Commission says it will consider whether Telecom, Vodafone and Telstra's plan to build a new fibre-optic communications cable between Australia and New Zealand raises "potential competition concerns".

CallPlus chief executive Mark Callender told the Dominion Post the company expects to lodge an objection to the surprise collaboration with the regulator this week.

Callender says having the "two largest retail players" own the cable meant there were obvious competition concerns.

A commission spokeswoman says it had not received any requests from the consortium seeking clearance for its investment.

"We will be considering whether this venture raises any potential competition issues."

Original story

The proposed trans-Tasman cable announced on Tuesday it will cater to growing internet traffic in Asia, says Telecom CEO Simon Moutter.

“We’re going towards the trend, which is that internet traffic is shifting towards Asia, so we’re looking at a cable network that’s going in the other direction [to the US],” says Moutter. “Today, Southern Cross network can easily handle the forseeable future in the US.”

Moutter made the comment during a joint media conference about the cable project Tasman Global Access (TGA) with Vodafone NZ CEO Russell Stanners.

Both chief executives ruled out using intellectual property on building a cable that was gathered by failed projects Optikor (backed by Kordia) and Pacific Fibre (backed by Rod Drury, Stephen Tindall and Sam Morgan).

“I don’t think we need it,” says Stanners. “We already have landing sites in NZ, we [Vodafone] have two and Telecom have two. Landing sites are already determined, there’s lot of IP inside these partners already.”

Stanners says TGA will provide the extra capacity needed to give consumers a faster broadband experience, especially as the country shifts to the new Ultra Fast Broadband environment.

Moutter says a modern submarine cable is expected “to have a 10 to 20 year life before it would be completely irrelevant. The optics can be upgraded over the course of that, as has been the case with Southern Cross. The capacity grows over time and at some point gets too tough on the fibre that’s in there and you have to move forward to further investment.”

Stanners says two players in the market are required for competition. “This [TGA] will be a competitive alternative.”

Wholesale agreements between TGA and Retail Service Providers have yet to be worked out.“[That’s] a long way down the track,” says Moutter

The ownership structure of TGA isn’t finalised, but Moutter says it’s likely to be an equal partnership between the three telcos – Telecom, Vodafone and Telstra.

TAG will have a separate management and board to Southern Cross and the country in which it is incorporated has yet to be determined (Southern Cross is registered in tax-haven Bermuda).

Pacific Fibre founders tweet reaction

Pacific co-Founder Sam Morgan has offered his take on the proposed cable via Twitter:

"A new cable is great news, but redundancy will be provided by SX,

meaning SX still controls pricing. Win for Telecom."

Another co-founder Rod Drury has cautiously welcomed the TGA announcement in a series of tweets:

New cable great news. Would have preferred AU-NZ-USA but any cable is a good cable. Awesome news for Internet businesses and exporters

“On new cable, Govt will say the market worked, but a PPP to USA could have been a step change to grow from. Shame it's so hard to be bold

“Wonder how the Govt peeps feels after Southern Cross lobbied so hard there was no international capacity problem when PacificFibre in play.”

InternetNZ raises the “R” word

Internet NZ has put out a statement cautiously welcoming the new trans Tasman cable.

Policy lead Susan Chalmers says there are a number of questions, “not least of which relate to potential regulatory oversight.”

“The location of the new cable company will be important. The headquarters of the Southern Cross Cable is in Bermuda, which handily avoids Commerce Commission oversight. InternetNZ strongly suggests that this new company be located in New Zealand.

She says many global sources of internet content are diversifying from the US to Australia and Asia.

“An additional cable to Australia will assist in the efficient delivery of this content to New Zealand. For example, last year cloud computing player and retail behemoth Amazon built a Content Delivery Network (CDN) node in Sydney, bringing their content closer to New Zealanders. The shape of the internet is changing, with content coming closer to end-users in New Zealand. This means faster delivery.”

Comments

D J Green

1

Where the strength is in this turbulent business world you have to follow.
The cable is good news and as they say we are pointing more towards Asia.
The US initiative was to be commended but going in the wrong direction.

Anonymous

2

So while our govt goes out of it's way to stop tax avoidance from it's people, the cable that connects us to the world gets off tax free.

Go figure.

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