Joyce hails 'exciting' cable plan

Private funding sought for $900 million project

The Government has welcomed an ambitious proposal by three of the country's highest-profile businessmen to build a $900 million submarine communications cable linking New Zealand, Australia and the United States.

Trade Me founder Sam Morgan, The Warehouse founder Stephen Tindall and Xero founder Rod Drury are behind the venture, Pacific Fibre, which aims to break the near monopoly of the Telecom half-owned Southern Cross Cable over international internet traffic. They hope to lay a cable by 2013.

Communications Minister Steven Joyce said it was an exciting development.

Pacific Fibre's planned cable

"It's good to see another potential player step up in the international bandwidth stakes. I look forward to the development of their business case."

Drury said the cable was needed to prevent the country becoming a technological backwater.

"To us in the technology industry we are seeing this growing digital divide. We haven't got the Kindle yet, so you can't get information as quickly as Americans get it. It looks like we are not first on the list for the Apple iPad. You are seeing now this tangible digital divide and it is going to get big. We just have to do this."

The proposed cable could create a virtuous cycle, attracting skilled workers to New Zealand and growing the tax base, he said.

Drury would not disclose how much of their own money the businessmen might invest. The cable would cost up to $900 million. Pacific Fibre would need to raise the vast bulk of that from professional investors.

Morgan said the country desperately needed a cable that was not purely based on profit maximisation, but on delivering unconstrained international bandwidth to everybody, "so we've decided to see whether we can do it ourselves".

Tindall said the venture would take huge effort and had many risks, but could be as valuable to the economy as refrigerated ships were in the past.

Rosalie Nelson, an analyst with research firm IDC, sounded a note of caution, saying the submarine cable business was not an easy one, and it was unclear what Pacific Fibre's backers were bringing to the table by way of money or relevant expertise.

State-owned enterprise Kordia has been trying to create a business case for a $200m cable linking New Zealand and Australia for several months, but has not yet managed to get prospective customers to commit to buying capacity. Nelson said the case for new submarine cable capacity could be undermined if there were "lots of different groups all with their own agenda desperately trying to attract customers".

Kordia chief executive Geoff Hunt welcomed the initiative and said it made sense for it to team up with Pacific Fibre, but Kordia's focus would remain trans-Tasman.

Southern Cross marketing manager Ross Pfeffer said the price of sending and receiving data over Southern Cross was the same as in the now-competitive Australian market and he was unsure what another cable would achieve. Falling prices meant Southern Cross was struggling with the business case to replace its existing cable network, which was engineered to last until 2025.

"There are lots of intended cable developments around the world. Some of them get off the ground. What you find is when they have the backing of major telecommunications companies they become economic."

Without that backing, cable projects usually failed, he said.

Unlike the Southern Cross Cable, which is the shape of a "figure of eight" running through Hawaii, Pacific Fibre would lay a single cable, relying on deals with other cable providers to provide back-up in case of a break. Mr Drury believed that by 2012 the technology would exist to lay a 5.1 terabit per second cable all the way to United States without having to land in Hawaii. That could give Pacific Fibre a speed and capacity advantage over Southern Cross.

Both ends of the Southern Cross cable meet in Auckland. Mr Drury said that Pacific Fibre had not decided where in New Zealand its cable would land.

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