Kordia says new cable is needed

Xero CEO Rod Drury says fibre to the home plans should be scrapped for another Pacific cable

Internet traffic on the government's proposed $1.5 billion broadband fibre network is in danger of grinding to a halt at the country's border unless international capacity issues are resolved, says Kordia's chief executive, Geoff Hunt.

The broadcasting and telecommunications company chief supports the government's investment, but says it has to be developed in tandem with expansion of our international internet links.


See also: TUANZ welcomes Tasman cable plan

Cable plan failure disappoints industry

Plug pulled on second Tasman cable


The nub of the issue is our lack of market competition. New Zealand has only one sub-marine cable which connects our internet network to the rest of the world. It is run by Southern Cross Cable and half-owned by Telecom which reaps handsome dividends from its stake. (Singtel holds a 40 percent stake and the remaining 10 percent is owned by US-based Verizon).

Observers say Southern Cross Cable charges monopolistic high fees to provide data and bandwidth to companies which  increases everyone's  bills and limits data downloads.

Hunt reiterates Kordia's plans for a second cable, announced in April last year, are still afloat. He says the cable will be funded by bank finance and foundation customers, but declined to say who the banks were.

Kordia wants to build a second cable from Auckland to Sydney in partnership with Australian-based Pipe International which, in turn, has cable access to other countries.

Kordia's reasons for building the cable received a boost last week when the Commerce Commission released analysis showing what many suspected already; it takes Kiwis almost double the time (2Mbit/s) to access international websites, compared to national content (5Mbit/s).

Kordia says about 90 percent of websites and online content which New Zealanders use are hosted overseas.

To obtain the full benefits of fibre right to the home, users would need to be allocated ''significantly more international bandwidth'' than they are now using,  says  a Kordia submission on the government's fibre plan.

Economic researcher Covec has estimated competition from a second cable will result in $1b in net economic benefits and a 24 percent cut in broadband bills in the next decade.

The last government had allocated $15m for a cable investment, but that funding ''isn't guaranteed'' under the National government, says Hunt. Kordia is preparing a case to present to communications minister Steven Joyce, who says only that he is open to the idea.

Research and Education Advanced Network New Zealand chief executive Donald Clark says it allocated $15m under the previous administration for a second cable, and ran a tender  for the funding last year but Kordia was the only compliant response. Reannz did not recommend the government proceed with the funding because Kordia's tender was not advanced enough, says Clark.

Hunt  says the business case is being built on the back of commitments from customers to take capacity with long-term agreements. He knows of a  New Zealand-based software services business which was  offered a project involving 300 software specialists working in New Zealand. But the cost of international bandwidth prevented the company taking up  the deal.

Online accounting software firm Xero chief executive Rod Drury agrees investing in the government's fibre build without addressing the country's internet capacity problem is ''wasting time while the rest of the world moves ahead''.

The Government should scrap its investment plans for fibre to the home, Drury says, and instead invest $1b in an international undersea cable to San Diego or Guam.

Xero, which sells accounting software off the web, hosts its data in servers in the US. The international capacity constraints means live meetings, high-quality demos, and even  laptop video conferencing are hard to do, he says.

Brett O'Riley, chief executive of the New Zealand Information and Communications Technologies Group, helped set up the Southern Cross Cable in 1996. He says the cost of international capacity was raised  by  several members polled for their views on the government's fibre broadband plan.

''We have to have international connectivity at the very least on par with our major trading partners to give us an advantage as a country so far from other markets.''

BusinessDay.co.nz

Join the newsletter!

Error: Please check your email address.

Tags Southern Cross CablexerocovecKordiaNetworking & Telecomms ID$1.5 billionKARENbroadbandreannz

Show Comments
[]