ISP views puzzle cable boss

Major internet service providers don't expect a shortage of available bandwidth from the Southern Cross cable - particularly while wholesale price levels continue.

Major internet service providers don't expect a shortage of available bandwidth from the Southern Cross cable - particularly while wholesale price levels continue.

This is despite indications from the Southern Cross Cable Company of demand on bandwidth for the trans-Pacific cable stretching its capacity to provide (see Southern Cross cable struggles with demand). Southern Cross market manager Ross Pfeffer said earlier this month that home and small-business users moving to broadband internet would provide one of the major drivers behind growth in bandwidth demand - which should augur big demand among ISPs.

"We’re getting the bandwidth we want,” says David Dix of Auckland-based KC Computer Services, though the company will definitely be coming back to Telecom for more in the medium-term future. KCCS uses the bandwidth for its own customers and on-sells it to other ISPs. The limiting factor on growth as Dix sees it will be the demand from the internet customer. That is very price-sensitive, and Dix does not see a price war developing any time soon at the retail level.

Wholesale prices for Southern Cross bandwidth represent only a 15% to 20% reduction on previous levels, he says, which makes it difficult for an ISP to make a convincing business case for generating huge customer demand with low-price high-speed offerings.

Ihug took Southern Cross bandwidth from Telecom because it was the only source willing to commit to pricing and ready with the cabling to take it to where Ihug wanted it, says chief Nick Wood. With more providers developing that capability, the situation may become more competitive in the near future. Price drops have been much more significant in Australia, which has had a historically high price for cable capacity.

The purchase of Southern Cross capacity at present in New Zealand is largely for replacing satellite bandwidth taken up when cable capacity ran short over the past few years, Wood says. Higher growth could well come as internet customers move onto large-bandwidth offerings like Xtra’s DSL-based Jetstream and Jetstart and Ihug’s own Ultra – but growth rates are difficult to predict with any certainty. “We’ll have to see a big reduction in bandwidth cost to bring more major take-up,” he says.

Pfeffer professes himself puzzled by the two ISPs' statements. “I don’t know where they’re coming from,” he says, reiterating his statements last week that SCC has had to bring upgrades forward to cater for current and predicted demand. The first upgrade was incorporated in the launch of the cable in November, and the second is promised two months after the final leg of the cable, the southern one from Hawaii to the US mainland, is hooked up. This is scheduled to happen on March 4, putting the upgrade in May.

The company has also announced plans to implement a new form of the dense wavelength division multiplexing (DWDM) technology already in use on the cable. This new technology can potentially quadruple the bandwidth of the cable to 480Gbit/s, but Southern Cross Cable will settle initially for a doubling to 240Gbit/s, by implementing the technology only on one fibre pair. This is scheduled to happen by early next year.

ISPs suggest the pressure may be coming on the cable more in the US and Australia, but growth is coming from the New Zealand market as well, Pfeffer says.

When the second upgrade comes through about half the cable’s current capacity of 120Gbits/s will be on stream. The full capacity will be available by early 2002, Pfeffer says.

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