A second cable getting closer

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 cables 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.