Hamish Fletcher

Hamish Fletcher is a business reporter for the NZ Herald

New cable won't solve Telecom 'monopoly' - Greens

The Southern Cross cable comes ashore on Takapuna beach back in 1999. Photo / NZ Herald
The Southern Cross cable comes ashore on Takapuna beach back in 1999. Photo / NZ Herald

A second internet link out of New Zealand announced today will not address Telecom's "monopoly" on international connectivity, says the Green Party.

The Labour Party and a consumer advocate has also signalled some disquiet over potential competition issues that could arise from the venture.

Telecom, Vodafone and Telstra have announced a deal to build a new undersea telecommunications cable between Auckland and Sydney, which should dramatically increase the amount of internet data able to be sent to and from New Zealand.

The companies say the new cable, tentatively titled the "Tasman Global Access" cable, will "significantly improve New Zealand's international telecommunications connectivity as well as strengthen links into fast-growing Asian markets."

The total cost of the cable is expected to be less than US$60 million ($70.9m).

A design is expected to be finalised within the next few months, with a likely completion date of mid to late next year. The cable will incorporate three fibre pairs with a current design capacity of 30 terabits per second - approximately 300 times the current internet data demand out of New Zealand.

Asia-Pacific Cable Connections:

Telecom chief executive Simon Moutter and Vodafone New Zealand CEO Russell Stanners issued a joint statement this morning, saying:

"The business case for a new cable between New Zealand and Australia is compelling, providing greater capacity and global redundancy capability. It also reflects the growing importance of trans-Tasman internet traffic: for example, around 40 per cent of both Telecom and Vodafone's international internet traffic is now Australia to New Zealand, versus just 10 per cent in 2000," they said.

"We are seeing increased data content being provided from Australia-based servers by global companies and being accessed by New Zealand internet users. An additional cable connection with Australia will strengthen the business case for international data servers to be located in New Zealand."

But in a statement today the Green Party said the proposed cable would not "address the monopoly Telecom currently has on connectivity to the rest of the world".

"The second trans-Tasman cable will improve New Zealand's internet connectivity but will do little to break Telecom's monopoly over pricing," Green's spokesperson Gareth Hughes said.

"The move will now make it much harder to justify building a second cable to the USA, yet this is exactly the kind of internet infrastructure New Zealand needs if we are to have a truly resilient and competitive network. Reliance on a single provider for our international internet provision has meant higher prices, data caps, and less innovation for services. Today's announcement is likely to have only a small impact on the current unsatisfactory situation. It's not the step change our economy needs.

Telecom's stake in the second trans-Tasman cable will ensure there is no price competition for internet out of New Zealand. And this will also benefit co-investors Vodafone and Telstra," Hughes said.

Labour's communications and IT spokesperson Clare Curran said "there are serious competition issues as Telecom is effectively competing with itself".

"We are also concerned that the cable infrastructure will be built by the telecommunication companies which will then provide the retail services on it. Labour seeks assurances that these issues are addressed transparently and that there is commercial wholesale capacity available for other carriers on an equal footing," Curran said.

Telecommunications Users Association chief executive Paul Brislen, who lobbies on behalf of consumers, said he was supportive of the project but that questions still hung over it.

This was because Telecom also owned half of the Southern Cross Cable system - the only existing link out of New Zealand.

"Will we see real wholesale competition between the networks or will Telecom's role in this stymie that? That's a question they'll have for answer if not for us then I presume it's possible the Commerce Commission could look at it, although it's tricky because Southern Cross is domiciled in Bermuda," he said.

But Moutter told the Herald this morning he did not believe any competition issues arose from Telecom's investment in both cables and that he'd expect them to compete.

Stanners also said that he would imagine competition in the wholesale internet market would improve as a result of the second cable:

"You need two people in the market to be competitive we'll be two players in the market so this will be a competitive alternative," Stanners said.

One consequence of the Telecom/Vodafone link was that it would be more difficult for a player to get a second cable to the United States laid, Brislen said.

NZ company Pacific Fibre hoped to build a 12,950km fibre cable between Auckland, Sydney and Los Angeles at an estimated cost of $400 million but announced in August last year it had failed to raise enough capital for the project.

Pacific Fibre hoped to rival the Southern Cross Cable Network's pipe, which is the only link transporting internet traffic in and out of New Zealand.

Internet entrepreneur Rod Drury, who was involved in the failed Pacific Fibre project to connect Auckland Sydney and Los Angeles, said it was "great news" but tinged with a "bit of emotion".

"This is just the next best option and it's going to be very good for internet business and exporters," he said.

"Clearly the business case for Pacific Fibre was pretty good. I still think for New Zealand this is vital infrastructure I would have much preferred we did a PPP (Public Private Partnership) with the New Zealand SuperFund investing and we step-changed by connecting Australia through New Zealand up to the USA.

That would have generated a lot of economic activity and built some competitive advantage for New Zealand. It's a shame it's hard to do these really bold things," Drury said.

While the Greens said the cable would "shut out competition", Minister for Communications and Information Technology Amy Adams said the new cable would provide the market solution the government always expected would happen.

"There has been rapid growth on the trans-Tasman route in recent years and this will only continue as New Zealanders access high-speed broadband," Adams said.

"It is estimated that about 40 per cent of New Zealand's international traffic is on the trans-Tasman route and this volume is growing more rapidly than traffic on the trans-Pacific route to the US, due to an increasing amount of content being hosted on servers in Australia and Asia."

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