The Commerce Commission says it will look into a transtasman cable planned by a consortium of telcos for potential competition issues.
Telecom, Telstra and Vodafone announced a memorandum of understanding yesterday for a new link between New Zealand and Australia called the Tasman Global Access.
If the project goes ahead it would be New Zealand's second international connection, running alongside the Southern Cross Cable system, which Telecom has a 50 per cent interest in and which connects to Australia and the United States.
It is estimated the project will cost less than US$60 million and planned to be completed by the end of 2014 if launched.
Slingshot chief executive Mark Callander said yesterday that the cable would create "an unlevel playing field" and that it could present competition issues.
A Commerce Commission spokesperson said this morning that while no formal probe was being conducted, the watchdog would look into the planned venture.
"You've got three competitors getting together to do something, so we'll have to look into that,' a commission spokesperson said.
Telecommunications Users Association head Paul Brislen said yesterday that competition questions hung over the project.
Mark Petrie, chief executive of Christchurch-based internet retailer Snap, said the new cable probably would not bring the level of competition that the country needed.
"I think that would be better served by having an independent owner of the cable that isn't a retail player in New Zealand." he said.
Telecom boss Simon Moutter did not believe the venture would present New Zealand with competition issues.
Vodafone chief executive Russell Stanners said: "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."
According to a Telecom representative the model being considered for the cable would see the capacity on it divided up between the shareholders rather than being sold directly to other retail internet providers
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By Hamish Fletcher @hamishfletcher Email Hamish