Government backing needed to avoid 'world's fastest intranet'

The Southern Cross cable is New Zealand's only link. Photo / NZ Herald

The Government needs to step in fast to revive a scheme to build a high-speed telecommunications link out of New Zealand or we risk only ever having a single connection, says an industry commentator.

Competition on New Zealand's international broadband link was dealt a blow earlier this month with news the high-profile backers of a second submarine internet cable were pulling the pin. The Pacific Fibre project had planned to build a 13,000km cable between Auckland, Sydney and Los Angeles at a cost of around $400 million.

Big business names behind the project included Facebook billionaire Peter Thiel, Trade Me founder Sam Morgan, Xero's Rod Drury and the Warehouse founder Sir Stephen Tindall.

Announcing the cancellation, Pacific Fibre chairman Sam Morgan said it had spent millions of shareholder funds and despite getting some good investor support had not been able to find the level of investment required in New Zealand and offshore.

"The global investment market is undoubtedly difficult at the moment but we knew this was always going to be hard, regardless of our timing."

Investor Rod Drury told the New Zealand Herald earlier this month there had also been political concerns over the potential of Chinese involvement in the project.

Currently New Zealand's only broadband cable link is provided by the Southern Cross Cable Network, a venture in which Telecom has a 50 per cent shareholding. IDC senior analyst Glen Saunders says Southern Cross extending the estimated lifespan of the cable to 2025 and earlier this year slashing prices by 44 per cent on new customer contracts has perhaps put off "a desperate need" for an additional link.

He says a business case for a future venture might come down to how quickly uptake of the Government-backed fibre network happens.

"If we're using a lot more fibre and bandwidth then ultimately Southern Cross might not be able to cope."

He says the "killer app" that drives a thirst for fibre connections could be five years away.

Telecommunications Users Association chief executive Paul Brislen says his fear is other submarine cable players will be turned off for a long time by the failure of the Pacific Fibre project.

He says the Pacific Fibre business case was predicated on hooking up the Australian market, but with extra capacity being added directly between Australia and North America by other players, the investment rationale gets tougher.

"Without the Australians needing to sign up to a fibre that comes through New Zealand there is very little chance of getting a fibre off the ground that just connects New Zealand to the US because the costs just aren't balanced by the income you would receive from the customer base," Brislen says.

He would like to see the Government back an alternate link, either directly or by committing to purchasing capacity.

"It's a lot of money to be investing in this part of the world, so without a government backing it I think we'd be stuffed."

With the added links out of Australia firing up, the Government needs to move fast as the window for a viable business case closes, Brislen says.

"It would be a crying shame to build this UFB (Ultra-Fast Broadband) and RBI (Rural Broadband Initiative) project and have the world's fastest intranet."