Internet cable operator cuts prices by 44%

Telecommunications Users Association chief executive Paul Brislen. Photo / Paul Estcourt

The operator of New Zealand's only international internet cable has cut wholesale prices by 44 per cent as one of its potential competitors announced progress on a rival project.

The Southern Cross Cable Network runs between Auckland, Sydney and the United States and transports all the internet traffic coming in and out of New Zealand.

The company - which is half owned by Telecom New Zealand - said cable upgrades and lower costs had allowed it to almost halve what it charges internet companies for trafficking international data.

But despite a sharp drop in wholesale prices, commentators say it could be a long time before these cuts flow through to consumers.

InternetNZ chief executive Vikram Kumar said the lower wholesale rates apply only to new contracts and consumers will need to wait until internet companies re-sign with Southern Cross before prices change.

"It is absolutely not going to happen in the short term," Kumar said.

Telecommunications Users Association chief executive Paul Brislen agreed the cuts would take a while to reach the retail market.

"It'll increase data caps eventually, but because the ISPs are buying capacity on a 10-yearly cycle - the contracts run for quite some time - the odds are you won't mostly see much of anything in the short-term at all."

Brislen said the wholesale cut was about "keeping potential competitors on their toes".

One possible rival to Southern Cross' monopoly in the international cable market comes from Axin, which is planning to run a 3000km cable between Australia and New Zealand.

Axin announced on Monday night it had signed a survey agreement with Huawei Marine.

This surveying is a "critical element of the project, as the data collected will allow Huawei Marine to deploy a system properly designed for the changing conditions along the [cable's] route", the company said.

If work goes ahead, Axin hopes the cable will be completed by the end of next year.

Although there has been speculation that state-owned transmission company Kordia would join Axin, the pair have not reached an agreement.

"To clarify, Kordia has collaborated with Axin on various aspects of this project over time but has not signed a commercial agreement to operate the cable," Kordia said yesterday.

Another company, Pacific Fibre, is also planning to enter the cable market and build a US$400 million between Auckland, Sydney and Los Angeles.

Backed by the likes of Trade Me founder Sam Morgan and Facebook billionaire Peter Thiel, Pacific Fibre is still gathering capital for the cable.

It has already signed customer contracts with Vodafone and iiNet, but has yet to start the build.