Kiwi internet upstart takes on telcos

By MICHAEL FOREMAN

Gulf Harbour-based Quest Communications has bought more than two gigabits of bandwidth on the Southern Cross Cable as part of an ambitious $250 million spend to become a "carriers' carrier" in New Zealand.

The small New Zealand internet company also has designs on a chunk of third-generation (3G) frequency, which it plans to bid for in the Government's radio spectrum auction in July.

Quest chief operations officer Nigel Colling said the bulk of the $250 million investment was for bandwidth acquisition, but also included the rollout of "ATM" switches, "backhaul" provision and interconnect agreements.

Quest will use its Southern Cross link and other networks to offer wholesale, high-speed international bandwidth for at least half the price of the major telcos.

If successful in its spectrum bid, Quest claims it will invest nearly $1 billion in a comprehensive internet and 3G mobile phone network in competition with established carriers such as Telecom and Vodafone.

Based on similar Australian auctions, Mr Colling estimated that a single spectrum block would cost around $150 million, but "it could go to any level."

Backing for the project, which included a further $200 million earmarked for additional switching, had been sourced from a "European telco making a strategic investment," but the company would remain New Zealand-owned.

The backers - understood to be based in Germany or Britain - would be revealed after the July spectrum auction, for which a "substantial war chest" had been set aside.

Quest has purchased several blocks of the 120Gbps Southern Cross optical fibre network, including 600 megabits per second (Mbps) between Australasia and New Zealand, 600Mbps between New Zealand and the US and 1Gbps from Australia to the US.

The company has also secured further 1 gigabit links from the US to Europe via London and Frankfurt, and from San Francisco to Asia via Japan.

The $US1.2 billion Southern Cross fibre optic loop to Australia and America is expected to be available from mid-November. The cable is 50 per cent owned by Telecom, 40 per cent by Cable and Wireless Optus and 10 per cent by MCI Worldcom.

When the links go live in November, Quest will offer international high-speed internet access in up to 155-megabit capacity "STM-1" units to internet service providers, telcos and businesses.

Mr Colling admitted that Quest was now a very small operation with turnover in the "hundreds of thousands" and employing only eight people.

The company launched the internet service provider Kiwinet at the beginning of this month.