Kordia intent on Tasman broadband cable

State-owned communications company Kordia is pushing ahead with its part of a transtasman broadband cable.

With international credit tight, it is still not certain it will have the Government backing and funding for the Australian Pipe International project.

Chief executive Geoff Hunt said yesterday Kordia was "highly committed to the project and it is a really important part of its future".

But the transtasman cable - which some in the sector argue will provide the quickest impact on broadband prices - did not feature in the Government's fibre-optic plans announced on Tuesday.

The $1.5 billion taxpayer contribution to a private partnership announced then appears to rule out investment outside New Zealand.

Hunt said yesterday the company would be able to go ahead with the transtasman cable providing a second broadband link out of New Zealand.

"It is bankable with project financing and we expect our gearing to have dropped quite a bit."

The National Business Review has reported Kordia needs $200 million for its part of the project - the cable from Auckland to Sydney - which would link with the Pipe network cable being built to Guam, then on to the United States.

If it goes ahead, the Kordia cable would break the monopoly of Southern Cross Cable - the only broadband link to the US - which is 50 per cent owned by Telecom New Zealand, 40 per cent by Singtel and 10 per cent by the US company Verizon Business.

Labour allocated $15 million to the Kordia venture in the 2008 Budget.

Former minister David Cunliffe estimated that lack of competition for the internet traffic added $10 a month to household broadband bills.

A Kordia-commissioned study estimated that the new international broadband link would contribute $1 billion to the economy over 10 years.

But publicly National has been unclear about its attitude to the SOE - in particular its role competing with the private sector.

Kordia is in the midst of a rough year.

It has paid dividends to the Government alongside ambitious capital expenditure, including its purchase of Orcon.

Kordia faces a $2 million to $2.5 million loss for the year to June 30, Hunt estimated.

The bulk of Kordia's contribution for the cross-Tasman link would not be apparent for two years and he expected its debt would have fallen considerably.

Kordia had signed a memorandum of understanding with Pipe and Hunt expected proposals to be presented to the board in September or October.

"Yes we would like to do it. But we are only going to put the case once we have some foundation customers teed up and the project finance is in place."

Hunt said that the Southern Cross monopoly provided enough capacity to meet demand, but the value of the new cable was in delivering competition that would bring down prices.

LAYING DOWN CHALLENGES
* State-owned communications firm Kordia is to lay a broadband cable to Sydney and link up with one to Guam and on to the US.
* Development of the Sydney-Guam leg by the Australian Pipe International is almost under way.
* But the New Zealand leg will need Government support - whether moral or financial - to challenge the monopoly held by the Southern Cross Cable Network.
* Southern Cross is 50 per cent owned by Telecom, 40 per cent by Singtel and 10 per cent by the US company Verizon Business.
* Since being split from TVNZ in 2005 and under Labour Kordia has been taking a bigger role in the communications sector.