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Pacific Fibre has signed a deal with a US-based cable company to build New Zealand's second international internet link.

TE SubCom, who developed the world's first transatlantic fibre-optic cable in 1988, will design, construct and lay Pacific Fibre's 12,750km internet pipe between Auckland, Sydney and Los Angeles.

SubCom is a subsidiary of TE Connectivity, an electronics company worth US$12.1 billion.

Pacific Fibre's trans-Tasman cable, linking Australia and New Zealand, will be 2150 km (1355 miles) long and the trans Pacific cable, linking New Zealand to California, will be 10,600 km (6,585 miles) long.

The company argues the cable system is needed to bring competition to the international capacity market, allowing New Zealand to take full advantage of the Government's ultra-fast broadband scheme.

"Demand for international capacity in Australia and New Zealand is sharply increasing and is on track to continue growing for years to come," said Pacific Fibre chief executive Mark Rushworth.

"The Pacific Fibre cable will not only provide unsurpassed high speed international connectivity to satisfy the growth in broadband demand, but it will also help Australia and New Zealand realize the potential of both countries' multi-billion dollar broadband initiatives."

According to Rushworth, the Pacific Fibre system will be the highest-capacity-per-fibre-pair system ever built.

The cables will each have two fibre pairs, with an ultimate capacity of 12.8 terabits.

The agreement with TE SubCom comes on the back of an announcement last week, confirming Pacific Fibre's $91 million contract with the Crown-owned research network, REANNZ.

The deal put Pacific Fibre a good step closer to acquiring the US$400 million it needs for the cable project.

The funding from REANNZ will form part of the debt component of the cable, which is 40 to 45 per cent of the build (US$160m-US$180m).

The remaining funding, being led by Credit Suisse and First NZ Capital, will come from investors.

Rushworth said more customer agreements would be announced in the coming weeks.

If all goes to schedule, the cable is due to be operational by the first quarter of 2014, he said.

Southern Cross Cable Systems operates the only internet cable currently running out of New Zealand, but argues it is more than capable of shouldering the demand for internet capacity.

Last month the company, which Telecom has a 50 per cent stake in, announced it would upgrade its system over the next four years, drastically increasing the speeds on the pipe.

State-owned transmission company, Kordia, is also planning to build a trans-Tasman cable but is still in the process of gathering funds.

- NZ Herald staff