Net bandwidth to spare, for the moment

By CHRIS BARTON

The Southern Cross cable "lights up" tomorrow, freeing New Zealand's international bandwidth bottleneck with a tenfold increase in capacity while keeping one of its three fibre pairs in reserve.

In the jargon of submarine telecommunications, the "relatively not kitted out" pair means Southern Cross is holding back some capacity for future technologies that can pump even more data down the cable's incomprehensibly thin strands.

Southern Cross Asia Pacific marketing director Ross Pfeffer explains: "We kit it out progressively - just ahead of demand and take advantage of emerging technology."

Kitting out means installation of the electronic and light-based equipment in the nine cable stations that "drive the wet segment" - the 30,500km of underwater pipe housing six hairlike fibre optic threads and consisting of two separate cables linking Australia, New Zealand, Fiji, Hawaii and the United States.

In all there are three "loops" - two of 80 gigabits per second (Gbps) to the United States and one of 40 Gbps between Australia and New Zealand. That gives a total capacity of 200Gbps.

But Southern Cross is described as a 120Gbps cable because it is designed so signals can be transmitted simultaneously around both sides of the loops. That way there are fully protected circuits that automatically restore in a split second if there is a failure on one side.

Put in perspective, Southern Cross offers a more than tenfold increase over the 4Gbps to 8Gbps bandwidth available through satellite and submarine links to Australia and the United States.

But it's also not a real number. The actual capacity of Southern Cross is a closely guarded secret - partly for competitive reasons and partly because the technology changes so fast.

"There are options to make it larger, but the whole issue is a moving target."

How? "Basically dense wave division multiplexing is getting denser," says Mr Pfeffer. That's the process of sending data on different colours of light.

At present each fibre pair can handle 2.5Gbps on each of 16 colours. Technology being tested by Alcatel and Fujitsu on the largely unused fibre pair is pushing 10Gbps and more. If the technology checks out, Southern Cross suddenly expands from 120Gbps to a 480Gbps pipe.

So will there be enough bandwidth for years to come? Mr Pfeffer estimates capacity on Southern Cross - 50 per cent owned by Telecom, 40 per cent by Cable & Wireless Optus and 10 per cent by Worldcom - will be used up in two to three years. But he acknowledges that analysts in the United States say the projections are conservative.

"All these pundits are predicting compound annual growth of 250 per cent, whereas we are looking at growth down about 100 and something per cent."

If the US analysts are right and there is an unprecedented bandwidth demand due to the rapid uptake of fast, always-on internet access to the home, then both Southern Cross and a second cable being built by another consortium including Telstra and Singapore Telecom will not be enough to cope with the bandwidth growth curve.

What is known is that about half of Southern Cross' capacity - whatever that may be - had been sold to 35 customers by August last year. The first customer meeting, "Hawaii Fibre O," snared $US550 million. With the $US640 million the company got in presales when it started the ambitious project 2 1/2 years ago, that was enough to almost break even on the $US1.3 billion cost to build.

About $US100 million was added to the original price due to the resiting of a cable station in Oregon because of difficulties in getting Californian environment law consents.

The results of "Surfing URL" - a second customer meeting to purchase capacity held in the United States in August this year - have not been released. But it was attended by 120 people representing 50 companies.

The good news for prospective buyers is that competitive pressures meant the price for bandwidth was slashed.

A 15-year 155Mbps connection between the US and Australasia fell from $US12.9 million a year ago to $US10.32 million.

The same-sized link between New Zealand and Australia fell from $US4.1 million to $US3.2 million.

Two years ago the prices for each of those links were $US37.8 million and $US9.95 million, respectively, so why does the price of bandwidth keep dropping?

"The world price for cable capacity is falling. There is an elasticity of demand. Unless we get the price right people can't afford to buy it," said Mr Pfeffer.

"The price started to fall as more capacity started to emerge. It's a balancing act of what the market had available in funds and what they needed. The rapid change in circumstances allowed the market price to emerge."

He said many customers who bought in the early rounds had price protection built in to their contract. The lower cost in bandwidth is expected to flow on to consumers. A year ago New Zealand internet service providers were paying between $10,000 and $15,000 a month per megabit per second of bandwidth.

When they start using the new Southern Cross circuits - probably by the end of the month - bandwidth costs are expected to go as low as $4000 per Mbps.