Claims that US fears of Chinese sank Pacific Fibre exaggerated: Drury
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The idea that Pacific Fibre was sunk due to American fears of Chinese investment and espionage has “taken a life of its own”, says Rod Drury.
“There’s a bit of sensationalism in all this,” he says.
Drury says there was some political pressure from the US regarding Pacific Fibre’s proposed $400 million cable, but this was for the most part posturing for a better deal.
“We were told it would be difficult to connect a 100 percent Chinese invested cable,” says Drury.
Drury says this political wrangling was not something the team at Pacific Fibre were experienced in, but they tried to mitigate risks by managing who they worked with.
Pacific Fibre’s vendor for undersea fibre technology was SubCom, an American company. Drury says he hoped this partnership would ease any concerns the US had about Chinese interests in the cable.
On advice from New Zealand Trade and Enterprise and Trade Minister Tim Groser, Drury says Pacific Fibre sought investment from an approved group of Chinese investors.
But he believes what really sunk Pacific Fibre was a lack of domestic investment and further government support.
“This would have been much easier if there was substantial New Zealand content in the funding,” says Drury.
Drury says investment from NZ Super Fund would have been appropriate and could have saved the venture. The superannuation group has a mandate to invest in critical New Zealand infrastructure, which Drury says the Pacific Fibre cable would come under.
A spokesperson for NZ Super Fund told Computerworld it did not invest in Pacific Fibre because Pacific Fibre did not pass its due diligence.
“ Ultimately we were unable to gain enough confidence in the opportunity, for our purposes,” says the spokesperson.
“Any investment we make needs to generate sufficient returns for the risk we have to take on, relative to other investment opportunities both domestically and internationally.”
In response to ICT Minister Amy Adam’s comment that UFB success is not dependent on a second international internet cable, Drury says this shows the minister’s lack of understanding in this space.
“An argument is we could just cache overseas content, but these people don’t understand that’s not all New Zealanders want to do online. We want to use live communication. What about multi-video Skype chats, what about Google Hangouts?,” says Drury.
Drury, who is also the CEO of cloud accounting tool Xero, says because of poor international connectivity his company has been forced to hire sales managers overseas in order to conduct webinars and sales pitches online.
Drury says Southern Cross does have additional international capacity, but there is no incentive for it to open that up without competition from another player.
“Southern Cross is acting completely rationally, they need to maximise the return from their monopoly cable,” says Drury.
“They could give us more bandwidth for less, but the more capacity they use the closer they get to footing up hundreds of millions of their own money to increase capacity.”
Drury says he is conscious that Pacific Fibre’s folding will make it difficult for other private cable ventures to succeed as investors will be reluctant to sign up once more.
Posted by BENJAMINPetra at 8:08:03 on August 8, 2012
The reason it failed would be it was not a good deal for investors. I suspect that Rod and Co where greedy and put a ridiculous valuation on there role for putting the deal together.
Posted by Anonymous at 16:42:12 on August 3, 2012
Posted by Anonymous at 12:28:53 on August 3, 2012
Posted by Longreach at 13:52:24 on August 5, 2012
Posted by Anonymous at 11:29:32 on August 6, 2012
Posted by Anonymous at 10:59:07 on August 3, 2012
Posted by Anonymous at 10:20:00 on August 3, 2012
"There's a bit of sensationalism in all this," he says.
That's what it boils down too...
Let's not forget the facts here, XERO is very successful and is a great NZ story. But it's all offshore. What would be interesting is to know why it's offshore.
And when will XERO be sold off to some international provider?
Posted by Harry Finch at 18:40:23 on August 2, 2012
Posted by Anonymous at 11:59:41 on August 3, 2012
Posted by Anonymous at 12:03:07 on August 6, 2012