Telcos announce investment in trans-Tasman cable

UPDATE 10.30am - ICT minister welcomes news and TUANZ is cautious; Telecom, Telstra and Vodafone to invest in US$60 million cable

A new submarine cable project that will link New Zealand and Australia at a cost of around US $60 million ($71 million) has been announced by Telecom, Vodafone and Telstra.

The three telcos have signed a non-binding memorandum of understanding to co-invest in the construction of a cable between Auckland and Sydney. The project is called Tasman Global Access (TGA) Cable.

The cable will incorporate three fibre pairs with a current design capacity of 30 terabits per second – approximately 300 times the current internet data demand out of New Zealand, says a media statement about the project.

Construction is expected to be complete by mid to late 2014, with the design finalised in within the next few months.

Govt welcomes move
ICT Minister Amy Adams has reacted to the announcement on social media, tweeting: “Great to see market solution from Vodafone and Telecom on new trans-Tasman submarine cable given growth of data traffic on that route.”

A statement from Adams' office says: “The new cable will provide an important step in New Zealand’s connectivity, and it also provides the market solution that the Government always expected would happen. There has been rapid growth on the trans-Tasman route in recent years and this will only continue as New Zealanders access high-speed broadband," she says.

“It is estimated that about 40 per cent of New Zealand’s international traffic is on the trans-Tasman route and this volume is growing more rapidly than traffic on the trans-Pacific route to the US, due to an increasing amount of content being hosted on servers in Australia and Asia.”

Telecom CEO Simon Moutter and Vodafone New Zealand CEO Russell Stanners jointly commented: "The business case for a new cable between New Zealand and Australia is compelling, providing greater capacity and global redundancy capability. It also reflects the growing importance of trans-Tasman internet traffic: for example, around 40 percent of both Telecom and Vodafone's international internet traffic is now Australia to New Zealand, versus just 10 percent in 2000.

"We are seeing increased data content being provided from Australia-based servers by global companies and being accessed by New Zealand internet users. An additional cable connection with Australia will strengthen the business case for international data servers to be located in New Zealand.”

The TGA will potentially four additional international cable systems currently serving Australia (with several more proposed or in development), the statement claims.

These include the Southern Cross (50 percent owned by Telecom) and the Australian Japan Cable (jointly owned by Telstra, BT, Verizon Business and Softbank).

Third time lucky?
The TGA partners claim it “will achieve significant international connectivity benefits for New Zealand at a fraction of the build cost of another, much longer trans-Pacific cable.”

Pacific Fibre, backed by Rod Drury, Stephen Tindall and Sam Morgan, was a $400 million submarine cable project that intended to link New Zealand with Australia and the US, but it was shelved last year.

State Owned Enterprise Kordia also had a project to build trans-Tasman cable called Optikor, but that too was shelved. Chief executive Scott Bartlett told Computerworld last week that the company did not intend to revive the project.

“The reality is building a second submarine cable is critical for the country but it’s so difficult commercially to get off the ground,” he says.

He says that when Pacific Fibre was announced, Optikor lost its potential customer base.

“Pacific Fibre was just so much sexier. Kordia had done so much work, it had done desktop surveys which cost about a million bucks, it was a whole lot of work to get that point and the customers were lining up [before Pacific Fibre].

"I think I am saying that if Pacific Fibre hadn’t come along then on balance Optikor probably would have gotten away.”

There have been other proposals for a second international cable, including a suggestion from Kim Dotcom that he might revive the Pacific Fibre project, and a South Pacific project call Hawaiki Submarine Cable that would link New Zealand and Australia with several Pacific islands by the end of 2014.

TUANZ mixed reaction
In a blog post TUANZ CEO Paul Brislen has mixed views on the announcement.

“While it’s only a memo of understanding (MoU) at this point, the $70m build probably will go ahead as it makes good business sense,” he writes.

“However it does make it more difficult to build a direct NZ-US cable in the future, under the current conditions.”

“A trans-Tasman pipe means we’re more likely to continue accessing content that’s already stored in Australia and so strengthen Australia’s role as the local hub. I can see a future where the Southern Cross Cable has expired and any replacement is a direct link from Australia to the US rather than via New Zealand. That would condemn us to a world where data connections to North America have to go the long way round, increasing latency issues and ping times and decreasing our desirability as a destination for hosting content.”

Brislen says TUANZ wants to understand how the cable will be wholesaled, more about Telecom’s shareholding in competing cables (TGA and Southern Cross) and where it will land.