A second internet link out of New Zealand announced today
will not address Telecom's "monopoly" on international
connectivity, the Green Party says.
The Labour Party and a consumer advocate has also signalled
some disquiet over potential competition issues that could
arise from the venture.
Telecom, Vodafone and Telstra have announced a deal to build
a new undersea telecommunications cable between Auckland and
Sydney, which should dramatically increase the amount of
internet data able to be sent to and from New Zealand.
The companies say the new cable, tentatively titled the
"Tasman Global Access" cable, will "significantly improve New
Zealand's international telecommunications connectivity as
well as strengthen links into fast-growing Asian markets."
The total cost of the cable is expected to be less than US$60
A design is expected to be finalised within the next few
months, with a likely completion date of mid to late next
year. 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.
Telecom chief executive Simon Moutter and Vodafone New
Zealand CEO Russell Stanners issued a joint statement this
"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 transtasman internet traffic: for example,
around 40 per cent of both Telecom and Vodafone's
international internet traffic is now Australia to New
Zealand, versus just 10 per cent in 2000," they said.
"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."
But in a statement today the Green Party said the proposed
cable would not "address the monopoly Telecom currently has
on connectivity to the rest of the world".
"The second trans-Tasman cable will improve New Zealand's
internet connectivity but will do little to break Telecom's
monopoly over pricing," Green's spokesperson Gareth Hughes
"The move will now make it much harder to justify building a
second cable to the USA, yet this is exactly the kind of
internet infrastructure New Zealand needs if we are to have a
truly resilient and competitive network. Reliance on a single
provider for our international internet provision has meant
higher prices, data caps, and less innovation for services.
Today's announcement is likely to have only a small impact on
the current unsatisfactory situation. It's not the step
change our economy needs.
Telecom's stake in the second transtasman cable will ensure
there is no price competition for internet out of New
Zealand. And this will also benefit co-investors Vodafone and
Telstra," Hughes said.
Labour's communications and IT spokesperson Clare Curran said
"there are serious competition issues as Telecom is
effectively competiting with itself".
"We are also concerned that the cable infrastructure will be
built by the telecommunication companies which will then
provide the retail services on it. Labour seeks assurances
that these issues are addressed transparently and that there
is commercial wholesale capacity available for other carriers
on an equal footing," Curran said.
Telecommunications Users Association chief executive Paul
Brislen, who lobbies on behalf of consumers, said he was
supportive of the project but that questions still hung over
This was because Telecom also owned half of the Southern
Cross Cable system - the only existing link out of New
"Will we see real wholesale competition between the networks
or will Telecom's role in this stymie that? That's a question
they'll have for answer if not for us then I presume it's
possible the Commerce Commission could look at it, although
it's tricky because Southern Cross is domiciled in Bermuda,"
But Moutter told the Herald this morning he did not believe
any competition issues arose from Telecom's investment in
both cables and that he'd expect them to compete.
Stanners also said that he would imagine competition in the
wholesale internet market would improve as a result of the
"You need two people in the market to be competitive we'll be
two players in the market sot this will be a competitive
alternative," Stanners said.
One consequence of the Telecom/Vodafone link was that it
would be more difficult for a player to get a cable between
another link to the United States off the ground, Brislen
NZ company Pacific Fibre hoped to build a 12,950km fibre
cable between Auckland, Sydney and Los Angeles at an
estimated cost of $NZ400 million but announced in August last
year it had failed to raise enough capital for the project.
Pacific Fibre hoped to rival the Southern Cross Cable
Network's pipe, which is the only link transporting internet
traffic in and out of New Zealand.
Internet entrepreneur Rod Drury, who was involved in the
failed Pacific Fibre project to connect Auckland Sydney and
Los Angeles, said it was "great news" but tinged with a "bit
"This is just the next best option and it's going to be very
good for internet business and exporters," he said.
"Clearly the business case for Pacific Fibre was pretty good.
I still think for New Zealand this is vital infrastructure I
would have much preferred we did a PPP (Public Private
Partnership) with the New Zealand SuperFund investing and we
step-changed by connecting Australia through New Zealand up
to the USA.
That would have generated a lot of economic activity and
built some competitive advantage for New Zealand. It's a
shame it's hard to do these really bold things," Drury said.
While the Greens said the cable would "shut out competition",
Minister for Communications and Information Technology Amy
Adams said the new cable would provide the market solution
the government always expected would happen.
"There has been rapid growth on the transtasman route in
recent years and this will only continue as New Zealanders
access high-speed broadband," Adams said.
"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."