By Dan Satherley
Recent improvements in data caps and prices for broadband in New Zealand are unlikely to continue with the failure of Pacific Fibre, says one expert.
Yesterday the company announced it had failed to get the $400 million in funding it needed to lay a new 13,000km cable linking Auckland, Sydney and Los Angeles.
The cable would have competed with the Southern Cross cable, which is New Zealand's only internet link to the rest of the world, and 55 percent owned by Telecom.
"We still cannot see how the Government's investment in [ultra-fast broadband] makes sense until the price of international bandwidth is greatly reduced," co-founder Rod Drury said.
Dr Fernando Beltran, senior lecturer in the Department of Information Systems and Operations Management at Auckland University, says data caps have increased recently because Telecom was "pre-empting" the introduction of the new cable.
"The short term implication of this is that we may not see this trend we've seen in recent months where data caps were increased by Telecom and other providers for residential access," says Dr Beltran.
"They have been increased but that trend won't gather any pace because there is no pressure from a competitor like Pacific Fibre.
"Price-wise we are likely to remain at the same levels so we won't see any reaction on that side, in the short term anyway."
Dr Beltran says there's no danger of the current cable being overloaded.
"Capacity-wise, it’s been said there is enough capacity on the cable," he says. "The important thing is the economics, not the technology. The problem is that if you charge too high, no matter how capable your cable is or how much capacity it has, you are discouraging people from using it just because of the price."
"If you have a second or third cable, what happens is that the users of the cables, the internet providers, are the ones determining which one to use and how to use it. That would bring better prices just due to that competition."
TradeMe founder Sam Morgan, The Warehouse founder Stephen Tindall and software entrepreneur Rod Drury were members of Pacific Fibre, a company set up in 2010 for the project.
They sought funding from the NZ Superannuation Fund, but the venture was deemed "too risky", reports the National Business Review.
Telecommunications Users Association CEO Paul Brislen said he was surprised by the decision.
"This is exactly the kind of project pension funds want to invest in," he told the NBR. "Long-term infrastructure projects are good for New Zealand as a whole.
"There was no requirement for the fund to bankroll the entire Pacific Fibre operation, that would indeed have been too much, but surely a shareholding would not have been remiss?"
It has also emerged US authorities would not allow the cable if China had a stake in it, fearing espionage.
“[The Chinese] love investing in infrastructure, especially strategic infrastructure like this," Drury told interest.co.nz.
“Then as we just tested that with some of the US connections, it was made clear that that may be a problem."
The US fears Chinese investment would mean using Chinese-made equipment, something they would not allow.
3 News
source: newshub archive
