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New cable greeted with cautious optimism

Tuesday 19 Feb 2013 5:48 p.m.

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Plans to build a new internet cable between New Zealand and Australia are being welcomed with some caution.

Vodafone and Telecom announced today they'd teamed up with Telstra in Australia to build a new undersea cable. But will it help or hurt competition?

“Customers have always said we need to have two cables out of New Zealand - we'll now have two," says Vodafone New Zealand chief executive Russell Stanners.

“With two comes competition, which means better pricing, which means we can then look to offer the kind of deals our retailers want.”

Currently most of our internet traffic goes through the Southern Cross Cable, which connects New Zealand to Australia and the United States.

The proposed TGA cable would go between Auckland and Sydney, and with much greater capacity. In theory that would mean cheaper broadband for homes and businesses, as long as companies allow other internet providers to use their connection.

“We’d like to see it parlayed out into a wholesale regime that allows everybody else to have a crack at it too – that way we’ll see prices come down and hopefully it’ll be a true competitive model,” says Paul Brislen of New Zealand Telecommunications Users Association.

But there are concerns about whether this gives Telecom too much of the market, as it already owns a controlling stake in the Southern Cross Cable.

“[With] Telecom having a significant share in the second cable, it's unlikely we're going to see Telecom having a price war against another Telecom cable, driving down prices for New Zealand consumers,” says Green Party MP Gareth Hughes.

A group of investors called Pacific Fibre already tried to fund such another cable to Australia and the US, but gave up last year after only raising about half of the $400 million needed.

Vodafone and Telecom say their plan will cost up to $71 million, and they're confident of success, expecting the new cable will be built before the end of next year.

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