IT Brief New Zealand logo
Technology news for New Zealand's largest enterprises
Story image

Pricing: How will a new international cable benefit NZ?

By Brendan Ritchie
Wed 13 Aug 2014
FYI, this story is more than a year old

DTS CEO Brendan Ritchie writes the second of his three part series of posts on the subject of the additional undersea cables planned for New Zealand in the coming years.

A couple of years ago there was a very real argument to be made that New Zealand ISP’s paid too much for international bandwidth, and in turn data costs to consumers were also too high.

However, the threat of real competition in the form of the now defunct Pacific Fibre, kick started a drop in international pricing in NZ. As I stated at the time of that ventures demise;

The legacy Pacific Fibre (PF) will leave is that of lower pricing from Southern Cross (SCC), yet ironically that contributed directly to their downfall.

The moment PF was launched, the very threat of genuine competition made SCC jump into action and offer volume deals on fixed terms, which in one act both locked away a large portion of the market and forced PF to adjust their business model.

Lower $/Mbps = more Mbps that need to be sold for breakeven to be reached in the same period as initially planned.

In the two years since, we have seen NZ and Australian transit pricing merge to the point that market offerings now largely match each other in terms of price and data offered.

Contention is still modelled in the same way by ISP’s, with low cost flat rate pricing usually meaning it is highly contended, and a higher cost p/GB in the business space reflecting reduced contention, but the price points for each in Australia and NZ are almost mirrored.DTSLogo

The difference in market factors for Australia is that they have several undersea cables connecting them to the world, yet the price per Mbps is almost identical in both countries.

This suggests that one cable or many, there are costs that need to be recovered on these massive projects and at this stage in their life cycle we have reached something of a stable price point for this part of the world.

Will the Vodafone/Telecom cable drop prices?

The impact of this cable depends on whether access over that service will be available via wholesale channels. If access to other ISP’s is not offered, market impact will be muted.

This cable has a much lower cost to build given its shorter direct path to Sydney (AU$60 million to build 30Tbps versus the US$350 million for Hawaiki to build 6Tbps of capacity), and with the destination of traffic coming out of New Zealand set to be a 50/50 split between Australia and America, the financials look much better for the TGA link.

If the price point offered by TGA reflects the points I have just made, and if ISP’s can be smart about how they route traffic over the cheaper path and utilise peering arrangements out of Sydney, then costs can be lowered. A LOT of “ifs” there though…

But, do lower international bandwidth prices = lower consumer prices?

Not really. International bandwidth sits well behind staff costs, domestic transit costs, tail circuit costs, hardware costs and some others I am probably forgetting right now.

It is a fairly small part of the overall cost structure that goes into providing services to end users. Market maturity and rationalisation has lowered pricing, and ubiquitous access to UFB at regulated pricing has helped lower retail pricing.

The market is crowded at the retail level, and the industry is now 20+ years old, margins are falling as services are becoming commoditised, and UFB is driving that.

Quality circuits for SME’s and consumers now cost less than ever, the companies selling services over those tails are competing harder than ever, and even though providing UFB circuits to consumers brings increased costs in terms of how many regions an ISP needs to deploy hardware in and how much grunt the hardware deployed needs to have, market pressure is demanding that scale is the answer to ensuring profitability.

In summary…

* New Zealand and Australia currently have very similar rates for international transit, leading me to believe that additional cables to the USA from NZ will do little to reduce international transit costs

* TGA may, in the right environment, provide lower p/Mbps costs than SCC/Hawaiki, but even if that does happen, international transit costs form a small part of overall ISP costs, so will provide little scope to reduce consumer pricing.

By Brendan Ritchie – CEO, DTS

The last post in the series will detail the benefits brought about by the existence of additional paths to the world in terms of redundancy...

For part one click here

Brendan Ritchie is the CEO of DTS, a business focused ISP that has been supplying clients across Australia and New Zealand with internet, voice and tailored WAN solutions since 2002.

Related stories
Top stories
Story image
Whispir reports significant revenue growth as CaaS market expands
Australian cloud platform Whispir has announced its financial results, reporting significant growth as it continues to introduce new Communications-as-a Service (CaaS) offerings to the market.
Story image
Cradlepoint launches architectural extension of NetCloud solution
With this latest release Cradlepoint is focused on helping lean IT organisations with advanced SD-WAN and zero trust capabilities.
Story image
Ivanti reveals potential ROI of 261% for Endpoint Management Solution
Ivanti has announced the results of a commissioned Total Economic Impact (TEI) study conducted by Forrester Consulting.
Story image
Schneider Electric launches Connected Services with Claroty
Schneider Electric is teaming up with Claroty to assist in maintaining cybersecurity for physical assets - a critical issue.
Story image
8x more users attacked via old Microsoft Office vulnerability in Q2
"Criminals craft malicious documents and convince their victims to open them through social engineering techniques."
Story image
Facial recognition
Benefits vs risks of facial recognition technology
Once a distant, futuristic concept, facial recognition technology is now found in many technological applications with a variety of different functions. 
Story image
Virgin Money works with 9Spokes to create custom offering
Virgin Money has worked with Kiwi SaaS 9Spokes to build a custom version of its business dashboard offering, M-Track, to generate stronger insights for the bank and its customers.
Story image
Can biometrics help? 123% increase in Gen Zs scammed online
In the three years leading up to 2022, the number of Gen Zs who fell victim to online scams rose by 123%, according to Ping Identity.
Story image
Kaspersky uncovers new attacks by advanced persistent threat group
The attacks involved modifications of the well-known malware, DTrack, as well as the use of a brand-new Maui ransomware.
AWS Marketplace
Learn how security orchestration, automation, and response (SOAR) enhances your security strategy.
Link image
Story image
Sophos reveals latest ransomware trend impacting orgs
Sophos has announced in a new whitepaper that Hive, LockBit and BlackCat, three prominent ransomware gangs, consecutively attacked the same network.
Story image
Demand grows for future-proof mobile access solutions
HID Global, in partnership with IFSEC Global, recently released the 2022 State of Physical Access Control report for the fourth year running.
Story image
Data Protection
Safeguarding your financial data
As the digital revolution marches on, managing data security has never been more important. Here are five important steps to take toward better financial data security.
Story image
Artificial Intelligence
Gartner unveils key emerging tech to watch in 2022
"Such technologies present greater risks for deployment, but potentially greater benefits for early adopters," says Gartner.
Story image
CISOs need to consider a risk-based cybersecurity strategy
Rather than talking in terms of attack vectors and vulnerabilities, CISOs and security decision-makers must look at actual business risk.
Story image
Hybrid Cloud
The essential guide to digital transformation by SolarWinds
Digital transformation is a buzzword thrown around all the time by companies, but what does it actually mean and why is it important? SolarWinds breaks it down.
Story image
Lucid Software
Lucid Software expands enterprise offerings with enhanced slack apps
Lucid Software has expanded its enterprise offerings with enhanced slack apps for its Lucidspark and Lucidchart technology.
Story image
Email scams
HelpSystems shines light on impact of response-based threats
Response-based attacks targeting corporate inboxes have climbed to their highest volume since 2020, representing 41% of all email-based scams.
Story image
Digital Transformation
Federated change is the best path to digital evolution
Businesses that can successfully manage the exponentially expanding masses of data produced by modern consumers will be the businesses that survive and prosper.
Story image
Artificial Intelligence
Appier achieves historically high growth rate of 56% YoY
"Our strong momentum over the past two quarters underscores Appier's significant growth alongside our customers."
Story image
Dynatrace extends application security capabilities for runtime environments
Dynatrace has announced that it has extended its Application Security Module to detect and protect against vulnerabilities in runtime environments.
Story image
Contact Centre
Treasure Data launches new customer experience functionality
Treasure Data has introduced a new strategic vision and product positioning for Customer Data Cloud, reflecting the company's focus.
Story image
Artificial Intelligence
Concentric AI protects sensitive data with new capabilities
The new capability reveals sensitive data shared across email and business messaging platforms and highlights who has inappropriate access to content.
Story image
Digital Transformation
Top tips for making your finance transformation program a resounding success
Planning to make 2023 the year you embark on a wholesale finance transformation program? It’s a move that will stand your enterprise in excellent stead as you navigate the complexities of the post-Covid business landscape.
Story image
Augmented Reality
TeamViewer remote access software integrated into RealWear Cloud
TeamViewer has announced a major expansion of its partnership with RealWear, a leading provider of assisted reality wearable solutions for frontline industrial workers. 
Story image
Investment in APAC cold storage to reach $5 in next decade
Investment in Asia Pacific’s cold storage market is expected to grow fivefold in the next decade, according to JLL.
Story image
CM Group recognised as Best Overall MarTech Company
MarTech Breakthrough has ranked CM Group as the Best Overall MarTech Company for the third year running and Cheetah Digital as Best Overall Marketing Campaign Management Solution.
Story image
Tech job moves
Tech job moves - Fastly, INX, Kinly, SmartBear & Vectra AI
We round up all job appointments from July 29 - August 12, 2022, in one place to keep you updated with the latest from across the tech industries.
Story image
Data Protection
Advancing genomic sequencing and public health with digital infrastructures
Right before our eyes, we've witnessed the development of the COVID-19 vaccine in record time. An enormous achievement in an otherwise lengthy task that previously took, on average, 10-15 years.
Story image
Australian Grand Prix uses CENNZnet blockchain for fan experience
CENNZnet was employed by Power'd Digital to deliver the Formula 1 Heineken Australian Grand Prix's 2022 AusGP Access program.
Story image
How well do rangatahi understand cyber safety in Aotearoa?
Do rangatahi in Aotearoa understand the importance of being safe online, or has lifelong exposure to the internet resulted in widespread complacency?
Story image
Cloud Security
Tenable makes additions to Cloud Security portfolio
Tenable has announced additions to Tenable Cloud Security that represent the next step in assessing threats related to cloud vulnerabilities.
Story image
Lacework launches new capabilities for better threat detection
Lacework has announced new capabilities that enable organisations to uncover more critical threats to their infrastructure and empower teams.
Story image
Video: 10 Minute IT Jams - An update from Mendix
Mendix is a low-code platform used by businesses to develop mobile and web apps at scale, and Jornt joins us today to discuss how these offerings work, and what benefit they have in the development process.
Story image
Avast reveals zero-day exploits targeting Chrome and Microsoft
Avast, released its Q2/2022 Threat Report today, revealing a significant increase in global ransomware attacks, up 24% from Q1/2022.
Story image
Artificial Intelligence
Is your chatbot bringing down the customer satisfaction score?
The top 10 reasons why chatbots are failing to meet customer expectations and what you must do to avoid that.
Story image
Data analytics
Pressure on orgs to up their data analytics game - study
A recent report from Sisense highlights data transmission, analysis, and risk management remain top concerns for data professionals in APAC.
Story image
How to increase the success rate of business data projects
Amid changing economic conditions and uncertainties about supply chains and staff availability, it's never been more important for New Zealand organisations to be innovative.
Story image
Digital Transformation
Why it is imperative to keep up with technology advancements
Technology is constantly evolving, which is why digital transformations can often be complicated. What legacy items stay? Will the new and old work together? Or is there a whole new system that we need to introduce?
Story image
Why printing security plays a vital part in keeping Aotearoa safe
While internet printing, mobile printing and other similar technologies have no doubt made things easier to manage, it has also brought a whole new set of problems to the table.
Story image
Workday research finds A/NZ organisations becoming leaders in digital agility
New research from Workday and IDC has revealed that Australia and New Zealand are becoming leaders in digital agility.