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South Pacific undersea cable market heating up

By Brendan Ritchie
Mon 7 Dec 2015
FYI, this story is more than a year old

We had some big news this week as we learned of a third undersea cable, the Moana, which will be built by Alcatel-Lucent and will connect NZ to Hawaii. With a fair bit happening in this space, I thought it would be a good idea to provide a brief overview of the current plays and some questions that come to mind for me as a result.

So, here is a brief recap of where we find ourselves at present:

  • The Southern Cross Cable (SCC) is the incumbent, the only cable connecting NZ to the world, and the major cable connecting Australia to the world. It runs between Australia/NZ/Hawaii/America in a figure 8 topology.
  • Tasman Global Access (TGA) is a joint initiative between Vodafone NZ and Spark that will connect NZ to Australia in 2016. The cable is being built by Alcatel-Lucent.
  • Moana Cable system was announced this week and will connect NZ and some other Pacific island nations to Hawaii. The cable will be completed in 2018. This cable will be owned by Alcatel-Lucent directly.
  • Hawaiki Cable. The only proposed cable with any question marks around it, as the commencement date keeps getting pushed back (now 2018) and the company is still seeking $150million in funding to get started. If it does go ahead, it will connect Australia/NZ/America in a non-protected topology (sort of an upside down T shape).

Some thoughts on all of this:

  • Has the Moana Cable partly come about due to efficiencies gained by Alcatel-Lucent through them already being in the area laying out the TGA cable? Is it a case of the TGA job finishing and the ship gets straight on with Moana?
  • Moana will get NZ traffic back to Hawaii, and to The Cook Islands and Samoa, but not a lot of demand exists for those locations as end points. I would like to understand how the interconnects will work in order to have traffic to continue on to the USA, and what those agreements will do to wholesale costs.
  • After years of discussion around the likelihood of multiple undersea cables going to/from NZ, it is now a reality that will soon to be realised. The questions is; will it be 3 or 4? In my view, 3 is far more likely. Vocus has made such a large commitment to SCC that I can’t see their game plan changing too much, but if other transit providers can do the deals required to secure low cost routes to the rest of the world via Moana, and to Australia using TGA, wholesale prices will drop lower and Hawaiki will find their return on investment getting ever further away.
  • How much will SCC do to lock in business prior to Moana coming on board in 2018? Will we see wholesale bandwidth prices drop further?
  • In terms of retail pricing, I don’t see much changing as a result of all of this. Bandwidth makes a small percentage of an ISP’s overall costs, and NZ doesn’t have the scale required for prices to drop much further. Staffing and other network overheads still have to be covered, and if anything, those costs are increasing.

So that’s it, a busy and interesting time ahead, and I expect to see a white flag from Hawaiki in the new year.

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. Tweet him on @bcarmody.

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