Writings on technology and society from Wellington, New Zealand

Tuesday, January 15, 2008

A transatlantic tunnel, hurrah!

…is the title of an old book by Harry Harrison which I haven’t read, but I’ve always loved the title. The title captures some of the enthusiasm around connecting our world. And today, we connect our world with undersea fibre cables, as I have written about before.

In New Zealand, our international fibre – our lifeline to the world – is all provided by a single company, the Southern Cross cable company. This company, or rather its backers Telecom and Optus, had the vision and the guts ten years ago to make the large investment necessary to run fibre right across the Pacific Ocean, by two different routes. A ring of fibre provides great service and makes it unlikely that the connection can fail even if a strand of cable is cut. Imagine trying to sell that to investors in the mid 90s!

But here we are a decade down the track and no-one doubts that the Internet is key to our society and our economy, to our place in the world. Undersea cables are a fact of life – they alway have been for New Zealand, of course, but the kind of capacity and robustness provided by Southern Cross is now a necessity in a wired age. Put bluntly, no-one will want to come here or remain here if we can’t be part of the Internet revolution that is happening in developed countries around the world.

And the problem we are hitting with our undersea cable is that its all owned by the company, which justifiably feels free to set the price for what it believes will deliver maximum returns. According to Southern Cross, the cable has way more capacity than New Zealand will use, and it can be – and is being – upgraded to deliver even more capacity. The problem with this argument is that it’s disingenuous. The cable is expensive to use – that’s why we all have data caps on our Internet accounts, something that doesn’t happen in most other countries. If the cable weren’t so expensive to use we’d use more of it. This effect pushes a lot of New Zealand websites offshore. What Internet services and breakthroughs are we missing out on because we have such limited and expensive bandwidth to the rest of the world?

People have been grumbling about this for a few years now. Rod Drury mused publicly that the government should fund an infrastructure investment in this area, as governments have over the years for things like power systems and roads. Minister Cunliffe appeared to suggest at a recent conference that this was a possibility.

This, then, is the context for Southern Cross’s recent statement that, if another cable is to be built, that it should be a Southern Cross cable. Southern Cross would love to build New Zealand another cable, especially with a government subsidy, but I suspect they’d build it anyway to protect their monopoly. And it’s election year. Hmm.

No-one likes to have their source of revenue attacked, especially by the government. But, here we have a private monopoly which is holding back New Zealand’s access to the world and vice versa. We can’t afford for one company to run all the airline flights in and out of New Zealand, and we can’t afford for one cable company to do the same for the Internet.

New Zealand needs another international cable company – not only a new cable, but one run by an entirely separate company. We need the market forces of competition on our electronic lifeline to the world.

posted by colin at 7:49 am  


  1. Rubbish – what about a well-regulated government monopoly? What is there to suggest that 2 companies running undersea cables would be any more likely to compete than the existing Southern Cross?

    Recall Southern Cross is itself an expression of the 2 owner companies (Telecom and Optus) cooperating to avoid higher capital costs and price competition.

    If government is going to be asked for a public subsidy to lay another ‘competing’ underseas cable, why not have government retain ownership of the asset we have paid for? A panel of regional elected delegates (voted in by users with an ISP account) could act as Board of Directors and set price level signals to management to avoid excessive profitmaking… or something similar.


    Comment by bob — 28 January 2008 @ 2:23 am

  2. I’m agnostic about who owns a new cable so long as it isn’t Southern Cross or a close relative. I can understand and argument that says, like water pipes, these things are just expensive parts of infrastructure that are created an kept in public ownership.

    The most important thing is that we have diversity on the route. Ideally we should have at least three cables. Getting another one in would be a great start.

    Comment by colin — 31 January 2008 @ 6:27 am

  3. I am not very familiar with the technology, but is it possible for a New Zealand company with a data-intensive website mirrored on servers in both NZ and America, but using the same address, with all traffic directed to one or the other depending on where they originate and both sites kept synchronised so they display exactly the same content? The key being that the user wouldn’t know where the data was originating, both sites being identical, as far as the user would know it was only one website.

    This way a company could cater for both national and international traffic with virtually unlimited bandwidth, only requiring the cable for synchronising the two servers.

    If broadband companies could then offer no data cap on internal communications but a cap on international traffic this system would probably work really well for NZ companies. And be a big boost in business for local web hosting.

    It wouldn’t help access to international sites of course unless the international company saw it was in their best interests to mirror popular content in NZ. Very high-use sites such as Youtube may find it worthwhile to cache the most popular content in NZ in this case. No sense sending the same video 5000 times down an expensive cable when you can send it once.

    Comment by Samuel — 31 January 2008 @ 10:26 pm

  4. Samuel

    There certainly are technologies that can help. RadioNZ, for instance, hosts in the three main centres in NZ and in California. Unforutnately, those ISPs who refuse to peer (TelstraClear are the main one) force their customers to pick up from the California server.

    There are also commercial ‘cacheing services’ like Akamai which transparently place web content closer to its users. But they cost money.

    The real point here is that we need a robust and diverse Internet. Diversity needs to include diverse ownership so competition will drive down prices.



    Comment by colin — 1 February 2008 @ 9:13 am

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