UPDATE: Telecom CEO Simon Moutter says there hasn't been an agreed upon ownership structure as of yet, but expects shares will be divied out equally among the three companies. The thrust of the cable is it takes advantage of the international connections into Australia, and its proximity to the growing South East Asian internet market.
"This new cable allows New Zealand to tap into the cable economy that Australia already benefits from," says Moutter.
Asked what the benefits to consumers would be in building this second cable, neither Moutter or his counterpart at Vodafone Russell Stanners answered openly.
"Your average retail consumer doesn't really know where their traffic is going," says Moutter.
Stanners says a joint venture with Telecom was not a backup plan to its plans to invest in Pacific Fibre's trans-Pacific cable.
"This option didn't exist when the Pacific Fibre venture ended, and we were sad to see it not eventuate," says Stanners.
"It's our firm belief that there's always been a lot of capacity out of Australia. This makes sense."
Telecom, Vodafone NZ, and Telstra in Australia have signed a memorandum of understanding to co-invest in the construction of a submarine internet cable between Auckland and Sydney, according to a statement from the joint venture.
The project, known as the Tasman Global Access (TGA) Cable for now, has a tentative completion date of mid to late 2014.
Unlike the current monopoly held by the Southern Cross Cable (SCC), which is 50 percent owned by Telecom, the proposed cable terminates in Australia - requiring further connections on cables like SCC for international capacity.
Representatives from the two New Zealand companies say the cable is expected to cost less than US$60 million. A design is expected to be finalised within the next month, and the cable will be built witha capacity of 30 terabits per second (which according to the signatory companies, is 300 times New Zealand's current data demand).
Paul Brislen, the CEO of the Telecommunications Users Association of New Zealand (TUANZ), says today's announcement comes as a surprise. Vodafone has expressed interest in an overseas cable in the past, by pledging to the failed Pacific Fibre cable project. Telecom has made hints at furthering international capacity, but a teaming up of the two largest New Zealand players wasn't on the radar, says Brislen.
In the short term the consumers will benefit from the cable, as it puts pressure on SCC to make its international capacity more competitive. However, smaller ISPs will feel the pain, says Brislen.
A representative from Telecom says data capacity is allocated to the three partners by the amount they invest into the cable, and there is no direct reselling of capacity to smaller ISPs.
"The country's largest internet retailer [Telecom] now owns half of one cable, and it likely owns a third of this cable. The CEOs will need to answer how this affects competition, and it's likely something the government will look into," says Brislen.
The newly announced cable will also make it near impossible to put a business case forward for a second connection into the US, as planned by Pacific Fibre.
"With this cable we now have enough capacity to last us many years, which makes it difficult to float the idea of a second cable into the US. Everything that we do in the future will go through Sydney, and any future invest by data vendors like Google and the like will be done there. Sydney becomes the data hub of the South Pacific," says Brislen.
More as this story develops.
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