Large Aussie ISP signs 10-year deal with Pacific Fibre

Pacific Fibre has signed a definitive long-term agreement with iiNet for the supply of international capacity, the start-up revealed this evening - putting it another step closer to funding its proposed $US400 million cable between Sydney, Auckland and LA.

Chief executive Mark Rushworth said he was very pleased to have Australia’s second largest DSL broadband provider on board as a foundation customer.

"It's for a ten-year term with a realistic potential for more capacity down the track," Mr Rushworth told NBR.

CFO Michael Gleissner refused to disclose financial terms, saying only that it was a "significant deal" for both companies.

Mr Gleissner told NBR that iiNet [ASX:IIN] currently buys international bandwidth through a number of wholesalers, including Vocus.

Vocus is an agent for the 50% Telecom-owned Southern Cross Cable.

Mr Rushworth said the incumbent cable provider was Telstra, which owns and runs the Endeavour cable between Australia and the US, as well as wholesaling capacity on Southern Cross Cable's Sydney-Auckland leg.

Landing iiiNet is a vindication of one of Pacific Fibre's key selling points - that it will be an independent cable, unlike Southern Cross and Eneavour and others that are owned, or co-owned, by companies that also have retail ISP interests.

It's unlikely Pacific Fibre will supply 100% of any ISP's international capacity. But as data demand booms, and internet service providers' existing bandwidth contacts pop at the seams, the start-up is looking to cater to their needs as they go shopping for additional capacity.

1.3 million connections
According to its 2010 annual report, the acquisition-hungry iiNet has more than 1.3 million subscribers - a number bolstered by its recent purchase of the retail business of Telecom's Australian subsidiary, AAPT. Last year, it made a profit of $A35 million on revenue of $A462 million.

iiNet chief executive Michael Malone (last seen in cahoots with Orcon over its new VoiP phone/modem) said, “As a foundation customer with Pacific Fibre, our customers will enjoy some of the fastest paths when accessing international content both now and well into the future."

Second anchor customer
Pacific Fibre recently announced a $91 million, multi-year anchor customer deal with Crown-owned Reannz.

A third major anchor customer deal will be announced shortly, Mr Rushworth said.

Last week, Pacific Fibre said it had signed US company Tyco Electronics Subsea Communications (aka TE Subcom) as its partner in its bid to build a cable between Australia, New Zealand and the US.

The company, founded by Rich Listers Sir Stephen Tindall, Rod Drury and Sam Morgan, aims to launch its international service in 2014 - breaking the Southern Cross Cable's long-time monopoly on New Zealand's fibre optic connection to the outside world.