Vodafone, iiNet call for cable rivalry after Pacific Fibre fails

BUSINESSDESK: Vodafone New Zealand and iiNet back more competition among international cable networks, though neither is prepared to bear the brunt of Pacific Fibre abandoning its plans after struggling to attract funding.

Pacific Fibre shelved plans to build another international cable linking New Zealand's internet infrastructure with the rest of the world after failing to raise the $400 million it needed to fund the project.

That was in spite of it attracting $US200 million in committed sales from five foundation customers, including mobile phone operator Vodafone and Australian internet service provider iiNet.

Vodafone and iiNet shared their disappointment of the project falling over, but neither will be adversely affected by Pacific Fibre's failure.

"There's no impact at all – we hadn't put any cash on the table," iiNet chief business officer Greg Bader told BusinessDesk. "We're disappointed it didn't get up, especially for New Zealand."

Vodafone said it is "very disappointed that the project hasn’t come to fruition" and is "still in favour of a second international cable to help break down the digital divide between New Zealand and the rest of the world".

ASX-listed ISP, iiNet, extended its capacity supply agreement with Southern Cross Cables last week, though Mr Bader said it was unrelated to Pacific Fibre's collapse as there was always going to be a gap in their capacity needs.

Pacific Fibre chairman Sam Morgan says the board believed it would be able to attract funding as it was a long-term infrastructure investment.

"We feel like we've done everything we can to succeed and we are all hugely disappointed that we have not managed to get there." 

Rival Southern Cross Cables doesn't expect Pacific Fibre's failure to get off the ground will impact on its own business, as it continues to upgrade its own facilities in the face of accelerating technology gains.

"We've got five cables out of Australia, and that's been competitive for quite some time," said Ross Pfeffer, director of sales and marketing at Southern Cross Cables. "It's difficult for a new cable to take off."

Southern Cross has built up the bandwidth speed on its cable network to 40 gigabits a second from 2.5 Gbps a decade ago, and expects it to increase to 100 Gbps by the end of this year, rising to 400 Gbps in two years.

Mr Pfeffer said Southern Cross has taken a measured approach, building ahead of demand, but not locking itself into technology that might need to be replaced too quickly.

The improvement in the capability of new technology mean it is hard to predict what kind of demand New Zealand's ultrafast broadband and rural broadband initiatives will deliver, though Southern Cross will be able to deliver with its network expected to last beyond 2025.