Cable to help meet insatiable demand

By Chris Barton

Southern Cross Cable partners celebrated the latest milestone in their $2 billion investment in a Pacific fibre optic loop yesterday even though recent bad weather means the scheduled landing at Takapuna will not occur until next week.

But the near-landing did provide a glimpse into how the submarine fibre optic strands, expected to come into service around June next year, will help meet the insatiable bandwidth needs of New Zealand and the rest of the world.

When it is finally complete in November next year, the cable - 50 per cent owned by Telecom, 40 per cent by Cable and Wireless Optus and 10 per cent by MCI WorldCom - will provide capacity of 200 gigabits a second in a loop between New Zealand, Australia and the United States.

That will be enough for the entire population of Australia and New Zealand to make overseas phone calls simultaneously.

While the cable's southern ring capacity of 40Gbps is a big improvement over the paltry 5Gbps that currently links Australia and New Zealand, some suggest internet demands will quickly gobble all the space on the new pipe - possibly by the end of 2001.

A curious twist in the economics of bandwidth is that despite the increasing demand and the shortage of supply, costs are plummeting.

New Zealand internet service providers now pay between $10,000 and $15,000 a month per megabit per second of bandwidth. A year ago the cost was around $25,000 per Mbps. When Southern Cross comes on stream costs are expected to go as low as $4000 per Mbps.

But as Ihug director Nick Wood points out, there is never enough.

When the internet service provider started in 1994, it was using a paltry 128Kbps bandwidth. By April last year, that had climbed to 56Mbps. Today it is using 140Mbps and has just secured another 130Mbps to meet demand.

Mr Wood was at a Southern Cross customer meeting in Hawaii this month - with Clear and Telecom - to seek a piece of the new pipe.

At the meeting, Southern Cross slashed its base prices - from $US37.8 million ($73.15 million) to $US12.9 million for a 15-year 155Mbps connection between the US and Australasia. The same-sized link between New Zealand and Australia fell from $US9.95 million to $US4.1 million.

Increased competition among wholesale bandwidth providers is the main reason given for the price drop, along with the greater use of satellite bandwidth.

But advances in technology enabling Southern Cross to squeeze more capacity out of its fibres have also helped. Asia-Pacific marketing director Ross Pfeffer says new techniques mean Southern Cross could push its 40Gbps ring to as high as 400Gbps.