KEY POINTS:
Communication links between New Zealand and the rest of the world have been the subject of a great deal of discussion in recent weeks.
Much of it has focused on two aspects of the debate - first, the risk associated with those links and second, the possible cost/benefit to consumers in New Zealand of a competitor to the Southern Cross Cable System.
A recent Herald article, Across the Tasman, two cables better than one, contained a couple of opinions that are worth addressing.
The first was the view that a single cut to the Southern Cross Cable would cause significant communication issues to New Zealand. This is not the case.
There are currently three fibre-optic submarine cables emanating from New Zealand, two of which make up the Southern Cross Cable System.
The Southern Cross Cable System is configured to be self-protecting; this is known in the industry as a "self-healing ring".
It consists of a fibre optic cable from Takapuna to Hawaii and on to mainland US. A second cable runs from Takapuna to Muriwai Beach, across the Tasman to Sydney and then on to Fiji, Hawaii and mainland US where it lands in California and is linked via terrestrial routes to the landing site of the first cable in Oregon. This effectively forms a figure eight.
The two cables, while part of the same system, are completely separate.
The system has two landing points in New Zealand, two in Australia, two in Hawaii, and two on the continental US.
The cable cannot be cut by a single event, unless it was a major volcanic eruption or geographical event which destroyed the Auckland region.
As well, there are a number of satellite earth stations owned and operated by a range of companies, which, although mainly located in the Auckland region, could provide limited additional capacity through satellite in the event of a catastrophic event.
Both Southern Cross cables have sufficient spare capacity and the ability to upgrade to meet the growth needs of New Zealand and Australia for at least the next five, and more probably 10, years. They are designed to operate for at least 13 more years, and we would expect that they would last much longer.
In addition to Southern Cross, there is also Tasman2, which is an older fibre optic cable from Auckland to Sydney, carrying predominantly voice and non-internet related traffic.
It has been fully utilised for some time, but has been very reliable all its life, and should remain so for at least another five years.
Would an extra cable to Australia reduce internet access prices in New Zealand? To answer this, we must understand the Australian market.
Australia has more than five times the demand for traffic to the world than New Zealand, and there are currently four significant cables linking Australia to the world; Perth via Indonesia to Singapore, Sydney to Guam and the two Southern Cross Cables to the US.
Today the capacity from New Zealand to the world is less than 8 per cent of the consumed capacity on Southern Cross. In recognition of the importance of the Australian market, as well as the availability of competing cables, Southern Cross prices its capacity based on the market dynamics in the Australian market, and regularly reviews its prices. Southern Cross has always charged identical prices for capacity in New Zealand as it does in Australia, which ensures New Zealand benefits from the relative size of the Australian market.
So, if there is very little risk, and no cost drivers for building another cable to Australia, should we do it? Of course we should, if the commercial returns are there. Let's not pretend that it is needed as a response to a high risk or high local cost environment.
* Fiona Beck is president and chief executive of Southern Cross Cables.
