A sample cross-section of the Southern Cross Cable. Photo / Chris Keall
A sample cross-section of the Southern Cross Cable. Photo / Chris Keall
The Southern Cross Next cable linking New Zealand, Australia, and the US has gone live, nearly doubling NZ's global broadband connectivity.
The new cable can pump internet data between countries at up to 72 terabits per second - or enough capacity to stream more than 4.5 million Ultra HD 4Kvideos simultaneously.
Part-owner Spark said the new cable would also have the most direct route to the US, meaning 5 per cent lower latency, or lag.
That did not mean punters at home would necessarily see any immediate speed boost.
Internet performance depended on a variety of factors, including how much international cable capacity your internet service provider was willing to purchase from Southern Cross and other international providers.
Spark, unsurprisingly, is a big Southern Cross customer - in its 2021 annual report, the telco said it had committed to buying $50m worth of capacity for the coming year.
Another key factor was whether content from an offshore service, like the US-based Netflix, was "cached" or copied to servers in Australia or at your ISP in NZ.
A sample cross-section of the Southern Cross Cable. Photo / Chris Keall
But it would definitely provide New Zealand with more security and redundancy as NZ continued its journey from one international cable to many (more on which below).
At its first-half results briefing on February 22, Spark said it would make its final equity contribution to Southern Cross Next in April, and that revenue would flow from the new cable from mid-year (a target that has been hit).
But the telco also qualified: "Southern Cross dividends: remain suspended and are not expected to resume until at least FY23."
Analysts did not expect the same fat profit contributions as in early years.
In 2017, Southern Cross paid Spark a dividend of $61m.
But that would prove the high-water mark.
Spark's share of Southern Cross profits slipped to $50m in 2018, then $15m in 2019 before the profit-share payout was suspended as part of the drive to finance the Next cable as Spark made a series of contributions to its construction, including the $35m noted in its 2021 annual report.
Although Southern Cross dividends were suspended, Spark did note in its latest annual report that the firm was still profitable.
It said Southern Cross made a $51m profit in 2020 and $39m in 2021.
Southern Cross VP Dean Veverka as the new Next cable was landed at Auckland's Takapuna beach - close to NZ's largest internet peering exchange in Albany - in June last year.
The US$300m Next was also bankrolled in part by customer pre-sales, and by bringing in a new Southern Cross investor: Telstra.
Before the Australian telco bought-in two years ago, the Bermuda-incorporated Southern Cross was 50 per cent owned by Spark, 40 per cent by Singtel Optus and 10 per cent by Verizon.
The Southern Cross shareholdings are now Spark 40.7 per cent, Singtel-Optus 32.59 per cent, Telstra 25 per cent and Verizon 1.67 per cent.
Nex lands at Takapuna beach in June 2021. Photo / Jason Oxenham
Our Government also chipped in a modest sum ($24m) for a Southern Cross Next spur that will link three Tokelau atolls to the new cable, according to an MFAT official who stood in for the waylaid Tokelau administrator Ross Ardern when Next was landed on Auckland's Takapuna beach in June last year.
From one to many
From 2000 to 2017, the original Southern Cross Cable Network (a figure 8 of two cables between Australia, NZ and the US, due to be retired in 2030) was our only major internet connection to the outside world.
In 2017, the Tasman Global Access cable between Auckland and Sydney - a $100m joint venture between Spark, Vodafone and Telstra - went live.
And in 2019, competition arrived in the form of the $500m Hawaiki Cable between Australia, NZ and the US, bankrolled in part by rich listers Malcolm Dick and the late Sir Eion Edgar.
Hawaiki was sold to Singapore's BW Digital for an undisclosed sum in a deal announced in July last year, with Overseas Investment Office approval on May 22 this year.
Hawaiki's new owner is now trying to raise funds for a new cable that would connect Invercargill, Dunedin and Christchurch with Los Angeles, Singapore and Jakarta.
The aim is to establish a fast broadband link to help facilitate a supergiant data centre in Southland that would take up the slack from the Manapouri power station after Rio Tinto closes the Tiwai smelter in 2024.
There are rival plans, including the Meridian and Contact proposal to use Manapouri to power the world's largest hydrogen production plant.
