'Fat pipe' short on users

PETER GRIFFIN finds out why there is so much spare capacity on the Pacific cable.

The management of the Southern Cross Cable Network blames sluggish demand for "fat pipe" capacity on poor marketing by Telecom and Telstra.

The network's Asia Pacific director, Ross Pfeffer, said "quite a lot" of capacity had so far been sold on the network, which links New Zealand, Australia, Fiji and Hawaii with the United States mainland, but only half of that had been "lit up".

The cable operator criticised Telstra and Telecom for failing to lure residential customers with attractive pricing and promotions for broadband, which he dubbed "the world's best-kept secret".

"The residential market doesn't really know about broadband," he said. "It hasn't been well promoted and it's really not widely available in an effective sense."

Mr Pfeffer said a question mark would be left over Australasia's economic development if broadband did not take off.

A leaked OECD report, The Development of Broadband Access in OECD Countries, put broadband penetration in New Zealand at 0.27 for every 100 people last year.

Last month, Telecom revealed it had managed to sign up only 21,500 customers to its high-speed JetStream service.

Thirty-nine per cent of those were residential customers.

But the company's network general manager, Simon Moutter, defended the Jetstream pricing and said Telecom did not yet make any money out of the service.

Telecom has a 50 per cent stake in the Southern Cross network, and therefore an interest in its success.

A Southern Cross dividend boosted Telecom's results by a net $221 million this year. But Telecom expects fluctuating demand for cable capacity, stating in its annual report that "the size and frequency of payments will vary".

Mr Pfeffer commended moves by the Australian Competition and Consumer Commission to put pressure on Telstra to offer its competitors ADSL services at a cheaper rate in Australia.

"Resellers of Telstra's own [ADSL] product buy it at the same price that anyone can buy it at," he said. "Then they have to add value and charge more."

In early September, the commission gave the telco 12 weeks to work out a fairer ADSL wholesaling arrangement. Telstra faces a penalty of up to $A10 million and $A1 million for each day it operates its own BigPond service if it fails to meet the commission's demands.

A call for greater broadband competition also came from Alcatel Australia last week. Chief executive Ross Fowler said low broadband penetration would put at risk "a healthy portion of GDP" within 10 years.

Despite weak demand, the Southern Cross Cable Network is pushing on with plans to upgrade its cable capacity from 60 gigabits per second to 80Gbps in November.

And uncertainty in the broadband market is not delaying the $A800 million Australia-Japan cable, to go live by Christmas.

The cable, a joint venture between WorldCom, Japan Telecom, Telstra, NTT, Teleglobe and the soon-to-be defunct AT&T/BT Concert alliance, will eventually have a capacity of 640 Gbps - the equivalent of almost 8 million simultaneous phone calls.

Mr Pfeffer said the cable was seen as a competitor, but with 95 per cent of traffic on the network routing to the US, linking with Asia was not a strong priority.

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