New hope for New Zealand telecoms competition

18 February 2013 by Steve Blum
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Fortunately, there are better ways to spend your time in New Zealand.

New Zealand is a relatively costly place to do Internet-related business. There’s only one underseas cable linking it to the outside world, the Southern Cross, which goes from Australia to California via New Zealand.

That’s two paths in and out of the country, but one owner. It’s not a competitive market. According to Market Clarity, an Australian telecoms research company, Kiwis pay 5.8 times more than Aussies for a gigabyte .

Competition of a sort might be coming in the next couple of years, though. A plan to build a second link across the Tasman Sea was announced today. Telecom NZ, Vodafone and Telstra are investing US$60 million in a new cable between Auckland and Sydney, with completion expected in 2014.

There’s some skepticism about how much competition the cable will inject into the marketplace. The Southern Cross cable is also partly owned by Telecom NZ, and the company was a little vague about who would have access to the new link and on what terms. And it only goes as far as Australia, although from there you can find competing transpacific fiber.

The most recent attempt to break the Southern Cross monopoly was a venture called Pacific Fibre which folded last year. It invested several million dollars in developing a route from Sydney to Los Angeles, also by way of Auckland. But it couldn’t raise the US$400 million necessary.

A bailout was promised but not delivered by Kim Dotcom (his legal, if not original, name). He’s a German immigrant to New Zealand who is building a larger than life image for himself as he fights U.S. government attempts to extradite him on content piracy charges.

So we’re left with today’s announcement. It’s at least a half step towards competitive international bandwidth pricing for New Zealanders.