UPDATE: New Zealand, Australia Eye New Under-Sea Cable By End-2014

   --New under-sea cable to have design capacity of 30 terabits per second 
   --Cable to cost less than US$60 million 
 

(Adds further details, comment from the head of the telecommunications users' association.)

 
   By Rebecca Howard 
 

WELLINGTON--Three major regional telecommunications companies will join forces to build an under-sea cable linking Auckland and Sydney, capable of handling 300 times New Zealand's current internet data requirements.

Telecom Corp. of New Zealand Ltd. (TEL.NZ), Telstra Corp. (TLS.AU) and Vodafone Group PLC's (VOD.LN) New Zealand unit Tuesday said they had signed a non-binding memorandum of understanding to invest in the construction of the so-called "Tasman Global Access cable" that will then connect to four international cable systems currently serving Australia. The cost of the cable is expected to be less than US$60 million and it will have a design capacity of 30 terabits per second.

"It makes good economic sense to leverage existing cable networks at a fraction of a build cost of a new cable directly across the Pacific or into Asia," Telecom Chief Executive Simon Moutter told a media briefing. Also, according to Telecom and Vodafone, around 40% of their internet traffic is now trans-Tasman, versus just 10% in 2000.

New Zealand currently relies on one high-speed fiber-optic cable between Australasia and the west coast of the United States. The Southern Cross international cable is half owned by Telecom, which also has a 33% stake in a second, limited-capacity cable connecting New Zealand and Australia. Telstra has a 36% stake in the second cable.

Telecom, Telstra and the Vodafone unit expect to finalize the design of the new cable within the next few months, with a likely completion date for construction of mid to late 2014. The project will be overseen by a joint venture company equally owned by the three partners. A decision has yet been taken on where it will be based.

While the new cable would increase New Zealand's internet capacity, Paul Brislen, chief executive of the Telecommunications Users Association of New Zealand, said there are some caveats.

He said the new cable might block any competitor from building a new trans-Pacific cable. "It is possible that we would end up with capacity into Australia and nothing else and that is a big concern as it adds a lot of latency and delay to our connections up to North America."

Telecom (TEL.NZ) shares were 0.2% higher at NZ$2.26 after the news.

Write to Rebecca Howard at [e-mail]

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