Telecom Wholesale deploying VDSL2

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Snowflake

#198120 26-Feb-2009 01:28

Screeb:
Regs:

I dont like the idea of kordia walking away with 'free cash' to build a competing cable - that seriously erodes the value and investment put into the existing scc cable. overseas investors who were nearly scared off by the govt meddling in telecom and auckland airport would probably never look this way again if this happened and that could cause some serious problems for our whole economy going forward.

I would, however, have no objection to the govt providing a loan to kordia so they can fund their portion if it cant find a bank/institution to offer finance in the current financial climate though.

Yes, god forbid the Government spends less than $200M to save the country $1B over 10 years. Obviously this is just going to turn away all those overseas investors who've been rubbing their hands with glee at the prospect of building NZ a second cable all these years. Wait...

i think you miss my point. why would overseas investors take a chance to create or invest in business in this country when they run the risk of having their investment destroyed at any time by the govt? Overseas investors will start pulling their money out of anything remotely to do with infrastructure - power, comms, transport, etc. When that happens then we really will need the govt to pay for everything.

and how do you see the country saving $1B from having this pipe? surely if the business case for having it was so solid, the govt wouldnt need to hand over cash to pay for it. Surely someone else would have already built it?

perhaps you would like to live in a communist country instead of one which promotes private enterprise? its getting harder to find them though, apparently that model didnt work so well.

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Ragnor

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#198126 26-Feb-2009 01:54

Regs, the SXC recovered it's build cost in <5 years and made Telecom ~$80 million last financial year in dividends from profit, Telecom owns a 50% stake.

Kordia going ahead with PPC2 to connect to PIPE networks PPC1 is a no brainer, it makes too much sense which is probably why it will fail to happen.

Regs

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Snowflake

#198128 26-Feb-2009 02:29

Ragnor: Regs, the SXC recovered it's build cost in <5 years and made Telecom ~$80 million last financial year in dividends from profit, Telecom owns a 50% stake.

Kordia going ahead with PPC2 to connect to PIPE networks PPC1 is a no brainer, it makes too much sense which is probably why it will fail to happen.

Then i dont know why telstra/telstraclear hasnt jumped at the chance to build this leg. Surely that would give them a competitive edge when negotiating trans-tasman connectivity. Maybe they crunched the numbers and decided that it was cheaper to just buy capacity off SCC.

remember too that SCC isnt just about connecting NZ to the world.... a large part of that cost recovery and subsequent profit is probably generated from the US <-> Hawaii loops and the US <-> Australia loops. Perhaps the ROI would have taken considerably longer if we were just talking about the NZ<-> Australia segment and that bandwidth from AU<->US or Hawaii<->US had to be purchased from a different owner.

And on the scc pricing note:

"Southern Cross pricing for NZ-US circuits has always been the same as our pricing for Australia-US circuits"

if companies struck multi-year contracts at what are now considered high prices then perhaps they read the market wrong. Much like someone holding a 5 year fixed mortgage at 8.5%. At the time it seemed like a good idea, but now that the fiscal environment has changed it became obvious it was a dumb decision.

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Screeb

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Ultimate Geek

#198221 26-Feb-2009 14:59

Regs:

i think you miss my point. why would overseas investors take a chance to create or invest in business in this country when they run the risk of having their investment destroyed at any time by the govt? Overseas investors will start pulling their money out of anything remotely to do with infrastructure - power, comms, transport, etc. When that happens then we really will need the govt to pay for everything.

What overseas investors? That was MY point - there aren't any in the first place. Not to mention $200M is very little in the scheme of things. And most importantly, most infrastructure is regulated by the Government in some form anyway.

and how do you see the country saving $1B from having this pipe? surely if the business case for having it was so solid, the govt wouldnt need to hand over cash to pay for it. Surely someone else would have already built it?

From that article... "Kordia commissioned a survey, by Covec, which found the Southern Cross stranglehold would cost New Zealand business $1 billion over the next ten years.".

With the credit crisis, it's pretty much impossible to get funding for anything. Regardless, Kordia aren't looking for the Government for money anyway, it was just a suggestion.

perhaps you would like to live in a communist country instead of one which promotes private enterprise? its getting harder to find them though, apparently that model didnt work so well.

Big rolleyes here. There's a slight difference between communism and ensuring there are no monopolies in infrastructure.

Screeb

698 posts

Ultimate Geek

#198224 26-Feb-2009 15:08

Regs:

Then i dont know why telstra/telstraclear hasnt jumped at the chance to build this leg. Surely that would give them a competitive edge when negotiating trans-tasman connectivity. Maybe they crunched the numbers and decided that it was cheaper to just buy capacity off SCC.

Telstra already have their own trans-Tasman cable...

remember too that SCC isnt just about connecting NZ to the world.... a large part of that cost recovery and subsequent profit is probably generated from the US <-> Hawaii loops and the US <-> Australia loops. Perhaps the ROI would have taken considerably longer if we were just talking about the NZ<-> Australia segment and that bandwidth from AU<->US or Hawaii<->US had to be purchased from a different owner.

SCC are hardly the only Hawaii/US cable. Given the competition on that route (esp. vs US data prices), revenue for just that stretch would be negligible. And why would it take longer for a ROI if SCC was just NZ/AU? The cost for the cable would be far cheaper in that case. And so what if it did? 5 years for a ROI for a major infrastructure investment is very good.

And on the scc pricing note:
"Southern Cross pricing for NZ-US circuits has always been the same as our pricing for Australia-US circuits"

if companies struck multi-year contracts at what are now considered high prices then perhaps they read the market wrong. Much like someone holding a 5 year fixed mortgage at 8.5%. At the time it seemed like a good idea, but now that the fiscal environment has changed it became obvious it was a dumb decision.

Another big rolleyes for Mr Regs! Yes, I'm sure ISPs are kicking themselves over the fact that they made such a dumb decision... wait... what decision? SCC are a monopoly. They had no choice.

Ragnor

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#198229 26-Feb-2009 15:47

Incomes and prices for everything else in NZ generally go one way - upwards. Companies providing internet and/or data services still have to invest in new hardware and technology to improve speed and capacity and their staff costs are naturally rising (unless they outsource to quasi-third world countries).

Why do people have this unrealistic notion that the cost of internet will fall at the same time as speed is increasing? I've got news for you it will get faster over time but it's probably not going to get much cheaper.

Regs

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Snowflake

#198247 26-Feb-2009 18:02

Screeb:
Regs:

Then i dont know why telstra/telstraclear hasnt jumped at the chance to build this leg. Surely that would give them a competitive edge when negotiating trans-tasman connectivity. Maybe they crunched the numbers and decided that it was cheaper to just buy capacity off SCC.

Telstra already have their own trans-Tasman cable...

so you're trying to tell me they don't need the SCC cable? try again: http://www.telstraclear.co.nz/business/products/data/trans-tasman-private-ip.cfm
"TelstraClear's Trans-Tasman Private IP network uses the self-healing Southern Cross fibre optic cable to connect its state of the art New Zealand Private IP network to Telstra's IP Solutions offerings within Australia" [today]

SCC are hardly the only Hawaii/US cable. Given the competition on that route (esp. vs US data prices), revenue for just that stretch would be negligible.

I'm not sure i'd agree with you there. And in any case I indicated that the US <-> Hawaii *and* US <-> Aus sectors would probably provide the bulk of the revenue. Especially in the early days of the SCC when choice of to Aus provider was more limited.

If you think that most of there revenue is sourced from NZ then please show us numbers cause it sounds rather far-fetched.

Another big rolleyes for Mr Regs! Yes, I'm sure ISPs are kicking themselves over the fact that they made such a dumb decision... wait... what decision? SCC are a monopoly. They had no choice.

but if we take your comment a few lines up then there obviously *was* a choice.... the telstra trans-tasman cable.... there was another choice too - shorter contracts.

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Screeb

698 posts

Ultimate Geek

#198262 26-Feb-2009 20:31

Regs:
so you're trying to tell me they don't need the SCC cable? try again: http://www.telstraclear.co.nz/business/products/data/trans-tasman-private-ip.cfm
"TelstraClear's Trans-Tasman Private IP network uses the self-healing Southern Cross fibre optic cable to connect its state of the art New Zealand Private IP network to Telstra's IP Solutions offerings within Australia" [today]

No, I'm saying that since they've got their own already, it doesn't make much sense to build another. If they really wanted to, they would just increase the capacity of their existing one.

I'm not sure i'd agree with you there.

Why not?

And in any case I indicated that the US <-> Hawaii *and* US <-> Aus sectors would probably provide the bulk of the revenue. Especially in the early days of the SCC when choice of to Aus provider was more limited.

Again (I really have to repeat myself with you, don't I?), if it were just trans-Tasman then the initial cost would be far lower.

If you think that most of there revenue is sourced from NZ then please show us numbers cause it sounds rather far-fetched.

I never said that...

but if we take your comment a few lines up then there obviously *was* a choice.... the telstra trans-tasman cable.... there was another choice too - shorter contracts.

Um, no, that was not a choice. Firstly, Telstra's one is far lower capacity than SCC's. Furthermore, SCC was the only one providing access through to the US, aside from lower capacity ones that go via Guam or Asia (which also adds a bit of latency. The link from AU to Guam also isn't redundant). Who says they could have had shorter contracts? SCC were/are a monopoly. They can tell them the contract is X years or stuff off (or perhaps pay an even more outrageous rate).

Regs

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Snowflake

#198285 26-Feb-2009 22:02

Screeb:
Regs:
so you're trying to tell me they don't need the SCC cable? try again: http://www.telstraclear.co.nz/business/products/data/trans-tasman-private-ip.cfm
"TelstraClear's Trans-Tasman Private IP network uses the self-healing Southern Cross fibre optic cable to connect its state of the art New Zealand Private IP network to Telstra's IP Solutions offerings within Australia" [today]
No, I'm saying that since they've got their own already, it doesn't make much sense to build another. If they really wanted to, they would just increase the capacity of their existing one.

are you serious? if they could 'just increase the capacity of their existing one" then why the hell do they buy capacity from the SCC?

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Screeb

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Ultimate Geek

#198297 26-Feb-2009 22:56

Regs:
are you serious? if they could 'just increase the capacity of their existing one" then why the hell do they buy capacity from the SCC?

Did you even read the rest of what I wrote? They still need to buy from SCC for redundancy and international links. Plus, it would be cheaper to buy capacity from SCC in the short term instead of increasing their own capacity.

raytaylor

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#198861 2-Mar-2009 23:40

Screeb:
Regs:
are you serious? if they could 'just increase the capacity of their existing one" then why the hell do they buy capacity from the SCC?

Did you even read the rest of what I wrote? They still need to buy from SCC for redundancy and international links. Plus, it would be cheaper to buy capacity from SCC in the short term instead of increasing their own capacity.

I didnt realise telstra had their own trans-tasman cable - I thought they just owned part of SCC which has its own redundancy system in place.

Ray Taylor

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PenultimateHop

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#198863 3-Mar-2009 00:45

Screeb:No, I'm saying that since they've got their own already, it doesn't make much sense to build another. If they really wanted to, they would just increase the capacity of their existing one.

I assume you are refering to TASMAN-2, which is a reasonably old cable, based on PDH technology. Simply "increasing the capacity" isn't an option, short of ripping all of the repeaters out of the water. At which point it'd be cheaper and much easier to lay a new cable (resource consents notwithstanding).

The rest of your arguments I really struggle with. If it was really such a boom market, it would be in Telstra's best interest to lay a cable across the Tasman, as the number of cables ex-Australia is increasingly large and not dependent on Southern Cross, especially since Telstra has just built their own Pacific cable to remove their reliance on Southern Cross.

The redundancy argument doesn't really hold much water, given that the SPOF in the picture is Southern Cross itself.

SCC are a monopoly, but they were the only monopoly willing to put their (and not the tax-payers!) money up for that position.

Regs

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Snowflake

#198865 3-Mar-2009 01:15

raytaylor:
I didnt realise telstra had their own trans-tasman cable - I thought they just owned part of SCC which has its own redundancy system in place.

Telstra don't own any of SCC: "The company shareholders are Telecom New Zealand (50%), SingTel Optus (40%) and Verizon Business (10%)."

And i think you are right- i don't even think Telstra have their own trans-tasman cable. As far as i can tell the AOTC who evolved into Telstra owned a share of the TASMAN2 cable along with Telecom and others.

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PenultimateHop

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#198867 3-Mar-2009 01:24

Regs: And i think you are right- i don't even think Telstra have their own trans-tasman cable. As far as i can tell the AOTC who evolved into Telstra owned a share of the TASMAN2 cable along with Telecom and others.

I believe the asset was transferred/sold to Reach Global Networks, which is a Telstra subsidiary/joint-venture with PCCW.

Screeb

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Ultimate Geek

#198870 3-Mar-2009 01:50

PenultimateHop:
I assume you are refering to TASMAN-2, which is a reasonably old cable, based on PDH technology. Simply "increasing the capacity" isn't an option, short of ripping all of the repeaters out of the water. At which point it'd be cheaper and much easier to lay a new cable (resource consents notwithstanding).

OK, but obviously they aren't building another cable, so they have their reasons...

The rest of your arguments I really struggle with. If it was really such a boom market, it would be in Telstra's best interest to lay a cable across the Tasman, as the number of cables ex-Australia is increasingly large and not dependent on Southern Cross, especially since Telstra has just built their own Pacific cable to remove their reliance on Southern Cross.

There's very little incentive for Telstra to build a second trans-Tasman cable, due to their new cable which you mentioned - most of Telstra's traffic will now go through that cable, instead of going via NZ. They have no interest in going through NZ (aside from redundancy), so it would be pointless to build a trans-Tasman cable now. Don't forget that TelstraClear has very little pull with Telstra, so a cable is not going to be built just for them either.

The redundancy argument doesn't really hold much water, given that the SPOF in the picture is Southern Cross itself.

Not sure what you're trying to say here... SCC is figure 8, unlike many cables in the region.

SCC are a monopoly, but they were the only monopoly willing to put their (and not the tax-payers!) money up for that position.

Telecom was a monopoly, thus they had all the money, resources, and potential for gain necessary to build the SCC. It's harder for others to build a second cable simply because they wont have a monopoly like SCC did.

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