OMG Telecom Co-Owns Southern Cross cable, y can't it set prices?

Forums › Spark New Zealand (including Skinny and BigPipe) › OMG Telecom Co-Owns Southern Cross cable, y can't it set prices?

richgamer

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#30040 27-Jan-2009 16:36

we all know how small data caps are because of the price of international data but i just found out telecom owns 50% of the southern cross cable that goes from nz and other countries to the usa. source:

http://en.wikipedia.org/wiki/Southern_Cross_Cable

so if telecom is the majority owner, why doesn't it lower the international data cost so we can get at least double the data caps we have for telecom's own broadband plans?

munchkin

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#192321 27-Jan-2009 16:43

If I recall correctly, many ISPs bought 10 or even 15 year contacts for data...

That, and no-one predicted the massive rise in data-intensive applications that has occurred.

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johnr

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#192322 27-Jan-2009 16:48

Co owns not owns %100 so there are other share holders

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Simonm

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#192383 27-Jan-2009 21:12

richgamer: we all know how small data caps are because of the price of international data but i just found out telecom owns 50% of the southern cross cable that goes from nz and other countries to the usa. source:

http://en.wikipedia.org/wiki/Southern_Cross_Cable

so if telecom is the majority owner, why doesn't it lower the international data cost so we can get at least double the data caps we have for telecom's own broadband plans?

http://www.ispmap.co.nz/topmap.html

Old site but you get the idea. There are 5 providers of bandwidth between the US and NZ. These providers pay for connectivity over the SSC and then charge for access into teh USA.

I would say, for anti-compeditive keeping the comcon happy, that the part of Telecom that manages its global gateway (ssc) has zip all to do with the pricing that telecom retail charges.

And also, 95% of people dont requrie huge data caps. The 5% that do need to stop downloading linux ISOs.

jfnz

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#192394 27-Jan-2009 23:16

Did the other thread you created not answer this exact question?

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Byrned

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#192442 28-Jan-2009 10:54

Is it at this point that someone points out that Telecom is corporate company and as such has a responsibility to return to its shareholders a maximum return on investment. They're not a charity.

Perhaps if you made a business case for it in such a way that it would increase there bottom line then I'm sure they would but they're not about to do it for fun & giggles - or for that matter to make you feel better.

The company I work for sells its goods to make a profit. We seek to maximise that profit by selling our goods at the price the market is prepared to pay vs how much we can sell at that price. Could we sell at a cheaper price? Yes. Do we? No.

I guess we could have everything owned by the goverment, run by the goverment. But that hasn't worked out well for countries that did that. Mind you it does seem that capitalism has its problems too

richgamer

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#192518 28-Jan-2009 16:22

it is simple really. telecom can charge xtra a lower amount for international data than any other nz isp, so xtra would for example offer a 20gb cap for $49.95(instead of 10gb) and other isps won't be able to do this because they will be paying the higher price for international data and xtra won't. after all, the government split up of telecom doesn't mean telecom has to play fair with it's southern cross cable right? so xtra would be the only isp that could have a 20gb cap for $49.95 and make a profit so other isps won't be able to offer that so everyone would join telecom which would give it's shareholders a maximum return on investment.

Byrned: Is it at this point that someone points out that Telecom is corporate company and as such has a responsibility to return to its shareholders a maximum return on investment. They're not a charity.

Perhaps if you made a business case for it in such a way that it would increase there bottom line then I'm sure they would but they're not about to do it for fun & giggles - or for that matter to make you feel better.

The company I work for sells its goods to make a profit. We seek to maximise that profit by selling our goods at the price the market is prepared to pay vs how much we can sell at that price. Could we sell at a cheaper price? Yes. Do we? No.

I guess we could have everything owned by the goverment, run by the goverment. But that hasn't worked out well for countries that did that. Mind you it does seem that capitalism has its problems too

cokemaster

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#192522 28-Jan-2009 17:10

The word anticompetitive springs to mind...

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munchkin

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#192525 28-Jan-2009 17:21

richgamer: it is simple really. telecom can charge xtra a lower amount for international data than any other nz isp, so xtra would for example offer a 20gb cap for $49.95(instead of 10gb) and other isps won't be able to do this because they will be paying the higher price for international data and xtra won't. after all, the government split up of telecom doesn't mean telecom has to play fair with it's southern cross cable right? so xtra would be the only isp that could have a 20gb cap for $49.95 and make a profit so other isps won't be able to offer that so everyone would join telecom which would give it's shareholders a maximum return on investment.

You really don't have a clue, do you?

Operational Separation means that Telecom has to treat itself as it would treat other companies, and I can tell you from firsthand experience - as can many others, that Telecom does this.

Secondly, Telecom itself does not control pricing for the SCC, this has been mentioned before but you have chosen to ignore it...so I'll say it again:

Telecom does not control the pricing for the SCC.

Telecom owns a share in the company which leases its asset (the cable) to other companies who then set the price - and most ISPs have bought long contracts - some of which are yet to expire. It can't set the price because it doesn't own the cable, it owns part of the company which owns the cable, which then leases the rights for data access to other companies...

So, to summarise:

Telecom doesn't own the cable;
Telecom owns a share in the company which owns the cable (SCC Ltd);
SCC Ltd. sells capacity to Tier 1 providers who then sell capacity to Tier 2 providers and ISPs;
ISPs sell access to you.

So, from this, we can deduce that the middleman - or comapnies like MCC Verizon and AT&T are responsible for the pricing.

If you don't understand, ask for more help. Don't jump to wild conclusions without researching things first :)

Edit: To further clarify something else you've said, Telecom hasn't paid dividends recently, and I don't think they will be for a while. This is why their share price has dropped recently, all the investors who were in there only for profit making are bailing out.

Dratsab

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#192539 28-Jan-2009 18:38

richgamer: we all know how small data caps are because of the price of international data but i just found out telecom owns 50% of the southern cross cable that goes from nz and other countries to the usa. source:

http://en.wikipedia.org/wiki/Southern_Cross_Cable

so if telecom is the majority owner, why doesn't it lower the international data cost so we can get at least double the data caps we have for telecom's own broadband plans?

Why don't you start up an ISP company and show everyone how it's done?

freitasm

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#192567 28-Jan-2009 20:05

richgamer: it is simple really. telecom can charge xtra a lower amount for international data than any other nz isp

As said before, no Telecom cannot charge less to Xtra because they have rigid rules and must not show favouritism or provide anti-competitive prices.

I think you have the wrong idea about the New Zealand communications market.

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munchkin

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#192569 28-Jan-2009 20:06

freitasm:
I think you have the wrong idea about the New Zealand communications market.

That's definitely true.

Regs

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#192638 29-Jan-2009 01:06

munchkin: Edit: To further clarify something else you've said, Telecom hasn't paid dividends recently, and I don't think they will be for a while. This is why their share price has dropped recently, all the investors who were in there only for profit making are bailing out.

Not sure where you are getting your information from but its dead wrong. Telecom has continued to pay out dividends every quarter and in the last couple of months their share price has risen from a low of under $2.20 to over $2.60. At $2.20 their dividend of 24c gave a return of over 10% which is about the highest of any stock on the market and anyone who bought shares at that price is looking at a pretty decent ROI right now.

http://investor.telecom.co.nz/phoenix.zhtml?c=91956&p=irol-dividendLatest

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munchkin

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#192774 29-Jan-2009 19:38

Regs:
Not sure where you are getting your information from but its dead wrong. Telecom has continued to pay out dividends every quarter and in the last couple of months their share price has risen from a low of under $2.20 to over $2.60. At $2.20 their dividend of 24c gave a return of over 10% which is about the highest of any stock on the market and anyone who bought shares at that price is looking at a pretty decent ROI right now.

http://investor.telecom.co.nz/phoenix.zhtml?c=91956&p=irol-dividendLatest

Patronising comments aside, you're right. I was thinking of the imputation credits, but the divdend has been lowered. Anyway, this is OT and doesn't help the thread