Pacific Fibre ceases operations

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Behodar

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#106854 1-Aug-2012 14:22

http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=10823806 :(

Edit: More here: http://www.nbr.co.nz/article/pacific-fibre-sales-hit-200m-says-will-be-fully-funded-mid-june-ck-116187

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#665446 1-Aug-2012 14:23

Haha not surprised by this. Let's hope the Chinese build the cable to Aussie. Oh wait New Zealanders hate anything to do with Chinese investment..... Well done NZers...

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geekiegeek

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#665461 1-Aug-2012 14:36

damn. Good on them for giving it a go though.

ajobbins

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#665462 1-Aug-2012 14:38

What a shame. NZ will continue to be held to ransom for international bandwidth by Southern Cross Cable.

The threat of Pac Fibre along helped to bring some of their prices down, however with the threat now gone we are unlikely to see further reductions, and may even see increases over time.

This is not good news for New Zealand

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sbiddle

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#665464 1-Aug-2012 14:43

While it's sad people need to understand it was never going to be a magic bullet that would deliver cheap flat rate broadband.

There is far more to costs, including domestic transit and more importantly domestic peering and connectivity - something Australia doesn't have to deal with. An ISP there buys transit that covers both domestic and international and offers low cost connectivity direct to the major CDN's that are hosted in Australia.

freitasm

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#665470 1-Aug-2012 14:52

Official word:

Pacific Fibre to Cease Operations

The Pacific Fibre board today resolved to cease operations, citing an inability to raise the NZ$400m required to fund the cable build.

Pacific Fibre launched in March 2010 and planned to build a 13,000km high-speed fibre-optic cable connecting New Zealand and Australia to California.

“A 13,000km cable is clearly an audacious thing to try and do.  We were fortunate to find supportive shareholders, fantastic staff and early customer support from the likes of REANNZ and Vodafone” said chairman Sam Morgan.

“We’ve spent millions of shareholder funds trying to get this done and despite getting some good investor support we have not been able to find the level of investment required in New Zealand initially and more broadly offshore.”

“The global investment market is undoubtedly difficult at the moment but we knew this was always going to be hard, regardless of our timing.”

“We started Pacific Fibre because we know how important it is to connect New Zealanders to global markets.  The high cost of broadband in New Zealand makes it hard to connect globally and it is this market failure, not a technical failure, that we tried hard to solve”  said co-founder and director Rod Drury.

“We still cannot see how the government’s investment in UFB makes sense until the price of international bandwidth is greatly reduced” said Mr Drury.

In September 2011, the Australian telecommunication research company Market Clarity reported the cost of bandwidth to the U.S. from New Zealand as 5.8 times greater than the price paid by Australians.

“This project had encouraging early momentum and we were pleased to attract a great team and board, and shareholders who invested because they felt passionately that this problem needs solving for New Zealand”, said Mr Morgan.  We believed funding for these long term infrastructure investments would have been more readily available and were confident the business case was solid.”

“We feel like we’ve done everything we can to succeed and we are all hugely disappointed that we have not managed to get there.”

“We’d like to thank our staff, shareholders, customers, partners and supporters”, Mr Morgan ended.

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#665481 1-Aug-2012 14:57

Talkiet

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#665483 1-Aug-2012 14:58

ajobbins: What a shame. NZ will continue to be held to ransom for international bandwidth by Southern Cross Cable.

The threat of Pac Fibre along helped to bring some of their prices down, however with the threat now gone we are unlikely to see further reductions, and may even see increases over time.

This is not good news for New Zealand

Disclaimer - I work for Telecom.

However, I challenge you to back up your statement with facts. The reason for this is that it's my understanding that Southern Cross has a history of dropping prices regularly, even before Pacific Fibre was a gllint in anyone's eye...

“With lower marginal capacity cost we have reduced our prices to the US from both New Zealand and Australia by 44%”, says Pfeffer, “the third largest decline in our history. Often coinciding with capacity upgrades, price declines are not new for Southern Cross, having averaged over 21 per cent annually since 2001. This longstanding practice has promoted the increasing use of retail internet data with reducing cost”. (Quote from their site)

Cheers - N

Please note all comments are from my own brain and don't necessarily represent the position or opinions of my employer, previous employers, colleagues, friends or pets.

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mattwnz

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#665504 1-Aug-2012 15:24

It's a bit sad. But isn't there a new cable between NZ and Oz that is soon to be built?

Lorenceo

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#665514 1-Aug-2012 15:37

So much for caps increasing further in the future. :(

NonprayingMantis

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#665541 1-Aug-2012 16:15

there was a study recently that showed the reason for datacaps being lower in NZ had virtually nothing to do with international capacity costs

http://www.stuff.co.nz/dominion-post/business/7023724/Aussie-ISPs-more-generous-with-data

" Consumer groups have at times blamed Southern Cross Cable's near monopoly on international bandwidth to and from New Zealand, but Market Clarity said national and international bandwidth costs were comparable between the two countries and might even be lower for Kiwi carriers.

The study found that Australian providers devoted more of their revenues to purchasing capacity than their New Zealand counterparts.

After all network costs were taken into account, the Australian retail broadband providers surveyed made a median profit margin of 26.3 per cent of revenues, while the New Zealand internet providers had a margin of 38.8 per cent, the company said.

The president of New Zealand's Internet Providers Association, Dave Mill, said it had decided not to comment on issues that it had not been heavily involved in, but would be happy to seek feedback from its members.

''The results are surprising,'' Market Clarity chief executive Shara Evans said. ''There is a widespread perception, particularly in New Zealand, that the costs of international services drive the difference between the allowances offered to Australian and New Zealand broadband customers. However, our research suggests that other factors are more significant.''

Ms Evans said no external party had funded or sponsored the survey and Market Clarity had published it purely to raise its profile and better understand the market. "

MattR

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#665556 1-Aug-2012 16:47

sbiddle:
There is far more to costs, including domestic transit and more importantly domestic peering and connectivity - something Australia doesn't have to deal with. An ISP there buys transit that covers both domestic and international and offers low cost connectivity direct to the major CDN's that are hosted in Australia.

Every state capital in Australia has at least one IX (Syd & Mel have more than one each), which practically every ISP (except Telstra, Optus, and AAPT) servicing that state connects to. See WAIX, PipeIX, and Equinix IX.

The 'domestic transit' you mention is really just access to Telstra, Optus, and AAPT due to the ACCC's "Gang of Four" ruling years ago - everybody else peers at the IXes (which is where the CDNs are located).

There are really only 4 big ISPs left in Australia - Telstra, Optus, iiNet, and TPG. They all have their own International networks. Exetel is a minor player, and I suspect will be bought by one of the 4 soon.

I've been told from a friend who's rather high up at one of the big4 in Australia that NZ ISPs pay the same price per megabit on SCCN as Australian ISPs, so that isn't a valid excuse for the lower quotas here.

I think the problem here is one of scale. NZ ISPs just don't have anywhere near as many customers as Australian ISPs, so the cost per customer is higher. I'd really like to see the ISPs build their own infrastructure to Sydney (for access to Asia) and especially California, where they can get much cheaper bandwidth. Buying off a transit provider in Auckland is always going to be more expensive - but the costs to build your own infrastructure again comes back to scale. You'd need enough volume to justify it.

I was an Internode customer for 8 years before I moved to Auckland, I love how they built their own network that stretches all the way to London (in both directions).

Matt.

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#665621 1-Aug-2012 18:04

Talkiet:
ajobbins: What a shame. NZ will continue to be held to ransom for international bandwidth by Southern Cross Cable.

The threat of Pac Fibre along helped to bring some of their prices down, however with the threat now gone we are unlikely to see further reductions, and may even see increases over time.

This is not good news for New Zealand

Disclaimer - I work for Telecom.

However, I challenge you to back up your statement with facts. The reason for this is that it's my understanding that Southern Cross has a history of dropping prices regularly, even before Pacific Fibre was a gllint in anyone's eye...

?With lower marginal capacity cost we have reduced our prices to the US from both New Zealand and Australia by 44%?, says Pfeffer, ?the third largest decline in our history. Often coinciding with capacity upgrades, price declines are not new for Southern Cross, having averaged over 21 per cent annually since 2001. This longstanding practice has promoted the increasing use of retail internet data with reducing cost?.? (Quote from their site)

Cheers - N

In the offical story post the line "In September 2011, the Australian telecommunication research company Market Clarity reported the cost of bandwidth to the U.S. from New Zealand as 5.8 times greater than the price paid by Australians. " Shows that we in NZ are paying 580% more that the same users in Australia.

The Monopoly is creaming us Kiwis

It's also sad about the new cable plan being cut, Vodafone must be happy as the just score the T/C fibre deals and the Pacific Fibre would have no longer been needed by them.

Talkiet

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#665630 1-Aug-2012 18:08

hellonearthisman:
In the offical story post the line "In September 2011, the Australian telecommunication research company Market Clarity reported the cost of bandwidth to the U.S. from New Zealand as 5.8 times greater than the price paid by Australians. " Shows that we in NZ are paying 580% more that the same users in Australia.

The Monopoly is creaming us Kiwis

It's also sad about the new cable plan being cut, Vodafone must be happy as the just score the T/C fibre deals and the Pacific Fibre would have no longer been needed by them.

It's a good thing that Australia and NZ have very similar regulatory environments and population. Have you noticed that the pricing from SCC is the same in Australia and NZ?

I haven't read the details of that research, buit I did note that one of the reasons for them doing the research (by their own admission) was to 'raise their own profile'... They don't have a lot of history.

Cheers - N

Please note all comments are from my own brain and don't necessarily represent the position or opinions of my employer, previous employers, colleagues, friends or pets.

Zeon

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#665637 1-Aug-2012 18:09

It's been stated many times but the cost of SCC is exactly the same here as it is in Australia so if competitive forces drive down costs there then they will come down ehre too (and have).

Guys don't get so caught up on this its only a small part of the equation. For example backhaul up the country can be even more expensive e.g. Invercargill to Auckland I bet costs more than Auckland to London.

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Lorenceo

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#665642 1-Aug-2012 18:13

I wonder which company it is causing that? ;)

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