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Monday, 14 January 2013 13:22

Southern Cross Cable cuts prices, again

By

Southern Cross Cable - which enjoys a monopoly on trans-Tasman fibre connectivity - has cut wholesale prices by 20 percent.

Sales and marketing director, Ross Pfeffer, said: "This will be our tenth major price reduction since 2000 and over the period our price decline has averaged more than 22 percent per year.

Southern Cross' last significant price cut was exactly a year ago, and by as much as 44 percent. That announcement came hours after the threat emerged of a possible competitor on the trans-Tasman route.

Chinese company Axin had signed a multi-million dollar marine survey contract with Huawei Marine in preparation for plans to build a trans-Tasman cable. There have been no announcements from Axin since.

Southern Cross has successfully fended off all potential competitors while industry commentators in New Zealand have bemoaned the lack of competition on the trans-Tasman route.

New Zealand based Kordia has had plans in place for several years for its Optikor cable but these have not progressed. It has been reported as being in discussions with Axin over a possible joint project.

A New Zealand company, Pacific Fibre, was set up in March 2010 to build a submarine cable linking Australia, New Zealand and the US, but it failed to secure funding and folded in August 2012.

Southern Cross' monopoly of the trans-Tasman route gives it an effective monopoly on New Zealand - US connectivity and in September 2011 Market Clarity reported that the cost of bandwidth to the US from New Zealand as 5.8 times greater than the price paid by Australians.

Meanwhile Southern Cross claims that its price cuts have brought down the cost of data for Australian and New Zealand Internet users.

Pfeffer said: "It's been pleasing to see big increases in data caps and declines in retail data cost for Internet users in both Australia and New Zealand over the last year. Our continued initiatives to increase supply and reduce price are designed to encourage this process and to support the needs of Australia's NBN and New Zealand's [Ultrafast Broadband Network]."

Southern Cross has benefited from technology advances that have significantly increased its capacity; to such an extent that it has shelved plans for second cable to the US.

The latest price decline marks the second stage of an upgrade due for completion in February that will boost capacity from 10Gbps per wavelength to 40Gbps using technology from Ciena and take total lit capacity to 2Tbps. An upgrade to 100Gbps is already underway, again using Ciena technology. It will take lit capacity to 2.6Tbps by June 2013.

Pfeffer said: "We currently have the potential to go to at least 7Tbps, about 30 times higher than our original design capability."

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