ComCom targets international broadband bottleneck

International data is twice as slow as local data, the Commerce Commission says in its latest quarterly broadband survey. The finding will put heat on the 50% Telecom-owned Southern Cross Cable - New Zealand’s only internet pipe to the outside world.

The commission also finds congestion in domestic backhaul and speed fading the further users are from Auckland - where the international cable lands.

Commerce Commission telecommunications branch director Osmond Borthwick says the latest report shows “that a lack of sufficient capacity on national and international connections is a major constraint on further improvements to the speeds that can be achieved by consumers. The commission will continue to monitor the effect of these constraints.”

The commission is required by the Telecommunications Act (2001) to monitor broadband performance. And each quarter, benchmarking company Epitiro and market researcher IDC carry out a survey on its behalf.

International websites take twice as long to load
The latest instalment of the broadband survey finds that average national speeds range between 1.9Mbit/s and 4.8Mbit/s (depending on ISP). But if you’re downloading from an international website, speed drops to an average of 0.6Mbit/s to 0.9Mbit/s for non-cached data, or 0.5Mbit/s to 1.9Mbit/s for cached data (where popular downloads are mirrored on a local server).

Southern Cross Cables Ltd, the company that owns the Southern Cross Cable Network, has repeatedly told NBR that it has no capacity issue, at all.

However, ISPs including WorldXChange and Orcon have continually groused about the prices charged by Southern Cross and the companies that sell access to the cable (including Telecom Wholesale, Verizon International and PacNet) are too high. To get the best deal on international data, a company must sign a multi-year, multi-million dollar deal - not something that suits New Zealand ISPs. The upshot: ISPs don't buy as much international bandwidth as they might.

Southern Cross pointed out to NBR that it dropped pricing 44% concurrent with its latest capacity upgrade late last year. Telecom Wholesale head Matt Crocket, who sits on the Southern Cross Cables board, tells NBR that while access to his company’s cable may be more expensive than cables in the northern hemisphere - up to 10 times more expensive, in analyst Paul Budde's estimation -  it’s the world's second longest cable network, with many segments deep, remote and expensive to maintain.

Team West Indies
On the regulatory front, the debate is largely academic.

Southern Cross Cables Ltd - 50% owned by Telecom, 40% by SinTel and 10% by Verizon - is incorporated in Bermuda, safely beyond the Commerce Commission’s jurisdiction.

And while the previous government toyed with the idea of backing a second transtasman cable - likely to be built by state-owned Kordia (in partnership with Australia’s Pipe Networks) under a tender managed by a second state entity, Reannz - it never went anywhere. And early this year, communications and IT minister Steven Joyce scotched the tender altogether.

Joyce sees potential for "new cable"
So can Southern Cross sleep happily? Not quite. On June 25, Mr Joyce - who has previously told NBR he would listen if Kordia mounted a business case, told the commerce committee:

“Commercial developments around a new transtasman cable have been continuing, and we’ve been following these, encouraged by the commercial interest and efforts being made. So we may see a further private investment in the transtasman, or certainly in the international cable environment.”

Watch this space.

Read the commission's full New Zealand Broadband Quality March 2009 report here.