In the wake of government funding being yanked, the SOE’s strategic development manager prepares to take to take a business case to Kordia’s board.

With Kordia heavily-geared, chief executive Geoff Hunt has ruled out bank loans to fund a transtasman cable, which is estimated to cost around $200 million.

Instead, Mr Hunt pinned his hopes on funding coming from a fellow government-owned company Reannz (Research and Education Advanced Network New Zealand Ltd).

But yesterday, government Reannz said it was abandoning its RFP for a transtasman cable after its RFI drew only one response (from Kordia).

Reannz chief executive Donald Clark said that he would not negotiate directly with Kordia, either. Such talks would be pointless when the government is not about to lavish $200 million on a cable for purely academic and research purposes.

IT and communications minister Steven Joyce tells NBR he will listen if Kordia puts forward a “business case” for a second transtasman cable. However, Mr Joyce does consider that the part Telecom-owned Southern Cross Cable has spare capacity to burn (which is true, at least at this point in time) and anecdotal evidence points to a ministerial preference for leaning on the current operator rather than replicating infrastructure.

Kordia strategic development manager Susie Stone says her company was not surprised that Reannz pulled its RFP.

Reannz' current commercial arrangement for international data traffic, with Southern Cross, expires in September, and under the best-case scenario, Kordia and its proposed partner, private Australian company Pipe Networks, could not complete a Sydney to Auckland cable before 2011.

Ms Stone says she is currently building a business plan for a transtasman cable, which will be taken to the board in September.

She accepts Reannz’ short term fibre needs will be met by Southern Cross come September.

But if her business case is accepted later in the year, she sees no reason why Kordia could not stage direct negotiations with Reannz about its longer-term international fibre needs. And at this point, talks would have to be another state-owned company. So far, no private organisation has offered itself as a cornerstone customer.

Ms Stone says that two cable operators are more competitive than one.

Southern Cross counters that multiple companies sell access to its cable. Some, like Telecom Wholesale and Verizon International are linked to its owners, but forebidden by internal rules to offer sweet-heart deals; others, like Pacnet - which independent ISPs says is the largest reseller of access to Southern Cross - are independent. Why should competition come through physically replicating cable?

But for Kordia, more bandwidth is better.

Another key facet of Ms Stone’s argument is that its partner Pipe Networks - already building a new cable from Australia to the US, via Guam, reaches up into Asia, while Southern Cross runs directly to the US.

Ms Stone also maintains tht having more than one cable operator run out of New Zealand would also prove a safeguard if anything went wrong with the Southern Cross Cable.

Telecom Wholesale head and Southern Cross Networks board member Matt Crocket counters that things go wrong all the time on the Southern Cross Cable, as with any submarine fibre, but that the network’s dual strands of cable mean service has never been interrupted.