Dotcom's cable - fact or fantasy? Kim makes his case

Dotcom with Pacific Fibre co-founder John Humphrey

KeallHauled

Chris Keall

Last Monday, I pinged other media for giving Kim Dotcom soft coverage over his plan to reboot Pacific Fibre (including TVNZ's website; the state broadcaster is swung in the other direction with a Sunday investigation this weekend; more on Kim's background in Comments).

I called Kim’s cable plan a fantasy.

He invited me out to Dotcom mansion to convince me otherwise.

Sorry Kim, you didn’t.

I still think you’re kidding yourself, or being willfully optimistic, on several key points.

Nonetheless, the giant German did very articulately nail why Pacific Fibre failed, and the conditions needed for a new contender to succeed.

Kim asked me to bring some industry people, so on short notice I rounded up a crew – Telecommunications Users’ Association CEO Paul Brislen, InternetNZ community lead Ellen Strickland and Institute of IT Professionals head Paul Matthews.

I also asked Pacific Fibre co-founder and chief technology officer John Humphrey (so did Kim, coincidentally, which turned out to be what tipped his decision to come along).

Pacific Fibre alumni had an interesting range of reactions when I contacted them about Kim’s proposal.

Sam Morgan wished any new cable contender well. But he was out of the game. He noted Pacific Fibre has spent a lot of money without succeeding.

CEO Mark Rutherford (and he is very much CEO on paper these day, with Pacific Fibre only existing as a line on the Companies Office register) was interested, but had a clashing commitment. He hoped to meet Dotcom shortly for a chat.

Rod Drury welcomed the fact fibre was back on the agenda, but told me Kim’s comments were “not helpful”. I think Rod worries that the second cable debate will become intertwined with Dotcom’s various past and present legal controversies, distracting from straight discussion of his new public-private partnership cable concept.

A graphic illustration of why two cables are better than one: the price of international bandwidth for a larger NZ ISP that cannot be named (click to zoom). ISPs sell chunks of data (that is, gigabytes) to their customers, but buy capacity from Southern Cross (or one of its wholesalers). Capacity is measured in megabits, gigabits and terabits – that is, the size of the pipe. Pacific Fibre ceased operations Aug 1.

Anyhow, myself, Paul, Paul and Ellen duly arrived at Dotcom Mansion midday on Tuesday.

There was no swimming or Segway hooning. We just sat around a table, talked cable economics and drank water (in a vain bid to jazz things up, I later told colleagues it was Mega Water, but the truth is it was just water).

Anyhow, this is Kim’s cable scenario:

His new company, Mega, is willing to become an anchor customer for whoever is willing to build a second cable, be it a re-animated Pacific Fibre, Rod Drury’s new push for a public-private partnership or Hawaiki or any other contender.

He told NBR his proposed new file-sharing service (due to launch on January 20), could buy $US20 million bandwidth a year within three years on a new fibre optic link.

Over 10 years, that would give a start-up around half the funds it needs (Pacific Fibre tried to raise $400 million for a Sydney-Auckland-LA cable).

To put that in perspective, he says Megaupload bought $40 million bandwidth a year.

Dotcom would also look at taking a share in a new cable company (right now, most of his assets are frozen and Mega has yet to launch and start getting new funds in the door).

I he does take a share – and bear in mind he’s talking a multi-year plan – he would be in a position to sway things toward his vision of full-cost broadband for business and government, and heavily subsidised accounts for individual Kiwis (he sees an international cable company providing free access for individuals, then ISPs adding a small fee to cover basic connection costs, so broadband would only cost about 15% of what it does today. I’m sure hard-nosed ISP owners would have their own definition of a small fee).

Dotcom does not need a new cable out of New Zealand to launch Mega. Hundreds of inquiries have come in to host the new file sharing service, which is set up from the get-go to be distributed (spread around server computers in different locations).

But he has registered Mega Ltd in New Zealand, he says.

"Mega and Megabox will have over 2 terabits of daily bandwidth utilisation within three years. Which is significantly more bandwidth utilisation than all of New Zealand's traffic combined.

"We would serve North American, South American and Australian Mega customers via servers based in New Zealand," Dotcom says.

Chicken-and-egg
But he could only serve those customers from New Zealand if:

1. A new submarine cable is laid to the US.

2. A huge new data centre is built here to host Mega (and here, again, Dotcom is not proposing to build one but become an anchor customer).

"Classic chicken-and-egg scenario," Dotcom says.

New Zealand, with its mild climate and relatively cheap, clean power is in some ways an attractive location for data centre operators.

But no one is going to build a supermassive data centre here unless a second cable is run out of New Zealand ... and no one is going to fund a second cable without some massive boost in bandwidth demand, such as a giant data centre.

L-R: InternetNZ's Ellen Strickland, Tuanz head Paul Brislen, Institute of IT Professionals CEO Paul Matthews.

Need to be bandwidth demand makers, not takers
Humphrey said no cable there's no business case for a cable  from New Zealand to the US.

As InternetNZ's Strickland frames it, public attention has been on cost and capacity, but the bottom line is that for a cable to succeed, we have to be "bandwidth demand makers, not takers".

NBR understands New Zealand ISPs typically have to buy bandwidth in both directions on the Southern Cross Cable. Since most of the traffic is one way, that effectively doubles the price.

"In the early days of Pacific Fibre I used to describe it as a cable that goes from Australia to the US that just happens to go through a small, impoverished Pacific Island nation along the way because only 10% to 15% of the traffic is New Zealand. If you can make the business case for Australia, then a little bit extra for New Zealand [such as a Mega data centre] then New Zealand can get connected," Humphrey says.

Most of our traffic is one-way (New Zealanders drawing data downwards as they access US sites and services), and relatively tiny demand at that. Pacific Fibre said it had one US-based telco as a customer, but never detailed the deal. A new contender needs major increase from the northern hemisphere. Cable economics demand a two-way street.

Having a Mega server farm based in New Zealand would boost demand for data based here by a factor of 14, Humphrey says – making a cable a far more economic proposition.

Pacific Fibre co-founder John Humphrey and Kim Dotcom: Both strongly believe the government should divert some of its $12.3 billion Roads of National Significance budget to an international cable.

Why not just buy capacity on the Southern Cross Cable (the 50% Telecom-owned fibre link that is currently our only major broadband connection with the outside world)?

Dotcom said there were issues of capacity and redundancy. Humphrey, perhaps anticipating Southern Cross' perennial objection to redundancy arguments (its figure 8 design means it functions as two cables, able to continue if any given segment is taken out of action, as we saw Friday morning), says that Google and other operators of huge server farms prefer to deal with two separate organisations.

Tasmanian future
Humphrey adds, "Southern Cross is halfway through its life. When it dies, if there’s no replacement, someone will build a cheap little Transtasman one and that will be it.  We’d be connected to the internet but forever under the sway of Australia. We'll be doomed to be just that little transtasman cable. We’ll be like Tasmania."

Brislen adds that any transtasman cable is a "three-hour flight in the wrong direction" taking data further away from the main internet hub of the US and increasing the killer problem of lag (more of which shortly).

How do we break out of the chicken-and-egg no-cable-without-mega-datacentre/no-mega datacentre-without-cable-logjam?

"Bit less tarmac and a few more bits," Humphrey says.

Take a sliver of the government's $12.3 billion budget for Roads of National Significance and use it to subsidise or incentivise a second cable, or giant data centre, or both.

Dotcom chips in: "Cut one of the lanes off that road and build five cables. One to the US, one to India, one to South Africa ... and connect yourselves to the world. Boom! That would be a much better investment than than roads."

Also attending, but letting their boss take the lead: Dotcom's colleagues and co-accused Mathias Ortmann (the operation's chief technology officer) Bram van der Kolk (website management) and Finn Batato (chief marketing officer).

The government did back Pacific Fibre to a not insignificant degree. It put a major Crown bandwidth contract out to tender, worth up to $91 million over 10 years, with a proviso that only new cable operators could tender.

But Humphrey laments, "The big Maori funds, ACC, the Super Fund. None of them stepped up." The Super Fund judged the project too risky. Others expressed enthusiasm but, when it came down to it, would not get their cheque books out (Lance Wiggs has noted that "Pacific Fibre didn’t even manage to sell to Government-owned Orcon, whose boss, Scott Bartlett, was a strong Pacific Fibre booster. Parent company Kordia has its a Transtasman cable plan). 

The private sector swung in, with Vodafone, CallPlus and iiNet (Australia's largest independent ISP) committing to major 10-year bandwidth contracts. But it wasn't enough to satisfy potential investors. 

Assuming the government has a change of heart, and offers more support for a future cable contender and/or a major domestic data centre project gets under way that makes the project more feasible, there's still another problem – at least if Kim Dotcom's involved.

One Pacific Fibre co-founder noted to NBR that the GCSB has to vet anyone who wants to land a submarine cable in New Zealand.

Dotcom brushes away this objection. It's not his cable. It's owned and run by a separate company. He's just the largest customer. 

And besides, "The GCSB listened to me for a few months. They know I’m no threat. They know I’m a nice guy. They probably have the transcripts of phone calls I had with people in Hollywood when I was talking to them trying to be a partner, not a pirate or some sort of bad guy."

But what about the US landing?

Again, Kim says he's not the operator. And he doesn't think the Americans would mess with what he sees as an economically transformative project for New Zealand.

"We are a customer on the new cable. An attack on us would affect all New Zealanders. They can’t pinpoint us. They would have to put significant harm to everyone else in New Zealand. I don’t think that’s a likely scenario."

I do. Kim sees the US government taking a fair, high-minded approach to the new cable. He thinks the US government now regrets the Megaupload case and is hopeful there will be some kind of resolution in the wake of the election.

But it disingenuous that the US would single him out over Megauplaod and his new project (shortly after we talked, it seemed to have pressured Gabon to suspend Mega's domain; the Department of Justice has also hinted at new charges if Mega launches) but take a neutral stance on a Kim Dotcom cable. And, make no mistake, a cable which has Mega has its largest customer would become known as the Kim Dotcom cable, whatever its own ownership structure. 

Dotcom emphasises his independence, but mulls deeper involvement down the line

Look, we are not in the business of building a data centre. But if the cable happens, we want to work with people who are in the business of building data centres and since this story broke we have been approached by a number of people who say, “We want to build the biggest data centre, would you be our customer? And this is what we want to be," he says.

"We would be a customer of this [data centre]; we would be a customer on the cable. If this customer relationship also allows us to become a shareholder we would love to do that. You know, it makes perfect economic sense."

Kim thinks he can woo potential investors, and help broker peering agreements (quid pro quo traffic arrangements) with network providers that would play the crucial role of keeping traffic costs down for those using an New Zealand-based data centre.

What about the alternative plan he put forward – suing Hollywood studios and/or the US goverment to raise funds for a cable?

Kim winces. He says it is very much a "Plan B" and he was surprised media seized on it (an inevitable outcome, I suggest, you can accuse the giant German of many things, but employing slick PR is not one of them).

Nevertheless, he says his legal team is now very confident of winning his case. 

And they have indicated that if he does, there will be some kind of settlement down the line. If he does receive a settlement, he will put it toward a cable project, Kim says.

He has no plans to sue the New Zealand government. The Mega Ltd company name has been registered here. Mega will pay taxes in New Zealand and could employ around 100. 

Kim riffs on with cable company ideas. "Another possibility would be to list it," he says. 

"That would have happened with Pacific Fibre at some point," Humphrey adds.

Eighteen months ago, the Pacific Fibre co-founder wrote a white paper on New Zealand as a giant data centre destination. This week, he delivered it to a data centre conference in Sydney.

"We looked at Hamilton, it’s geologically stable, near a river for water, near geothermal, near Auckland enough for a [cable] landing. That’s a good location – you’d really invent Hamiltron," he says.

Obviously, there are data centres in New Zealand already. But Humphrey's white paper is looking at a centre on the scale of Google's largest server farms; one that would have its own power station and consume up to 500 megawatts of electricity.

Dotcom add that if the Bluff alumuninium smelter is closed, the Manapouri power station could be redeployed to power a massive server farm.

Australia by contrast, has dirty power and, of course, several very hot months per year that pile on air con costs (interestingly, we've already seen some data centre action drift across the Tasman. Server farm operator and major Southern Cross Cable wholesaler recently bought NZ's Maxnet, and has plans to expand its data centre operation. And Australasian publisher APN – a major customer of Wellington-headquartered Datacom – hosts some of its Australian operations from NZ. Read more on the power and data centre questions in Paul Brislen's Strawman: How to save the New Zealand economy).

Distance no longer a killer
On the internet, to a degree, geography is destiny. And Dotcom says when he first met with Pacific Fibre, a couple of years ago, latency (or lag) of up to 140 milliseconds on an international cable made it unfeasible to host data here.

He says technology has overcome this objection.

"The beauty of the HTML 5 technology today and the new browsers is you can have download accelerators and upload accelerators built into the browser to open multiple connections to your target and they’re all transmitting data so the only latency issue is really the initial contact – and when half a second takes you one time around the globe it’s not a big issue," he says.

"So with a large file or streaming video you can utilise your entire bandwidth that you have available.

"Now location isn’t a problem any more and you can have users connecting to you from all around the world without any sort of downside."

Humphrey says he's approached potential builders of a super-size data centre.

"I’ve met with Google a lot. I’ve gone through the list with them. They have a list of about 40 criteria, but the top two are the ones that drive the decisions: power and bandwidth."

Kim adds, "You know, they would drop 30 of the top 40 boxes if you would provide a nice safe harbour law."

Even if it chips in no money, the government could pass legislation that made New Zealand the Switzerland of data.

"The other thing is this: New Zealand is a beautiful country. If you are a Google data centre engineer, and they ask you 'Do you want to move to Mumbai or do you want to move to the South Island of New Zealand?' Where do people want to bring their families? The safety here; the beauty of it."

He adds, "For anyone who has any kind of phobia about what’s happening with the world, New Zealand is the perfect location."

I'm not the bad guy: Dotcom faces extradition to the US on copyright, money laundering, wire fraud and racketeering charges centering on a the claim he caused $500 million damage to movie studios and other rights holders, and made $US175 million in illegal profits. He says he could make Hollywood money hand-over-fist from online if only it would work with him, not against him.

For capable capacity and data centre demand, the new Mega has to prove popular.

Kim thinks it will be bigger than Megauplaod. People's wariness will be overcome by Mega's innovations, including its its distributed server setup (with files replicated across multiple servers, so a raid on one location would not make a file inaccessible) and its one-click encryption, which he says is pioneering in its user-friendliness (as well as being a legal safeguard).

He adds, "I have worked on solutions to get content providers paid. I’ve spent millions of dollars on software called Mega Key which allows monetisation of free downloads. And I’ve built that for content creators.

"That’s what this Mega Box business will be based on – where you can basically download music for free has long as you have the Mega Key software installed on your computer which automatically replaces ads on the fly when you serve to other websites.

"You know, so it gives ad revenue which you can in turn use as credit to buy content. And if that works for music, down the road it’s also going to work for movies or any other content, even news sites.

"We would work with artists direct. Of course, labels could also work with us. They get 90% of the share and they get paid for free downloads, where as now there’s no provider out there who monetises that at all."

Doesn’t YouTube give people a share of ad revenue, once a clip generates significant traffic?

"Yes, but the big difference here is YouTube has an on-site advertising model. You are on their website. It serves three ads. No one's going to pay a dollar for three ads."

And while Humphrey may be wooing Google, Kim (no doubt with one eye on a likely line of defence if the Megaupload case ever goes to trial) takes a further swipe at the search engine's video-sharing site.

"If you go on YouTube right now, you’ll find more infringing material now than we had in our entire history," he says. He also claims Google is the world's biggest index for pirated material.

There needs to be a solution for content providers, but that cannot be military force and helicopters, Kim says.  

"With Mega, no one is criminalised any more. Everyone can have everything in abundance. Think about this. If a company like Gooogle can make $40 billion a year, what do you think a joint start-up of all Hollywood studios could generate in combination with something like Mega Key.

"They have what everybody wants. They just don’t know what to do with it. Guys like [movie mogul] Sumner Redstone – he's in his 80s and does everying with a pen. They don’t see it.

"They pick up the phone and they say, 'F**k you Joe Biden, I’m not giving you another chequ unless you take these f***kers down and that’s how this all went down."

Kim fumes, "The political interference in this whole case is quite significant." Former Justice Minister Simon Power also comes in for a verbal beating.

Yet he also wants to move on. "I don’t want to be remembered as the guy who got raided." He wants to contribute.

The question: are NZ politicians, US authorities and Megaupload's original customers willing to give him a second chance?

As the session winds down, Institute of IT Professionals CEO Paul Matthews hams it up with Dotcom. On a more serious note, Matthews says many of his members see the action against Megaupload as heavy-handed. His organisation held a "Mega Breakfast" in support of the entrepreneur – who was unable to attend because of bail restrictions at the time.


RAW DATA: Kim Dotcom's original email to media on his cable plan

We have decided to open the new Mega company in NZ, create jobs here and become a significant tax payer. Me.ga and Megabox will have over 2 terabits of daily bandwidth utilization within 3 years. Which is significantly more bandwidth utilization than all of NZ's traffic combined. We would serve North American, South American and Australian Mega customers via servers based in NZ. The submarine cable costs 400 million. We would fund a share and raise additional funds from Investors and backbone providers. Mega would be the single largest customer on the new cable and our presence here would attract new Internet businesses to open in NZ. Once the cable is installed it is relatively cheap to maintain. We would provide all NZ ISP's with free access to the cable for individual customers (citizens) and charge a fee to business and government customers. Because ISP's control the last mile & provide equipment like routers they would still charge a fee but it could be as low as 15% - 20% of current bandwidth plans with 3-5 times faster connection speeds and without transfer limits. I was always of the opinion that Pacific Fibre was the most important Investment into the future of New Zealand to ensure its competitiveness in the online world. You have clean and cheap energy here. Power is becoming the biggest cost factor for data centers around the world. With its own cable, cheap power and connectivity NZ could attract foreign Internet business. Unfortunately the current Government wants to invest into more tarmac roads. In 10-15 years more people will work and shop from home. You don't need Tarmac, You need Fibre!

Plan B is to win the case, sue the Hollywood studios and/or the US government for their bad faith / unlawful and political destruction of my business and pay for Pacific Fibre with the damages received.

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40 Comments & Questions

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Regardless of if you feel Kim is kidding himself, this is something that NZ needs if it even want's to have a chance of keeping a lot of innovation in it's borders.

I've had 3 friends leave the country to go pursue the start-up world right out of Uni because NZ didn't have the resources or means for them to set-up servers for their needs to communicate to the rest of the world. It's cheaper to pack-up and move the operations over seas.

If NZ wants to keep this innovation and have a foot in the door of how the future will operate Kim is very right in saying some of that road funding should be to connect us to the rest of the world. Because currently, once I graduate im off to New York to continue working for the start-up I'm currently working for abroad.

I want to stay here, but your not doing the best job at wanting to keep me and many others here.

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As an employer, I have to wonder that if you didn't learn to spell and punctuate at school, then what exactly did you learn?

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Dear Mr Slater
It is terribly bad form you know to play the man rather than the ball.
Perhaps your secretary can explain the etiguette of blogging.
Yours sincerely
Retired

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marian faihtfull says it all
'working class heros are nothing but peasents as far as i can see" which also showed me mr slater that if 'you want to live on the hill you must be able to smile while you kill" from the same album

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Nice for a change to see this corporate 'brainstorming' done in a relatively open or as near public manner as possible. Sure its all a bit of pr for many different agendas, but who cares its the sort of stuff that many would wish came from politicians or open public private partnerships. Too often the coprate talent hides away from public gaze for fear of having ideas robbed or more particularly the real funding relationships being exposed to scrutiny. How often in the heady days of the eighties did so many of us see our investments disappear with company directors seeming as if they planned the demise to rip off the small investors and I still wonder the real conversations and back room deals done in Christchurch; back on topic I am fascinated by this proposal and I hope the big man keeps rattling the money tree because John Key and his mates cant pedal a bicycle up a track.

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Still not sure where he gets the idea that international bandwidth is the largest cost of a NZ ISP. It isn't. It makes up maybe 5 bucks of the average connection. A there is no way he is going to get broadband down to 15% of its current cost.

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ISPs have said a second cable would mean bigger data caps (and anyone can use a terabyte a month with high def movie and TV series streaming, plus simple cloud stuff like online backup and photo and video sharing).

But Kim's broaderpoint - and it's a very good one, whatever you think of his past or present trouble - is that we need a broader focus. NZ needs to be a broadband demand maker. Attracting a mega data centre to NZ requires a second cable (for raw capacity, redundancy and price competition).

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Chris, all the content for that those HD movies and TV series have to be stored locally and close to the customer, you should know that. The idea of having a large Data centre which local ISP can store these HD content and TV series (once Copy right issues and distribution rights have been resolved) is where we should be thinking. The other content providers, Google, Netflix, apple etc can also host content which is Ideal, because of our time zone. As you know we pay for capacity whether we use it or not and as the daily graphs show we have peaks n troughs. To maximise the investment in international capacity we should be trying to remove the troughs, not by changing the kiwis to download times, but using the upload capability, though the hosting of data…. Which would lead to lower cost $/M and broadband locally, plus would attract the opportunity for more cables connected across the world.

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This is not true - Slingshot is spending over $30 per customer on it's unlimited plan. There is currently huge suppressed demand for more consumption - suppressed by the cost of international capacity.

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Sure Malcolm... But what's the cost per customer for your capped plans? You know, the ones with 'average' customers who don't download TBs of illegal content just because they can?

And who needs an international based cloud service if there is a new mega data centre in NZ so your precious family shots etc are safely tucked away locally, with low lag, safe in your own sovereign nation, under laws you (may) understand?

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Well at least he's actually trying to make it happen and he actually has a raw plan on doing so.

The only reason Mega Upload was a target because it was by far, the best file sharing site that I have ever seen (I'm a computer nerd and programmer) and it would of been a threat to YouTube and other (ironically mainly American) file sharing sites who are doing the exact same thing Mega Upload was doing - however Mega Upload had the better technology than all these other sites combined.

The media can portray Mr Dotcom however they like but I'm not buying it, sure he has a past of a hacker (so does Silicon Valley's Sean Parker) but he's turned his life around, he's an entrepreneur - he has a wife and kids, he's settled down.

The problem with New Zealand entrepreneurs is that they give up on ideas too quickly, and then media hawks swoop down to criticize on topics they don't know nothing about with 'experts' who know as much as Mr Dotcom does.

NBR is looking a little more bias everyday with opinion rather than fact, maybe it's time to start going on forbes for more relevant information..

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You're right. Many young hackers turn their life around.

Biographer Walter Isaacson related how the first product sold by the young Steve Jobs and Steve Wozniack was a device that let you make (illegal) free phone calls. Almost every Silicon Valley great had a youthful insdiscretion.

Kim Dotcom had some share market fraud mixed in with his hacking, which leaves a more lingering cloud (Wired has a comprehensive backgrounder here: http://www.wired.com/threatlevel/2012/10/ff-kim-dotcom/. It calls Dotcom a criminal, before going to to give the new Mega a reasonably positive write-up. Kim obviously didn't take the article badly. There was a big stack of copies of that Wired issue on the kitchen when I visited Dotcom Mansion.)

Still, when I talked to erstwhile immigration minister Maurice Williamson in the weeks after Dotcom's initial arrest, he defended the decision to grant the German millionaire residency. He was young when convicted. People make mistakes, people grow up.

But whatever you think of Dotcom's past and present legal problems, I think the worry Rod Drury has put forward is that is it's good to have a renewed cable discussion - but not necessarily one that risks drowning in a Is Kim good?/Is Kim bad? debate.

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Ah, I see where you are coming from now.

The current legal problems Mr Dotcom faces at this stage are still a problem and I can see how Mr Drury would find that as a threat too. Although maybe instead of being directly involved, Mr Dotcom could simply become an investor for the cable?

That way capital isn't so much of a problem and it won't discourage big players of the New Zealand tech scene.Nice article, interestingly written but I must say I do say both sides of the picture now.

Cheers

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Interesting reading. Hope something comes out of all these ideas.

Pacific Fibre should seriously consider approaching the public for funds with a solid business plan and I am sure there would be a good response to it.

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Waste of time debating this.. if Dotcom's involved this cable will NEVER land in the USA.. and other territories are prohibitively expensive.

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NZ does not need standover Kim.

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It's worth noting in the graph that SCC pricing in Jan for the entire year, You dont get pricing drops mid year. In 2011 the 40gbit/wave tech was deployed resulting in a massive increase in cable capacity. As such the Jan pricing reflected this increase. It's a bit bias to infer that the price drop was due to PF when other factors were on the table.

As tech and demand increases prices go down, SCC have always been open at only wanting X $$$ profit which is what we see from that chart.

PF failed because it couldn't get enough business, this is a clear indication that the demand simply isn't there right now. Come back in 5 years and it may be a different story

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Great point and one I was going to make. They have the capability to deploy 100G so the price will drop again. These technologies don't get installed overnight and take 12-18 months to execute, from RFP to testing and then implementation, so i think it was just timing !!

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Also notice how it's not tied to SCC directly with regards to pricing or usage. As you can see as the ISP needed more speed it got cheaper pricing

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Go away Kimmy

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The idea of having masses of bandwidth available to enable a data economy is an excellent one.

But what informed investor is going to hand over their money to an idealist currently charged with criminal conspiracy on the one hand, or invest in infrastructure that the NZ government will not allow to be built unless the Chinese government supplies the materials.

Sorry, awesome idea but wrong country to invest in.

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The idea is optimistic, and promising... If the NZ govt is willing to fund part of the cable build, further investors are bound to come along ...add to this a snowballing/domino effect and NZ, as a progressive country then takes a bold step toward ICT growth in this modern age of iPads, cloud storage, and data server farms... I for one would reconsider my relocating overseas, as the opportunity and capabilities here may finally be able to compete with those housed oceans away. The conversation is intriguing, the potential undeniable, and it ought to continue.

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Kim is a renegade, and operates outside the system. That's fine for his world, but it makes him an unreliable and unlikely partner in the world of national provision of broadband services.

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Anyone watch 20/20 last night? The guy is taking NZ for a ride? He's been convicted of insider trading. Hope he gets extradited- after all "he has nothing to hide...."

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Let's be honest - 20/20 doesn't exactly have the best reporting. It's like womans day for evening TV

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20/20 what a joke !
Only reminded me of why I should never watch nz tv. So they found some geezer whatsis name bushy something or other that clearly had a comercial dispute with the big guy and the end result is he got turfed out and is packing a load of indignation, no different to the contract labour I witnessed often that used to get 'escorted' out of the building with the little plastic bag of personal stuff and if lucky a taxi chit.
Then we get to see an interview with some mega Hollywood mogul, I thought this will be good, maybe Warners or EMI or even Universal, but no, we got to see some porno maker blubbing about his stuff being passed around freely like some grubby mag in the school locker rooms.
Blimey no wonder the world of media needs kicking into the 21st century.
As long as Kimmy dosn't take any of my money like the politicians do he can do what he likes.

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20/20 – is that the same show that does hard-hitting journalism on such topics as the ex-girlfriends of ex-All Blacks and the porn star turned housewife? Awesome sources upon which to based your opinion of someone you've never met. Whitney Houston has an alien love child btw...

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It is fascinating to watch the middle-class IT activist commentators being used in this way.

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Again Chris, you fail to mention that Telco's & ISP's are all signed up to 10 year contracts on the Southern Cross Cable (SCC) in NZ.....

So, while the price may of dropped on SCC, when the Pacific Fibre Cable idea was floated, it ultimately had no impact on the price for the consumer & what they pay to their respective ISP.......

Sure, Data Caps have increased, but they are still pultry, when compared to the rest of the world.

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Pacific Fibre made the point that while many ISPs and telcos are on 10 year contracts with Southern Cross (as NBR has often mentioned), broadband usage is expanding exponentially.

ISPs keep having to come back to the trough to buy more capacity, which opened the door to a new player.

And indeed Vodafone, CallPlus and iiNet said they would buy capacity on Pacific Fibre to help accommodate their rapidly increasing traffic - but there weren't enough anchor contracts to satisfy potential investors.

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Yes the 10-15 year IRUs are generally great for tax reasons, but the value of the acquired bandwidth falls exponentially as the required bandwidth for each ISP rises exponentially. That rate is 25-35% a year, and if prices are not falling by at least that much, then overall prices are rising.

As an aside - $20m revenue per year would make a difference, but it needs to be validated by those lending the money. Funders look at the credibility of the customer behind each contract. Tier 1 telcos are great, start-ups and those with frozen assets - not so much.

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Just a few points here.

With SCC you are buying an IRU and given MRU Points, Every year the number of points per gbit go down and you get more. So if you purchased 1gbit in 2001 you now have 10gbit for example in 2012 because of 10/40/100gbit tech going on. This for no extra cost.

Whats not known normally is that for Vodafone atleast this was a swap, Vodafone weren't going to be paying anything (or very little) for PF transit because PF was going to get Vodafone's SCC capacity in order to offer a single vendor protected access product.

Last, PF were going to be in the transit game themselves, PF was going to offer not just L2 products between AU<>NZ<>USA but also global transit, Perhaps their biggest wrong move, It would put them into the competing space where their clients compete, Whilst Vodafone,Callplus and iiNet didn't care being the "end user" themselves people like Vocus, Odyssey,Reach,GlobalGateway weren't impressed

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@chriskeall - did you ask Dotcom what would happen to NBR's online ad revenue if all your readers had Megakey installed.

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That issue was raised, yes. That is something some websites would have to live with. Or launch a Mega Lawsuit against, maybe.

Most of NBR's traffic is from people working in offices, incidentally - many of which are not agreeable environments to apps like Mega Key.

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Great idea Kim!

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Wish you a fair trial Mr Dotcom.
Now that you are able to pay your legal team by borrowing close to $4.83m US against a €10 million government bond, your lawyers must be pursuing your case harder. Poor guys really worked penniless for quite sometime. Anyway Mr Dotcom hope you have a fair trial and hopefully should win your case!!!
Merry X-mas and a Happy New Year!! Hope to see you in the "new avtaar" with your new project in 2013!!!

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y'know I cant help but wonder if a sizeable chunk of the naysayers here - those who are more interested in disparaging Dotcom with personal attacks, than objectively considering his ideas, are just mean minded partisan political followers. They are upset that Dotcom briefly lifted the curtain to give kiwis a glimpse of the corrupt practises indulged in by some members of the mean minded mob's 'team'.

That is how it seems to me from reading this thread.
Yes I know Dotcom has his own agenda but he has also come up with a project that could go a long way towards providing a solution for NZ's number one problem. That is the structural under-employment of it's still increasing labour force.

But who cares as long as 'your team' is in government eh?

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I would like to see Kim meet John Key in the "Fight For Life". Gloves or words! I would pay to be there.

Kim has a dodgy past not unlike JK, could a be a goer

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It's a bit late now Kim to try and play the good guy. Where were all these innovative ideas that are fair for content providers with megaupload - take down notices lasted 2 hrs for god sake. Why didn't you do deals with Hollywood bosses to create better business models to provide their content cheap to people that would never pay $30 for a dvd anyway, along with advertising revenue. You got too big too fast and personally making $175million without paying a cent to any of the content providers (unless they sued you) was simply stupid. You got greedy and became 'drunk in your own self-importance' - a typical German character flaw. Honestly Kim, even though these new ideas are good, the damage has been done and I think the show's over dude.

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but the dude did donate large sums to christchurch recovery and spent large sums to entertain kiwis but was rorted by key ,banks,and power but. not untill he had invested 10million in our bonds his nationalitie has nought to do with it the big man has bigger heart than the obove three combined

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