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Kim Dotcom’s fibre fantasy vs Rod Drury’s PPP reality

UPDATE: There are a number of reasons a Kim Dotcom-backed cable will never fly.

Pacific Fibre co-founder Rod Drury added another when he talked to NBR this morning: the accused pirate wouldn't get approval to land the cable in the US.

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

Mr Drury saw Mr Dotcom's overtures to Pacific Fibre as little more than clowning around on Twitter.

He was pleased a second cable was back on the public agenda as he formally pursues his new public-private partnership concept with ICT Minister Amy Adams (below), but Mr Dotcom's comments were "not helpful."

Undaunted, Mr Dotcom tweeted this morning, "I'll arrange a meeting with Pacific Fibre founders this week (if they have time) & explain my plan. Let's see what they think."

Sam Morgan told NBR he had never spoken to Kim Dotcom and was not involved in any way with his project.

"We [Pacific Fibre's backers] still think it is a big issue for NZ and wish anyone trying to do this the best of luck," Mr Morgan said.

"But doing this requires significant risk money with no guarantee of success.  We spent $6 million trying before we called it a day."


Kim Dotcom got an impressive amount of media over the weekend for his “plan” to revive Pacific Fibre – with the twist that Kiwis will get free or heavily discounted broadband (subsidised by charges to business and government, and money from the not-yet-launched Mega).

Sorry, but the bus just doesn’t go out that far.

Even at the height of Megaupload, Mr Dotcom didn’t have $400 million to spare for a Sydney-Auckland-LA cable.

His Plan A is to fund the new cable through his revived file-sharing service, Megaupload - due to launch January 20, but its success is far from assured (the entrepreneur is asking for investors via a recently launched splash page).

His "plan B" proposal to fund the project by suing Hollywood studios is the stuff of fantasy.

And as for the parallel suggestion of crowdfunding … that’s a neat idea for a $ 1 million project. Not so much for one that costs half a billion.

Dotcom mentioned Pacific Fibre co-founder Sam Morgan as a possible partner, but Mr Morgan told Stuff the pair had not discussed the project.

On Breakfast this morning, Prime Minister John Key dryly noted that Mr Morgan and fellow Pacific Fibre backer Sir Stephen Tindall could have put a lot more of their own money into the cable start-up (Mr Morgan told NBR that, collectively, Pacific Fibre’s NBR Rich List backers lost between $5 million and $6 million).

The PM also noted that the government had supported Pacific Fibre. He didn't detail the committment, but it was in the form of a pledge by a major government network operator, Reannz, to buy $91 million capacity over 10 years.

Drury's PPP plan
But despite his buffoonish proposal, Kim Dotcom has done the country a favour by putting Pacific Fibre back on the agenda.

In fact, it never went away.

Rod Drury is now pushing the idea of a new cable as a public private partnership (Mr Drury and Mr Morgan have previously told NBR they don’t think any private cable will succeed).

The entrepreneur has formally written to ICT Minister Amy Adams, asking the government to support the idea.

Ms Adams reply was that dialogue should be kept open on the project. However, at this point, Ms Adams said, the UFB was not in trouble, and it was premature government funding was necessary.

The next phase in the PPP project will be Mr Drury taking his arguments to the public, I strongly suspect – and that should make for a fascinating, forceful debate.

It will be interesting to see the details of Mr Drury's plan. In pre-Pacific Fibre times, he often mooted a debt-funded cable, with charges set at just enough to service the debt, plus ongoing management and maintenance costs.

Mr Key noted this morning that the 50% Telecom (as in Telecom retail not Chorus)-owned Southern Cross Cable (which currently enjoys a monopoly on NZ’s broadband access to the outside world) has capacity to spare. 

Pacific Fibre’s backers always argued that was part of the problem: manufactured scarcity.

For price competition and security*, two cables are better than one.

(*On security, Southern Cross is always at pains to point out its figure eight design includes two separate cables, with two separate landing points in Auckland).

ckeall@nbr.co.nz

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Comments and questions
22

I suppose a potentially wasteful duopoly is still better than a monopoly...

Yay ! - Kim Dotcom for PM

I dont care a toss if the flights of fancy of the rich kids are feasible. Its the stuff of dreams. Dotcom and his pals float great stuff and have proven capable until the Hollywood media and music moguls impoverished him. John Key dreamt of a bicycle path and couldn't even deliver that.
If there was the possibility of something or someone gifting the people of NZ a bonus (and huge thankyou for giving the FBI stitch up the flick) I reckon the party boy over a politician any day.

I was surprised at how everyone jumped aboard Dotcoms plan. He sure knows how to get free media attention with his pie in the sky ideas.

Having said that, I hope he succeeds. A free cable and data center jobs in NZ would be great for the economy.

How many people do you think a data center needs? Have you every been inside one?

A data center would need at least 4 people to keep it clean, plus maybe a couple more as security. :)

Maybe we should ask for some aid from Australia and USA to help fund the fibre.
We are acting like a third-world nation by having a single piece of string linking us to the outside world, so why not get the benefits of some freebies too?

Pacific fibre had actually already worked with what I think was a Sydney HQ'd ISP to jump on the bandwagon of their cable. It seems the hardest thing with this project is (after funding of course) accessing US soil..

The sticking point appears to be issues with the US Government. First, it made the original proposal unfeasible because it didn't want the Chinese influence (hardware and funding). Second, the US govt will never sign off on a proposal backed by Dotcom.

Therefore, the only solution for a revised Pac Fibre managed second cable from NZ would be to forgo the US link and instead peer with an Asian Internet Exchange such as one of the large Japanese PoPs.

Unfortunately, the Guam exchange would be out due to it being US and the US Govt may lobby Japan and other allies in the region. That leaves possibly the easiest landing for geopolitical reasons being China, which comes with a whole host of issues regarding Internet freedom etc.

Don't forget Australia will tell you to stick it too because there is no way New Zealand will be allowed to land a Huawei/China government back door on Aussie soil either.

New Zealand really doesn't seem to have many friends nowadays. Have you ever wondered if it's not everyone else who is the problem?

Wonder how Xero shareholders feel about its CEO swimming with Kim and being distracted by this sideshow once again...

Good to see some balanced views and reporting on this. Everyone else seems to have swallowed it hook, line and sinker.

Good stuff Chris, as always.

Why would the American's care who funded the cable? Why is the guy who made the cable his own personal agenda item bagging the guy who's offering a whole bunch of dosh to make it happen?

The US govt originally shot down Pac Fibre because it was banking on Chinese funding (which in part required them to use Chinese hardware - *Huawei*). I don't think they'd be conducive to a high profile individual who they are seeking to extradite being involved.

As noted in the article, Dotcom doesn't have the money on his own to fund the venture.

Pacific Fibre signed a US company cable company, TE Subcom, as its primary contractor and smacktalked Huawei: http://www.nbr.co.nz/article/nzs-pacific-fibre-takes-jab-huawei-ck-114758

Dotcom is a publicity seeking buffoon. The sooner he is extradited to the US to sort out his alleged US crimes the better. He has nothing of substance to offer NZ.

There are lots of other internet companies that must be worried by what happened to Kim.com They are probably wondering if the same thing could happen to them.
If NZ rejects Kim's extradition to the US then other companies may see NZ as a safe place to do business in.
Google may want to come here, after all they might be wondering if youtube is going to be next on Hollywood's hit list.
Zuckerberg can get a mortgage for 1%, maybe Kim can get access to some cheap money.

Is the above scenario plausible?

Maybe Kim is a genius.

A dangerous and failed attempt to gain credibility/good-will from publicity. Any cable involving him will never land in the USA.. as Paul Brislin rightly acknowledges. The alternative landings blow out the $sprohibitively. So he was never going to have to actually stump-up. The big-boy somehow thought Kiwis would view him as the good-guy, again persecuted by Uncle Sam in not being able to go-forward with the project.

the guy has a criminal record the size of a phone book - there is no way the US govt would deal with a company he's running. Game over, end of argument, will the last brain dead journalist to leave the room turn out the light?

now known as kim.comEDY or perhaps kim.comBO

Chris, please don't help SX repeat their invincible figure 8 claims any more. Fact: If a cable is down, overseas time-critical tarnsactions will fail - e.g. banking as they will time-out due to the latency incurred during re-routing around the fault. Fact: there were some serious Earthquakes in Canterbury recently. It is now well understood that these could recur anywhwere, and in addition that Auckland is a volcanic "mine-" field. the cable end point data centres for SX's cables are just over 10km apart in Auckland (their own figures) and so well within the radius of impact of a serious quake or typical volcanic base surge. This would eradicate NZ's international comms immediately, and for several months while new capabilities were built. SX is understandably not pushing this issue, they have to defend their business and it is commercially attractive to run cables old and new from Auckland, but it is not good for NZ. If Rod Drury or anyone else wants to go again then I applaud them, but please have the sense to route at least one of the new cables out of somewhere well clear of Auckland. Just look at Japan - in the tsunami over 5 cables were wiped out, and we only have two! This might be where the public part of the PPP could come in - funding to make sure that profit is not the only motive.

For more discussion on security, see "Dick remembers the day the Southern Cross Cable lost service - and says it will fail again" http://www.nbr.co.nz/opinion/dick-southern-cross-went-down-will-happen-a...

Back to the real issue. Pacific Fibre's founders have simply under estimated the supply / demand equation. I'm sure most ISPs who deal with SC are much happier today than they were several years ago - why? Competitive pressure. SC is an extremely well run business - in a round about way it is like trying to compete with TradeMe - you can do it but you'll never have enough money to make it successful - unless you throw caution to the wind for a long term sustained campaign. UFB's future challenge's have very little to do with the international connections at this stage - how about we sort the short term issues out first - Xero and MYOB are great examples for SME UFB usage drivers.