Southern Cross Cable

Odd email appears in journalists’ inboxes on April 1. Here’s one:

Please find attached a media release from Hawaiki announcing the coming into force of the Hawaiki cable.

Please also note that despite the date, this is not an April Fools’ joke – it is for real.

Hawaii cable contract
Hawaii cable contract

Hawaiki: Australia to Hawaii via New Zealand

If it was an April Fools Day prank, it wouldn’t have been a funny joke.

When built, Hawaiki’s cable will run from Australia to Oregon in the USA via New Zealand and Hawaii. There are options for branches to Pacific island nations.

It will be the second trans-Pacific submarine cable network linking New Zealand to the USA. The Southern Cross Cable Network has been doing the same job since 2000.

There may soon by a third. The Dominion Post reports rival cable operator, BlueSky, says it will still push ahead with yet another trans-Pacific submarine cable.

Hawaiki appears to have succeeded where Pacific Fibre and Spin did not.

Remi Galasso, Hawaiki CEO, has worked on the project for years and was previously involved in the Spin cable. It can’t have been easy getting this project over the line.

Hawaiki investor group
Hawaiki investors. From left: Remi Galasso, Laurent LeBretan, Sir Eion Edgar, Hamish Edgar, Malcolm Dick.

It’s very much a New Zealand project. Galasso lives here. He has teamed with Malcolm Dick, best known for being the power behind CallPlus and Slingshot. Sir Eion Edgar is a Hawaiki co-developer.

Hawaiki: Cable to the islands too

Like Spin’s abandoned project, Hawaiki plans to run cable spurs to New Caledonia, Norfolk Island, Fiji, Vanuatu and Samoa among other island destinations. There’s also provision to reach the Cook Islands.

Hawaiki Network

The April 1 press release has no specifics about island links. Instead it says there are : “options to expand to several South Pacific islands”.

Earlier Galasso said the cable would run to Hawaii and then pick up other cables to mainland USA. The April 1 press release says it will go to the US West Coast and provide an alternative route from Hawaii to Oregon.

Hawaiki contract signed, construction phase coming

The press release says a contract between Hawaiki Submarine Cable LP and TE SubCom has come into force and “the construction phase has commenced”.

We need to be careful about that last clause. While a contract “coming into force” is officially the moment when a cable project goes live — in theory, it is unstoppable — nothing is real or final until the ships lay cable. Indeed some submarine cables have been laid and not lit.

Hawaiki says the system will be complete by mid–2018.

Cable completion dates can slip

When Vodafone, what was then Telecom NZ and Telstra announced the go-ahead for the Tasman Global Access cable in December 2014, the press release said:

“The project will begin early in 2015. Alcatel-Lucent has been selected as the cable laying contractor after a competitive tender process, and the TGA Cable is expected to be built and providing data traffic by mid–2016.”

According to sources close to the project, the ship that was booked to lay the cable across the Tasman is now busy repairing the damaged Basslink cable between Tasmania and Victoria. TGA now hopes work will start in October of this year.

Cable laying is quicker than you might expect, so TGA could be live early in 2017 — just six months or so after the promised date.

If it runs to schedule, or even a little behind, the new trans-Pacific cable will be operational by the time New Zealand finishes its urban, fibre-to-the-premises UFB roll-out in 2019.

You won’t notice a thing… but that’s not the point

Few everyday users will notice if another submarine cable connects New Zealand to the rest of the world. It won’t make your broadband faster. It won’t mean bigger data caps. Prices for internet plans won’t change.

For most of us it will be business as usual.

The chances of an accident cutting us from the rest of the world will reduce. But for ordinary users that’s just another way of saying business-as-usual.

After all, we haven’t been cut off in the 15 years or so the Southern Cross Cable Network has been our digital gateway to the rest of the world.

There’s no pressing need for extra capacity. The Southern Cross Network has plenty of headroom and when the TGA cable starts operation it will add further capacity across the Tasman to where the big regional cloud and entertainment data centres are located.

SCCN CEO Anthony Briscoe on why Hawaiki isn’t needed

At a Tuanz After Five meeting in Auckland earlier this week Southern Cross CEO Anthony Briscoe used the same arguments his company has always used against a new trans-Pacific cable.

Tunaz After Five, Auckland April 2016. From Left: Luke Mackinnon, Vocus, Anthony Briscoe, Southern Cross, Mark Rushworth, Paymark
Tunaz After Five, Auckland April 2016. From Left: Luke Mackinnon, Vocus, Anthony Briscoe, Southern Cross, Mark Rushworth, Paymark.

His argument is persuasive, there are no pressing technical, economic or political reasons to install a second line across to the USA. He admits there may be an argument for the additional resilience a new cable would bring, but otherwise dismisses Hawaiki’s proposed cable as not making one jot of different to the everyday internet user in New Zealand.

As Mandy Rice-Davies once put it: “He would say that, wouldn’t he?”. Southern Cross stands to lose some business, or potential business, if Hawaiki comes on-line.

Vocus: A customer’s point of view

Vocus is one of Southern Cross’s largest non-telco customers. Chief technical officer Luke Mackinnon appeared on the Tuanz panel to give a user’s perspective of the international submarine cable market out of New Zealand.

Mackinnon says Vocus grew big on the back of wholesaling capacity on the Southern Cross Cable Network and is still experiencing 150 percent year-on-year growth in that market. Although a lot of that growth is out of Sydney, not New Zealand.

Reliable

He says that the network: “Has been architected to provide resilience. It’s not like the other cables operating out of Australia.”

This is a timely reminder of just how reliable SCCN has been over the years. There was a small disturbance when a ship disturbed a cable, but the network’s figure-of-eight configuration meant traffic could be rerouted.

Compare this with other networks out of Australia. Most have suffered major outages in recent months. Basslink, which is connected to a power cable, has been down for three months. Sea-Me-We 3 out of Western Australia is frequently broken.

Mackinnon says Vocus sees Hawaiki as offering an “interesting alternative route. It will give us access to other destinations. We might want that.”

Yet he says Vocus is looking for performance and is unlikely to stray from Southern Cross in the short term.

However, a few years ago Vocus CEO James Spenceley said his company was a “price taker” when it comes to international bandwidth. Since then Vocus has grown in size and importance, the arrival of an alternative route to the US is likely to give Spenceley more bargaining power.

Rushworth: It’s about competition

Tuanz asked former Pacific Fibre CEO Mark Rushworth to offer an alternative view. After agreeing, or rather not disagreeing, with many of Briscoes’ arguments against a new cable, he took little time zooming in on the key point.

“Do we need more capacity? Probably not. Would a new cable change prices? No. But, we’ve learnt in New Zealand that it’s never good when one company owns a market. Imagine life with just one airline or one bank”, he says.

Rushworth says New Zealand needs a second trans-Pacific cable because of what competition brings to a market.

Pacific submarine cable myths

Anthony Briscoe answered the critics, dismissing their arguments as myths:

  • Capacity. If users think they have slow internet because of insufficient international data capacity: “They should talk to their internet service provider. There’s no shortage of capacity. The ISPs may not be buying enough.”
  • Prices won’t change. The international component of a typical home user broadband plan is NZ$4. With plans costing from $75 for 80GB, halving the price of the international component won’t make a difference.
  • Redundancy. “They may have a point, but SCCN has never been out of service. If there was a redundancy problem the Tasman Global Access will go live soon.
  • Choice. “Consumers don’t buy international capacity, ISPs and telcos do. New Zealand ISPs get it for the same price, sometimes lower, than Australians”
  • Congestion at peak times has little to do with international links. Most content is cached locally, almost all the rest is cached in Australia”.
  • *SCCN only cuts costs when competitors emerge*: “We’re not that smart. We have a simple pricing model and we sell a long way ahead”.

Unpicking Hawaiki’s economics

At the Tuanz session, Briscoe ran over back-of-an-envelope calculations for the new cable network. The numbers here have not been checked back with Hawaiki, so they need to be treated with caution, but they’re too interesting to ignore.

Briscoe says the Hawaiki network will cost around NZ$500 million to build. This is the number Hawaiki has used in its publicity material.

“The depreciation on that investment would be $25 million. To break even on these numbers the network would need sales of NZ$50 to $60 million a year. At the moment the total traffic sold in New Zealand is $202 million a year”, he says.

While demand is climbing — remember Vocus talks of 150 percent year-on-year growth — revenue will not be increasing at anything like that amount. So a new player entering the market is likely to have a dramatic impact on Southern Cross Cable Network revenue.

Southern Cross Cable
Southern Cross Cable lands at Nedonna Beach, Oregon.

A new company plans to build a transpacific submarine cable. By now I have the hang of how this works:

First, there’s a big announcement complete with a list of features showing the planned cable differs from the Southern Cross Cable Network. There is also an argument explaining why the new cable is essential. Beautiful diagrams help media explain all this.

Second, the would-be cable builder reveals high-profile backers or partners. No matter how big the names or how compelling the business case, they are never willing to invest all the money needed to get the project moving.

Third, potential customers emerge. If nothing else, coming forward gives them an opportunity to negotiate with Southern Cross or their wholesaler.

Next, we get follow-up press releases about passed milestones. They contain tantalising hints that the project is close to take-off, but nothing specific about the date ships will sail.

This submarine-cable-announcement-cycle is a key part of the business of every new international communications link project. It can go on for years.

A new trans-Pacific cable isn’t real until the ships start rolling it out across the ocean.

Along the way Southern Cross responds with its own messages. Often a rival project’s announcement is met with news of another big capacity increase on the existing network. Just to keep us confused there are also reminders that Southern Cross still has plenty of spare capacity and that growing demand for data is still not enough on its own to justify building a new cable.

At times Southern Cross throws a wild card announcement into the mix. If nothing else this keeps everyone on their toes.

All of which explains the recent flurry of activity.

Bluesky plans trans-Pacific cable

In December Bluesky Pacific Group announced plans for Moana; a 9700 km submarine cable connecting New Zealand to Hawaii, with drops at a number of Pacific Islands along the route. The company said it has already contracted Alcatel-Lucent Submarine Networks to build the network.

Southern Cross Cable Network couldn’t let that pass without its own announcement so it revealed a footprint extension making its services available from four additional locations in Los Angeles and Silicon Valley. It also added 900 Gbs of capacity bringing its network total to 5.8 Tbs.

This, by the way, is a small increase for Southern Cross, usually its network upgrades mean a far bigger jump in relative capacity.

Within days Bluesky had its own new statement. It says Moana cable will now connect NZ, Samoa, Cook Islands and Hawaii. It will now also Moana add a connection from the US to Asia. Spark New Zealand, Optus and Verizon jointly own the Southern Cross Cable Network.

Last week the two main shareholders, Spark and Optus, went public on discussions about planning long-term, Pacific submarine cable capacity. The message is clear: “We’ve got you covered for trans-Pacific submarine cables”.

New Zealand - AustraliaNew Zealand’s internet centre of gravity is shifting.

Until now New Zealand data traffic was mainly east to and from the US. That’s changing. Increasingly our traffic goes west across the Tasman to Australia and Asia.

This will probably accelerate now cloud computing giants like Amazon and Microsoft offer data centres in Sydney and Melbourne.

The graph shows the trend is clear.

International cable trends
International cable trends – click on image to enlarge

Things have moved on since the last, 2013, data point.

Spark says last week the traffic was 56–57 percent trans-Pacific, and 43–44 percent trans-Tasman. Spark’s spokesman says if anything the trans-Tasman figure is lower than usual because of the holiday lull in work traffic.

Enter the TGA

The graph goes part way to explaining why Spark, Vodafone and Telstra plan to spend NZ$90 million building the Tasman Global Access cable.

The cable will run from Raglan to Sydney’s northern suburbs.

Alcatel-Lucent has the contract to build the submarine cable. Work starts soon. If it goes to plan, the TGA cable will be open by mid–2016.

That’s an interesting moment. Because if you extrapolate the graph data, it coincides with the time the two lines crossover.

Southern Cross holds the fort

Until then New Zealand will depend on the Southern Cross Cable Network: a single cable network operating two links; one heading west, the other east.

The existing network has served New Zealand well, but having all your economic eggs in one basket is not the best strategy.

Southern Cross argued there’s little need for more international capacity. It has upgraded network capacity as demand has increased. There’s plenty of headroom for the near future.

That’s needed. International data traffic out of New Zealand is increasing at about 60 percent year-on-year.

Southern Cross hits 100 Gbps

Today Southern Cross CEO Anthony Briscoe said in press statement that the network had recently completed live system trials with multiple vendors using 100 Gbps technology. This beats Southern Cross’ previous projections of potential capacity for the system

He says the network will support 12 Tbps capacity later this year up from the current potential of 7.8 Tbps and 14.4Tbps is achievable. That’s up from 240 Gbps when the network was first switched on.

Life in the old dog yet

Submarine cable networks have a use-by date but there’s plenty of life left in the Southern Cross network.

Despite the lack of competition here, New Zealand network customers pay the same price as Australians to use the Southern Cross network. Australia has competition between international cable networks. In effect, this means New Zealand already gets any savings we might get from competition.

And anyway, there’s something of a competitive question mark over TGA. Spark owns 50 percent of Southern Cross and around 45 percent of TGA. That means a race to the bottom on price is unlikely.

If it ain’t broken…

Why build a new cable if it isn’t needed for immediate added capacity and prices are already competitive?

Two main reasons:

First, New Zealand’s economy depends on international data connections.

The chances of both legs of the Southern Cross failing at once are slim. The network has a figure of eight design and the owners describe it as self-healing. That makes it reliable. There hasn’t been much downtime, but the chances of something going wrong are not infinitesimal.

Security, redundancy

Adding a third link boosts security. It means New Zealand is less likely to face catastrophic disruption.

Second, submarine cables don’t last forever. A new cable gives us more options for dealing with a replacement when the time comes.

The Southern Cross network started operating in 2000. Typically cable operations expect their networks to last 25 years at first, but if everything goes well they can then realistically extend the lifespan.

Southern Cross recently went through this exercise and now says the network is good until 2030. From day one the TGA will promise an extra decade or so of international links and it could be good until 2045.

An extra link also means there’s more capacity should circumstances change and the demand outstrips cable technology’s ability to deliver more. And adding capacity will give some service providers more confidence in either basing services here in New Zealand or providing services to this market.

Hawaiki

If there’s a downside to the TGA project, it’s that the trans-Tasman link reduces the likelihood of a third player servicing New Zealand. It doesn’t help the economics of Hawaiki’s plans for a trans-Pacific cable.

2015 promises an interesting year for submarine cable companies with an official Netflix service arriving in New Zealand. The service accounts for about 35 percent of all downloads in the US. Even with caching, it will mean a jump in international data traffic. Southern Cross is confident it will cope with any surge in demand, even so, it looks like a good time to build an alternative cable.

CommsDay reports Alcatel-Lucent global fixed networks president Federico Guillen says his customers no longer see fibre-to-the-home as the broadband end goal. He says recent technological advancements mean the focus hass shifted to vectoring.

There’s a context to Guillen’s comments. He was speaking at the CommsDay NBN: Rebooted conference in Sydney. The conference is looking at how Australia’s plans for a national broadband network will alter following this year’s change of government. The Coalition government has long been critical of the Australia Labor Party’s commitment to a fibre-to-the-premises (FTTP) network.

Guillen says: “Now it is about the [service] you provide to the end user; it doesn’t matter if you provide FTTP. What matters is that you provide 50Mbps, 70Mbps or 100Mbps – that’s what the end-user wants. And you need to do it more effectively”.

Alcatel-Lucent now talks of “fibre-to-the-most-economical point”.

Fibre to the whatever…

It will be interesting to see if Alcatel-Lucent repeats this message in New Zealand. The company is a Telecom NZ network infrastructure partner. Alcatel-Lucent’s best-known New Zealand project was the Telecom XT rollout which ran into teething troubles.

The company also works with Chorus and is involved in the Gigatown promotion. Alcatel-Lucent’s ng Connect open innovation program has committed to a $200k development fund for the winning Gigatown.

However, the company missed out on New Zealand’s big FTTP project: Ultrafast Broadband. It’s rival Ericsson won substantial UFB contracts from Chorus and from Whangarei’s Northpower. Meanwhile, Huawei got the business from central North Island’s Ultrafast Fibre and Enable in Christchurch. Huawei also has some of Chorus’s RBI business.

With question marks now hanging over Chorus’s ability to finance the full UFB build and other UFB builders said to be facing similar financial problems, is anyone game enough to put a high-profile Alcatel-Lucent speaker on a New Zealand stage to explain why building the FTTP UFB network might not be the best strategy?

image001
Chorus market development manager Hamish Girvan and the van.

Chorus uses vans to help to brand. Now it says it has a new van that can improve efficiency. The Chorus van comes with built-in communications technologies and a link to the cloud.

Among other things, this means workers can give customers a clear idea of when the van and the service person driving it arrives. It can also send a picture so customers know the person knocking on their door is genuine.

The van also tracks inventory, so if a tool or a part is missing drivers can find a nearby van to fill the gap. It can also tell workers tools were left at a job or even stolen.

According to Chorus market development manager Hamish Girvan, the smart van saves time and that quickly translates to money. The van was developed by Chorus, US-based Apptricity and Alcatel-Lucent’s ngConnect programme.

  • If you’ve got the money, Sandisk has a 256 GB Compact Flash card which should meet most of your needs for the immediate future. The card comes with something called VPG-65 certification. No, I’ve never heard of it either. However, according to Sandisk that makes it optimized to capture 4K and Full HD video. Apparently, these are all the rage in well-heeled photography circles. I say well-heeled because the card is on sale at US$1800 – that’s more than $2200 in Middle Earth currency.
  • Lots of fuss in the international technology press over the weekend about revelationsNokiawas toying with running Android on its wonderful Lumia phones. Well duh. Of course Nokia was checking out Android. Windows Phone is a great phone OS, but it isn’t exactly flying out the doors. The Finnish phone-maker would have been negligent if it didn’t at least explore the possible alternatives. Now if Nokia was checking out BlackBerry, that would have been a news story.
  • After winning a bruising battle to take the company private, Dellsays the next steps include sticking with PCs and tablets while pushing harder into what it calls the ‘enterprise solution’* market and building partnerships. In other words, what Dell has been doing for years. The difference this time is that Michael Dell can now act faster when opportunities to sell or buy business units come along.
  • Lots of excitement in the international technology press overnight about Box and the limited private release of Box Notes which some see as taking the company into the same territory as Microsoft Office and Google Apps. If you want an intelligent local take on the news turn to Ben Kepes’ Diversity Blog. He nails the story and asks the right questions.