ISPs and other internet industry players have raised anti-competitive concerns over the new Tasman Global Access (TGA) subsea cable to run between Australia and New Zealand.
Telstra, Telecom NZ and Vodafone New Zealand yesterday revealed plans to build the cable.
Telecom NZ chief Simon Moutter said yesterday that the three telcos will take equal shares of the cable's ownership, a fact that's raising eyebrows in New Zealand.
Though it is seen as a welcome addition to connectivity in the Pacific, industry players say they had hoped the cable would be built by an independent third party and not the telco incumbents that dominate the communications markets in the two countries.
Lobby group InternetNZ spokesperson Susan Chalmers said that although TGA would help reduce reliance on the existing Southern Cross Cable, which is majority owned by Telecom NZ, the three-way ownership of TGA isn't likely to result in price reductions on the route.
"The environment will not be one that encourages competitive pricing," Chalmers said.
Chalmers views are shared by independent ISPs Callplus and Snap, both of which expressed worries about the new cable being owned by three large vertically integrated incumbents.
New Zealand IT and communications minister Amy Adams and opposition ICT and communications spokesperson Clare Curran welcomed the cable.
However, Curran also expressed concern with Telecom NZ having ownership interests in Southern Cross and TGA, saying it raised serious competition issues.
The NZ Greens went further and said the new cable will shut out competition, reiterating demands that the Government take a stake in a new cable across the Pacific.
Regulatory interest in the deal seems likely. iTnews spoke to New Zealand regulator, The Commerce Commission, which confirmed a report by NZ Herald that it intends to scrutinise the deal.
"It's early days yet, but we will consider if the cable deal raises competition concerns," a spokesperson for the Commission said.
"However, that depends on where the cable will be domiciled, if it's in our jurisdiction," the spokesperson said.
Despite operating between Australia, New Zealand, the Pacific Islands and the US, the existing Southern Cross Cable (SCC) system is domiciled in the Bahamas.
Telecom's Moutter doesn't think there will be a regulatory case to answer.
"Cable systems around the world are owned by telcos in similar joint ventures, and it's a normal arrangement," he said.
Vodafone New Zealand chief Russell Stanners concurs: "Two players in the market are needed for competition," Stanners says and added that the TGA and SCC will have two different boards and therefore, there will be competition.
Telecommunications analyst Paul Budde echoed the two executives' sentiments.
"I can't see any major objections from the regulator as such consortia have been building these lines for over 150 years now, this is simply yet another one," he said.
"It will be an addition rather than competition".
One competition question looming large over the new system is whether or not the three telcos will wholesale capacity on the new cable.
Telecom New Zealand is cagey on that subject.
"Another cable just makes the market more competitive but it's too early to say exactly how that will play out in terms of wholesale arrangements," a spokesperson told iTnews.
Telstra was unequivocal. "We will be selling wholesale capacity on this cable system," a Telstra spokesperson said.
Few doubt that there is a need for more cables on the trans-Tasman route.
Moutter and Stanners yesterday pointed to the growth in data traffic as the main rationale for building the new cable, despite the existing Southern Cross one apparently having plenty of capacity left.
"There is a significant appetite for data and its growing exponentially," Stanners said, and added that the data growth was what drove Vodafone to buy Telstra's New Zealand subsidiary TelstraClear last year.
"It's all about data, and our business is selling gigabytes not minutes now.Telecom is committed to that future," Moutter said.
Whereas New Zealand data traffic is still US-oriented, an increasing amount of traffic goes to Australia where large services companies like Google, Amazon and Rackspace have set up shop, and to Asia where Microsoft and others host their cloud offerings.
Budde believes there is certainly room for a new cable, something that several companies have recognised but failed to organise finances for.
"People should realise that the use of the cable could be three to five years' away, and there is no doubt that traffic will have significantly increased during that time," Budde said.
TGA severs cable plans of others?
The agreement for the US$60 million (A$58 million) TGA is in the form of a "non-binding memorandum of understanding" and neither Moutter nor Stanners disclosed any concrete details as to its design or build.
Could the TGA be simply a ploy to stop competing consortia such as the Hawaiki Cable, which has stated an intention to build a trans-Pacific cable linking Sydney, Auckland, the Pacific islands and the US West Coast?
"To a certain extent, yes; incumbents are very good at that, and it won't be any different with this lot," Budde said.
"At the same time the competition couldn't get the project off the ground, so you can't blame them," Budde added.