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Friday, 20 May 2011 15:13

REANNZ becomes first customer for Pacific Fibre's planned Aust - NZ - US cable

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REANNZ (Research and Education Advanced Network New Zealand Ltd) - the equivalent of Australia's AARNet, has become the first customer on the cable planned by New Zealand company Pacific Fibre to connect Australia and New Zealand to the US West Coast.

The move comes just two years after REANNZ scrapped a RoI for the provision of a new trans-Tasman cable saying that the only proposal, from Kordia, was not sufficiently advanced.

Pacific Fibre and REANNZ say they have "agreed key commercial terms for a substantial contract to supply international capacity on the new Pacific Fibre cable system'¦for the NZ research, education and innovation communities." The two said that Pacific Fibre won the business through an open tender, and that they are now negotiating a final contract based on the signed key commercial terms.

REANNZ CEO, Donald Clark, said: "At current market rates, the value of the capacity commitment is over $NZ400m, though obviously we are paying far less than that. This is a long term commitment, and one that recognises our support for the Crown's policy goals of increased international cable competition at the right stage in the market process."

According to REANNZ: "The deal will see the amount of capacity available to KAREN [the name for the network operated by REANNZ] subscribers rise from today's 1Gbbs to an initial 40Gbps and then to 160Gbps over time. This step change is possible due to the superior economics of the new cable system and through restricting the use of the capacity to the KAREN community."

Clark, said: "Pacific Fibre will provide us with effectively unconstrained capacity to Australia and the USA from mid-2014, allowing us to collaborate with the rest of the world on an equal footing."

REANNZ is investing its own operational funding, along with $NZ15 million that the NZ Government granted to support a capacity purchase on a new submarine cable system.

The move has cast doubts on the prospects for Kordia's long-planned OptiKor cable that, if it goes ahead, will link Australia and New Zealand.

CONTINUED


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Kordia responded to the REANNZ - Pacific Fibre deal with an announcement in which CEO, Geoff Hunt said: "OptiKor is a trans-Tasman cable project only, and is designed to break the current Internet bottleneck in New Zealand. OptiKor will provide onward access to numerous existing cable systems out of Australia to Asia and to the US.

"The REANNZ tender was for capacity to Australia and the US which is the route of the proposed Pacific Fibre cable. So this decision makes sense."

Hunt said he was unable to give more detail on the status of the OptiKor project at present, except to say that it was alive and well.

 

Kordia had said it would call tenders in early 2010 with a view to having the system in operation by end 2011. In response to a request for an update in June 2010, Kordia told ExchangeDaily that an announcement about OptiKor would be made in July.

Nothing has been said since. However, TelecomAsia quoted Hunt in December 2010 saying that Kordia was struggling to sign up foundation customers. "We need foundation customers in place to underpin the financing of the project and we don't have them in place," he said.

Kordia had initially planned to build the cable as a joint venture with Pipe Networks whose PPC-1 cable to Guam contains a branching unit for a future connection to New Zealand.

Kordia also had its eyes on the Government's $NZ15m contribution to REANNZ which has now gone to Pacific Fibre. That money was allocated in the 2008 budget to support the development of a new Trans-Tasman cable and REANNZ was given the job of lead agency and anchor tenant.

REANNZ issued an RoI In October 2008 but in May 2009 abandoned the project saying the only compliant response had come from Kordia and that the Kordia project was not sufficiently advanced to warrant it entering into direct negotiations with Kordia.

Ironically, two years down the track REANNZ is planning to give the money to a company that is still trying to raise the $US400m needed to build its cable system.

You can read more stories on telecommunications in our newsletter ExchangeDaily, click here to sign up for a free trial...


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