news A little over two years since it formed with the aim of building fibre-optic submarine cables between Australia, New Zealand and the United States, local telecommunications venture Pacific Fibre has folded, citing an inability to attract sufficient funding for the project.
When it formed in March 2010, Pacific Fibre’s backers included The Warehouse founder Stephen Tindal, TradeMe founder Sam Morgan and Xero CEO Rod Drury, as well as former Vodafone marketing chief Mark Rushworth, telco veteran John Humphrey and entrepreneur Lance Wiggs. The group planned to construct a 5.12 Terabits per second, 13,000km cable to be ready in 2013, connecting the three countries. That capacity, it said, would be five times the level of the existing Southern Cross cable. The cable would also have the potential to branch out to reach several Pacific islands.
At the time, the group acknowledged the project would be difficult. “This is a bold vision which, as realists, we know will not be easy to deliver, it will take a huge effort to complete, and has many risks,” said Tindal in March 2010. “While we have completed early feasibility work it is essential for people to know we now need to determine the level of interest from potential partners before we go to the next stage of a full business case, risk assessment and proof of concept to take to investors and bankers.”
“We realise the risks are large but are prepared to push through to the next stage. We have released this news today primarily to ensure that any parties who are interested in this space have an opportunity to speak with us during this early planning phase.”
However, in a new statement released today, Pacific Fibre said it had “resolved to cease operations”, as it was unable to raise the NZ$400 million required to fund the cable build.
“A 13,000km cable is clearly an audacious thing to try and do. We were fortunate to find supportive shareholders, fantastic staff and early customer support from the likes of REANNZ and Vodafone” said chairman Sam Morgan. “We’ve spent millions of shareholder funds trying to get this done and despite getting some good investor support we have not been able to find the level of investment required in New Zealand initially and more broadly offshore.”
Morgan said the global investment market was “undoubtedly difficult” at the moment, but Pacific knew the project was always going to be hard, regardless of its timing. “We started Pacific Fibre because we know how important it is to connect New Zealanders to global markets. The high cost of broadband in New Zealand makes it hard to connect globally and it is this market failure, not a technical failure, that we tried hard to solve” said co-founder and director Rod Drury. “We still cannot see how the government’s investment in [New Zealand’s Ultra-Fast Broadband project] makes sense until the price of international bandwidth is greatly reduced.”
Pacific Fibre pointed out that in September 2011, Australian analyst group Market Clarity reported the cost of bandwidth to the US from New Zealand as 5.8 times greater than the price paid by Australians. “This project had encouraging early momentum and we were pleased to attract a great team and board, and shareholders who invested because they felt passionately that this problem needs solving for New Zealand”, said Morgan. “We believed funding for these long term infrastructure investments would have been more readily available and were confident the business case was solid. We feel like we’ve done everything we can to succeed and we are all hugely disappointed that we have not managed to get there. We’d like to thank our staff, shareholders, customers, partners and supporters”, Mr Morgan ended.
It’s sad to see this project be cancelled; Australia and New Zealand need all the international submarine cables they can get, in order to help drive down international bandwidth costs; an important factor for the local telecommunications players, given how much Internet content is located overseas.
Image credit: Pacific Fibre