Southern Cross Cable, New Zealand’s Internet lifeline

At the bottom of the world is a little scenic paradise called New Zealand. It is my home so I try to follow developments in ICT there.

Tyranny of distance is real for New Zealanders in times past. But thanks to the ubiquity of the Internet NZers are more connected to the rest of the world.

So how does NZ connect to the rest of the world ?

In 1997 a private company, Southern Cross (SX) spearheaded the effort to lay a submarine cable to link Australasia to the USA (via Fiji and Hawaii). Eventually this became the SX cable network and it looks like a figure of 8 as shown on the map.

SXmap

Today SX is owned by Spark/ used to be Telecom NZ / (50%), Singtel Optus (40%) and Verizon (10%).

Although the initial capacity on the SX cable was 20 Gbps/wavelength  advances in 40G and 100G technology, has allowed the present network capacity to scale up to 2.7Tbps.

Being an engineer, I would like to see more resiliency on the system and the only way to ensure that is to have diverse paths to other providers. For now SX continues to be the sole provider of international connections for the country.

The SX network has proven to be reliable. Significant outages have been far and few between; and on occasion when one part of the loop did break the resilient design held up well.

 

Price constraints performance

Without more players in the market NZers are unlikely to see better pricing for international data traffic. Although prices have dropped, ISPs have commented that the drops have not kept up with the year on year growth and demand for more international bandwidth.

There are 3 dominant ISPs in the country. Spark, Vodafone and Orcon and between them they own 75% of the market. With a small population, NZ ISPs achieve economies of scale and are constraint in terms of what they can afford for international bandwidth capacity from SX.

Since most of the content in demand reside outside of NZ – international traffic makes up 70% of total Internet (domestic + International) traffic; bottlenecks at the ISP’s connection at SX will translate to slow (international) Internet traffic for users.

A year ago, Netflix did a test of NZ ISP speeds and found that during peak times users experienced slow download speeds – between 2.5M to 3.5M. As a result Netflix is encouraging ISPs to install Netflix caching to serve content locally. NZ household consumption of data has gone up to an average of 50G / month – this is a 30% increase over the last 2 years. We expect to see even more consumption as more Netflix content becomes available in this region.

People might wonder if mobile usage will change the balance of traffic for ISPs and SX. In Australia and NZ mobile data costs are still extremely high so proportionally mobile is not a significant factor for international bandwidth.

However the rapid adoption of cloud services will drive more traffic across the Tasman leg of the network. Both AWS and Microsoft Azure serve NZ customers out of their regional centres in Sydney and Melbourne.

Some argue that there is sufficient capacity on SX networks but others have argued that better pricing will drive even more usage for SX and future international bandwidth providers.