$200m cable "will not bring down broadband prices"

Summary:Experts have warned broadband prices may not be on their way down, despite the opening of a AU$200 million cable link.

Experts have warned broadband prices may not be on their way down, despite the opening of a AU$200 million cable link.

Construction of Pipe Pacific cable-1 (PPC-1) is expected to be complete by mid-2009, Pipe Networks announced yesterday, and will link Australia directly to existing cable systems in Asia, the US and Europe via an exchange in Guam.

Speaking at the launch yesterday, Broadband Minister Stephen Conroy voiced his support for the project, saying that the cable will form an important link in the chain for Australia's new fibre-to-the-node network, while Pipe and ISP iiNet both suggested that the increased capacity enabled by the cable would put downward pressure on broadband prices.

"I'd like to see what they're basing that on," said Sheryle Moon, CEO of the Australian Industry Information Association (AIIA). "I wouldn't say that increased capacity automatically translates into lower prices, it depends on whether or not there's a latent demand for the bandwidth; we may find that by 2009 the demand has increased so much that it doesn't make such a huge difference."

It's one cable eighteen months down the track; how it will affect retail broadband pricing is absolutely impossible to say right now.

Guy Cranswick, IBRS

Moon added that executives from both Pipe and iiNet are predicating such claims on the assumption that increased bandwidth delivered by the cable will increase competition and drive prices down.

"What we don't know at this stage is whether there will be any surplus or not," she said.

Guy Cranswick, senior analyst at consulting firm IBRS, also queried the pricing claims. "In terms of actual home delivery to someone on a broadband plan you mightn't see much difference, because there are so many variables involved when it comes to things like access speed such as exchanges and load sharing," he said.

"As for being a critical part of the national FTTN network, it's also too hard to say at this stage because some of the details surrounding that project are themselves a little vague," he said.

Despite some concerns over whether the cable will bring down prices, AIIA CEO Moon said the network will bring benefits: "It will definitely have a positive impact, and speaking for the industry I can say that we're excited about it."

"There's been a long held belief that the existing cable links were choking," she said.

IBRS's Cranswick claimed that there was no way to tell what effect the cable will have on the broadband market by the time of its completion.

"You're talking about one factor affecting a complex market. I can't see that there's going to be anything immediate, and by the time it's finished any number of market forces will be acting on it," he said.

"It's one cable eighteen months down the track; how it will affect retail broadband pricing is absolutely impossible to say right now."

Topics: Broadband, Asean, EU, Government : AU, NBN, Tech Industry, Telcos

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