Southern Cross cuts shame tele'con' NZ

You have to question the motives of a monopolist when it suddenly slashes prices by almost half.

Such is the case of the Southern Cross Cable Network, which announced a 44 per cent cut in wholesale rates this week.

The company, half owned by Telecom New Zealand, operates the major international link between New Zealand and overseas. Other links have such a low profile that few have heard of them. Thus, Southern Cross Cable carries much of the country's internet traffic.

Now, Southern Cross credits its price cut on lower costs and its upgrading of its cable, so that our "dirt tracks" to the rest of the world are somewhat wider.

But it also comes as a rival announced progress on developing another link, which it hopes to have operational in a year or so.

A company called Axin has signed a supply agreementwith Huawei Marine to build a 3000km link across the Tasman.

This comes on top of the US$400 million Pacific Fibre project — a consortium featuring Sam Morgan of TradeMe fame, and tech businessman Rod Drury, amid others — which is busily signing up customers and raising capital.

What an amazing coincidence that Southern Cross feels able to slash prices as the prospect of significant rivals grows ever greater! It all seems to confirm how it has been abusing customers with monopolistic pricing all along.

It is also interesting to note that the new prices will only apply to new customers and new contracts, and some of these contracts can be 10 years long. Thus, we should not hold our breath for cheaper broadband.

Surely the costs have fallen already, and the lower prices can be passed on now.

Paul Brislen of the Telecom Users Association of New Zealand warns that this, along with the lower prices, will make it harder for Pacific Fibre to raise the capital for its project.

You can understand Southern Cross making such a defensive move to shore up its own position. But it all adds fuel to the fire for those who enjoy bashing Tele"con" New Zealand.

Southern Cross's behaviour strengthens their arguments that the incumbent telco really is a greedy monopolist that has been raping New Zealand for years!