Following the collapse of Pacific Fibre, Vocus has signed a deal to quadruple its capacity on the Southern Cross subsea cable.
The company announced yesterday that it has renegotiated its supply agreements to pay a lower rate than it had been, and has secured around 400 percent to 450 percent of the total capacity of its previous agreement. While the actual value of the deal has not been revealed, the company stated that it would be increasing its monthly payments to Southern Cross by 24 percent, and it will be paid off in 6 years. The asset life is in excess of 13 years.
Vocus CEO James Spenceley told ZDNet that the company had been looking for capacity for some time, but was waiting to find out whether the company should "buy a large chunk of capacity and make the investment now" or wait until the Pacific Fibre project went ahead. As Pacific Fibre has now folded, Spencely said it is the right time for Vocus to buy.
"We were approaching capacity, and had looked at buying capacity for a while, so it is actually perfect timing," he said.
Spenceley said that although capacity prices would have had a big drop initially if Pacific Fibre had gone ahead, he doesn't believe that prices will now go up with Pacific Fibre out of the market.
"I don't think prices are going to go up. One of the things with subsea capacity is you get the big drops in supply cost and our customer pricing when new cables get announced, and also when they come live," he said. "Given Pacific Fibre has fallen over and there's no credible cable on the east coast for the foreseeable future, we felt pretty confident that there was going to be a fair bit of price stability in that."
He said it would be tough for another cable to enter the market, but that it could be done at the right time.
"It's probably pretty difficult; I think Pacific Fibre is evidence of that. It's feasible. It's very hard for a company to do it without existing demands," he said. "I think at the right time, there is absolutely the opportunity for it."
Internet service provider (ISP) iiNet also recently increased its capacity on Southern Cross, going from 20 gigabits per second (Gbps) to 200Gbps.