Basslink resolution close: CitySpring

Basslink resolution close: CitySpring

Summary: Basslink cable owner CitySpring this week said negotiations to switch on the undersea fibre-optic cable to Tasmania were close to concluding, bringing hopes of increased broadband capacity to the island state.

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Basslink cable owner CitySpring this week said negotiations to switch on the undersea fibre-optic cable to Tasmania were close to concluding, bringing hopes of increased broadband capacity to the island state.

(Spirit of Tasmania and curious children
by 29cm, CC 2.0)

"It is certainly leaning towards a conclusion," a spokesperson for Singaporean company CitySpring, which bought the undersea link in August of last year, told ZDNet.com.au. "We're trying to create some creative solutions that will work for everyone."

The comments come days after Tasmanian treasurer Michael Aird uttered similar optimistic sentiments about the talks, which have been held for some months between CitySpring, the state government and Aurora Energy, which will use its infrastructure to link with the undersea cable and other internet service providers.

A number of large ISPs (such as Netspace) have complained that the cable needs to be switched on to provide competitively priced data transmission to the state, which is currently only served by Telstra.

In response to prior accusations that the $2 million fee the government has been paying to CitySpring for access to the cable despite its inactivity has left little incentive to the company to forge an agreement, the spokesperson said the company had spent millions which won't see a return on a dark cable.

"We're working hard to get it active and have it lit," the spokesperson said. "We wouldn't have spent the money or spent the time if we thought it was in our best interests to have it idle."

The issue has been receiving a lot of airtime this week, as Aird said a result was edging closer.

"I am hopeful we are getting closer to a resolution," he told ZDNet.com.au in an email interview. He was unwilling to estimate a timeline for finishing negotiations, but said that the government was doing everything it could to help reach a speedy outcome.

"Improving broadband competition in Tasmania is the highest priority for the government," he said.

Aurora Energy, the partner the Tasmanian government has selected to commercialise the Basslink fibre-optic cable, has also been a party to the negotiations, but declined to give any further comment than the government had offered.

Proof needed
Digital Tasmania, a group dedicated to get Basslink going, was glad to hear progress was being made, but didn't give the assurances much weight.

A spokesperson for the group said that its members had heard such words before. "We'll believe it when we see it," they said.

His scepticism has been founded by a history of dashed hopes. The government started building a fibre backbone for the state in 2003. In 2000, the government had selected Basslink to run an electricity cable under the Bass Strait and lay fibre-optic cable alongside. In 2005, government documents suggested that the cable might be operational by 2006. However, this never eventuated.

We'll believe it when we see it

Digital Tasmania

In August 2007, Singaporean company CitySpring Infrastructure Trust, a wholly owned subsidiary of Temasek, completed the acquisition of Basslink for over $1 billion.

Since that time nothing has happened, as the Tasmanian government, Aurora and CitySpring entered and became bogged in negotiations for an agreement about commercial terms of lighting the cable.

While the cable lies stagnant, Tasmanians can only get their backhaul from Telstra cables across the strait, which other ISPs have said leads to ridiculously high backhaul prices.

"Unfortunately, the cost of bandwidth to Tasmania remains appalling, as often happens under monopoly situations," Internode MD Simon Hackett said in a statement in May just after making the decision to stop offering some of its faster services in the state.

A ray of hope arrived in July as Basslink Telecoms received a carrier licence from ACMA. However, the negotiations continued to drag on until earlier this month, when Aird lost his temper. Confronted by a question at the legislative council about the cable, he said, "I know I am smiling on the outside — but I am fuming on the inside."

He said he had written a letter with officers from his department to lay the hard line down to CitySpring.

"It is not about talking tough," he said. "It is about trying to get people to understand that, as they have an obligation to their shareholders as developers of optic-fibre across Bass Strait, we have an obligation to the community of Tasmania... That is why I am running out of patience."

He said that commercial negotiations were fine, but to deny the state the opportunity to further develop the economy was not.

"The time is nigh when we will be talking very bluntly and very publicly about what is going on. CitySpring are on notice, Madam President, that the government has nearly had enough of their behaviour. I hope they will understand their obligations and our obligations to half a million people because we want to be connected to the rest of the world."

Although CitySpring was unable to confirm whether the letter had arrived and said it wouldn't have changed much, the spokesperson for the company did seem hopeful for resolution.

Michael Aird
(Credit: michaelaird.org)

However, Digital Tasmania was not the only group which was mistrustful of the positive statements, with Greens Leader Nick McKim calling on the government to explain what has taken so long.

"This unacceptable situation has been dragging on for a long time, and the government owes all consumers of broadband in Tasmania an explanation for the delays," he said this week in a statement.

"This situation is causing a significant competitive disadvantage to businesses and let's not forget that it was this government's incompetence which put us in this position."

If the Greens' pressure, along with Aird's determination and CitySpring's optimism do signal the end of the long Basslink saga, Tasmanians could see drastically reduced broadband prices. Digital Tasmania said that activation of the fibre-optic cable could lead to reduced internet access charges for consumers by as much as $15 per month through a reduction in wholesale costs and an increase in competition.

Internode's Hackett agreed that prices would fall. "Telstra, as always, will drop their previously unmoveable pricing to match any competitor that appears, and the result will be two lower cost paths, not one," he told ZDNet.com.au.

"That is how monopolies work — they take 100 per cent of a market while they can (at prices way above commercial rates on competitive routes), and once there is a second path, they lower their price to maintain their market share at no lower than 50 per cent by price-matching the new entrant."

Topics: Broadband, Government, Government AU, NBN

Suzanne Tindal

About Suzanne Tindal

Suzanne Tindal cut her teeth at ZDNet.com.au as the site's telecommunications reporter, a role that saw her break some of the biggest stories associated with the National Broadband Network process. She then turned her attention to all matters in government and corporate ICT circles. Now she's taking on the whole gamut as news editor for the site.

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7 comments
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  • "True Competition"

    Good to see "True Competition" at work instead of OPTUS/Singtel running to the regulator to whinge about and a so called monopoly by Telstra!!
    anonymous
  • how ironic...

    ... considering CitySpring is owned by the same group that owns 55% Singtel.

    One should also note that the precise reason that the State Government subsidises Basslink is precisely because of the entrenched Telstra monopoly across Bass Strait.

    The route between Melbourne and Hobart is a declared route, yet Telstra continues to flout the ACCC and their cost model that shows they should be charging 70-80% less than they currently do.
    anonymous
  • @how ironic

    but basslink are currently paid $2 million per annum by the tas gov for their cable just to sit there idle. while the hacketts of this world are screaming telstra monopoly. what is wrong with this picture.
    anonymous
  • irony

    A declared route means the ACCC can rule on pricing, they have and it has been applied. Do not try and blame Telstra for inflated pricing, blame the lack of aptitude by the ACCC and then lack of desire to invest by other parties.

    They will not switch it on until negotiations conclude, what negotiations? I'll tell you...
    1. Keep paying the $2 to keep it up and running
    2. Agree to switch away from Telstra ASAP at slightly below today's wholesale rate knowing once it switch on they will be getting a windfall because pricing will drop for new contracts.

    We would understand subsidising a working service but to subsidise something that should have been turned on 2 years ago is actually encouraging them to keep it switched off. $2m in income while there is no maintenance or operational costs for a service that would have cost about $20m to run is a pretty reasonable return.

    Aird knows he has been kidnapped and is still being held for ransom and it's not even his money, it's the Tasmanian residents.
    anonymous
  • ..pretty reasonable return?

    If Cityspring paid a billion dollars for Basslink as reported, two million per year income is a terrible return on capital - a mere 0.2%. It's hard to sustain the argument that the Tasmanian government's $2 million makes a lot of difference to Cityspring, but their failure to secure a commercial return on the investment is surprising. Meanwhile Telstra continues to do what Telstra does best - exploit a monopoly situation to the full. That's why it is important that access to the NGN, when it's built, must be more equitable.
    anonymous
  • return on Basslink

    You seem to have missed the point that cityspring make about $90m/year from the Basslink power connector.

    Leasing the fibre in that cable is basically icing on the cake, pocket money for them. The power cable is the main game in town, and why they won't be priced out of the market by telstra shenanigans either.
    anonymous
  • single-path

    Can anyone say "single path". I cant believe no-one has mentioned that this is only a single-path cable and operators have warned that if the cable went down it'd be down for 6+ weeks, who on earth can deal with that? Whats more, Basslink are by no means a discount/competition saviour, from my understanding their opening offers a while back were only a 30% discount vs telstra where telstra is a fully diverse service and theirs is not.
    anonymous