Reaction was mixed to the news last month on the failure of the proposed fibre optic cable from New Zealand to the rest of the world.

Some described it as “tragic news for New Zealand” while others saw it as being an “audacious thing to try and do.”

InternetNZ used the opportunity to again push for the government to support infrastructure projects that compete with Telecom’s grip on the market.

Another commentator said that it was “scuppered by American concerns about Chinese investment in the venture and fears that might allow for Chinese espionage.”

So much vested interest that it is hard to work out the pros and cons of the situation.  So some facts.

Pacific Fibre’s proposed 13,000 km high-speed fibre-optic cable was planned to connect New Zealand with Australia and the US.  It would have provided an alternative to the existing Southern Cross cable owned by a joint venture between Telecom NZ, SingTel Optus and Verizon.

Pacific Fibre was launched in March 2010 by a group of populous entrepreneurs including TradeMe founder Sam Morgan, The Warehouse founder Sir Stephen Tindall, and technology entrepreneur, Rod Drury.

The National Business Review reported that investment by the NZ Superannuation Fund was sought, but they deemed the venture was “too risky”.

Simply, the venture failed because it could not attract sufficient investor funding.  Which means that the savvy business people who did the due diligence on the project either did not see a sufficient business return and/or saw too many risks with the venture.

Some reality to the debate is brought by industry analyst Reg Hammond in an interview with the Dominion Post.

He argues that there has never been a business case for another NZ-US trans-Pacific cable.  He believes that the business case for a NZ-Australia cable will “only stack up once the Southern Cross cable becomes unreliable.”

In a Computer World article, acting Telecom NZ Chief Executive Chris Quin indicated that the Southern Cross cable derived only 5% of its income from New Zealand.  So New Zealand is a price taker for services over that cable.  Southern Cross have consistently dropped their wholesale pricing.

Whether a competing trans-Pacific or trans-Tasman fibre cable will affect our domestic broadband pricing is a mute point.   Retail prices are higher in New Zealand because our ISPs are smaller and cannot purchase international bandwidth at the same volume-based price points as Australian ISPs.

The existing Southern Cross cable has sufficient capacity, or is able to have capacity added at a capital cost that is small compared to laying a new cable, for our international bandwidth needs.

So where does this leave the other proposed trans-Tasman fibre cable?  Axin chairman Robin Lee has not returned calls so the question cannot be put to him.

Axin is a New Zealand company formed by people with only loose connections to government-owned China Telecom.  They have formed a joint venture with Huawei Marine Company to build a $100 million fibre optic cable between Sydney and Auckland.

The plan was to land the cable at Kariotahi on Franklin’s west coast.

However, the Australian Financial Review reported in March, that the Australian government was investigating another proposed cable that Huawei Marine intended to build.  That review is believed to be based on similar security concerns that saw the Australians bar Huawei from supplying equipment to their National Broadband Network.

What all this means is that the focus can now come off international bandwidth matters and go on to what matters more – rural bandwidth which remains inadequate under the Rural Broadband Initiative.