The old joke that the internet is a series of tubes isn't entirely inaccurate. The undersea cables which carry the information between countries and servers are vitally important if you live on an island in the Pacific Ocean.

Whoever owns the cables controls the flow of data and the prices. When there is a monopoly those prices can be high - around 10c per gigabyte for data between the US and New Zealand. That's not a typo, it's a wholesale rate, but more on that in a minute.

Right now there is one cable between Australia and New Zealand, and one between New Zealand and the US. It's called the Southern Cross Cable Network and connects Auckland to Sydney, and Auckland (via Hawaii) to California. This cable carries nearly all the data from New Zealand to the rest of the world and is half-owned by Telecom.

But now competition is looming. A joint British-Chinese venture (Axin) is in the starting phase of a new cable between Auckland and Sydney; and a New Zealand group has proposed a cable system connecting Auckland to Sydney and California.

Competition, as we all know, drops prices. Considerably, in fact. When Axin signed the contract for a marine survey, required before cable can be laid, Southern Cross Cable dropped the price of data between the US and New Zealand by 44 percent to 6c per gigabyte. That's the kind of drop that makes a thud when it lands.

Of course this is not a price consumers can get. But the drop will surely mean cheaper broadband is coming and price is the main barrier to adoption here. 

A Commerce Commission paper (the first of three) looking at demand for ultrafast broadband found price, especially for new wiring, was the main factor impeding uptake. It also found other "perceived problems" such as data caps and net neutrality were not an issue for consumers. I disagree, but the research says otherwise.

Southern Cross Cable says its price drop is "purely coincidental", to which I'm sure many added "yeah, right".

Hadyn Green - Technical Writer

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