[101932] in North American Network Operators' Group
Re: Lessons from the AU model
daemon@ATHENA.MIT.EDU (Geoff Huston)
Sun Jan 20 21:42:42 2008
Date: Mon, 21 Jan 2008 13:20:12 +1100
From: Geoff Huston <gih@apnic.net>
To: Randy Bush <randy@psg.com>
Cc: Andy Davidson <andy@nosignal.org>, Andrew Odlyzko <odlyzko@dtc.umn.edu>,
nanog@merit.edu
In-Reply-To: <4793E814.7090102@psg.com>
Errors-To: owner-nanog@merit.edu
Randy Bush wrote:
>
> and pricing in australia had nothing to do with a monopilist telco with
> a rapacious plan highly well articulated and sold to the govt by an
> arch-capitalist with a silver tongue?
I don't know about that. However, I do know that relatively small
isolated communities in the bottom end of the South Pacific Ocean have
to make somewhat tough calls in the provisioning of international
connectivity. Satellite is too slow, so it has to be submarine cable. If
you head west on cable then the costs escalate because of the
transcontinental costs just to get the the west cost and the trans-
Indian Ocean runs are either long or run very close to geologically
active areas, and even when you get to Singapore you still have to do a
full trans-Pacific to off load the majority of your traffic, so the end-
to-end delays start to rise. If you head north from the East Coast of
Australia then in theory you can tap into the larger equatorial and
north Pacific east west capacity market, but at the same time the end to
end delays are high and the cost of heading north is almost the same as
the costs of heading north east. And the east west market is highly
uncertain - during business slumps capacity could be had very cheaply,
but when asian demand is strong hen the price escalates very quickly, so
there are some risks with this option. Or you can head directly north
east, as Southern Cross has done some years back. The transmission delay
is as close to optimal as you can get, but it doesn't negate the fact
that at one of the cable is a community of 24M people, which is not
exactly a big market by anyone's metric, and these 24M individuals have
to fuel the entire business case for the infrastructure investment.
Southern Cross cost some US $1B to construct about a decade ago - I
suspect that a comparable project today would cost somewhere between
$300M and $700M depending on the amount of redundancy you are after, lit
capacity, and the precise landing points of the cable system. But these
days its an investment not without risk, as the existing deployed
systems have a significant capacity overhang in the AU/NZ end of the
market and therefor have the ability to undercut the price of any new
venture if they wished. So new ventures in cable systems in this part of
the world normally requires the buy-in from larger cashed up players.
The consequence is that aspirations of a fiercely competitive market
with follow-on in pricing drops to end consumers tends to be difficult
to realize. I suspect that in these markets it more of a battle between
bankers and investment models than it has any bearing on the technology
or the end user costs in the long run.
