[101933] in North American Network Operators' Group
Re: Lessons from the AU model
daemon@ATHENA.MIT.EDU (Randy Bush)
Sun Jan 20 21:44:13 2008
Date: Mon, 21 Jan 2008 11:21:34 +0900
From: Randy Bush <randy@psg.com>
To: Geoff Huston <gih@apnic.net>
CC: Andy Davidson <andy@nosignal.org>, Andrew Odlyzko <odlyzko@dtc.umn.edu>,
nanog@merit.edu
In-Reply-To: <4794015C.2010509@apnic.net>
Errors-To: owner-nanog@merit.edu
Geoff Huston wrote:
> 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.
QED! <grin>
