Ross Pfeffer Director Sales and Marketing Southern Cross Cables Limited 26 July 2011 Presented: CommsDay NZ Summit 2011
SOUTHERN CROSS MYTHS Controlled by TNZ Latency to the US can be significantly reduced Holds back capacity supply Imposes data caps Exploits its NZ market position Cannot support NBN and UFB
MARKET MYTHS More cables are required for security International Capacity demand grows at 60%+ pa NZ data caps are low because of international prices NZ s smaller ISP s must buy capacity on long contracts at high prices All Subscribers need Unlimited / TB plans Existing cables can t support Unlimited / TB Plans
OUR COMPANY Private and independent Multi national ownership TNZ, Singtel, Verizon The owners compete Board decisions require unanimity or super majority Southern Cross cannot be controlled by TNZ
OUR NETWORK 30,500 k 2 cable ring network with 10 access points 99.999%+ availability Constructed 2000-01 Engineered until 2025 In commercial service until 2025+ Costing US$1.4B Southern Cross has 2 cables connecting NZ to the Internet with extremely high availability
OUR LATENCY SX actual delay AUC-Haw-LA is 61 msec The minimum possible AUC-LA direct is 53 msec, An actual AUC-LA likely to be 56-61 msec Potential to reduce latency by 0 to 5 one thousandths of a sec by not going to Hawaii
OUR CAPACITY We have expanded capacity 4 times We are expanding again to be completed late 2012 Current upgrade adds 800 Gb and takes Lit capacity to 2 Tbps Southern Cross has consistently expanded capacity ahead of total market demand
SUPPLY POTENTIAL 5 cables from ANZ that can expand supply Existing cables can accommodate both 40% and 60% compound growth
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 OUR PUBLISHED PRICE CAGR decline of 23% Excluding volume discounts Price Declines reflect Capacity upgrades Cable competition ISP data cap wars (AU) Resale competition $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 SX Published 10G Price to USA per 1G Unprotected (US$M) Southern Cross proactively reduces price and provides volume discounts to reflect capacity expansions and meet broadband market needs.
OUR PRICE POLICY Customers are treated equitably Substantial Volume discounts to support a strong resale market Small ISP s in both AU and NZ purchase on the resale market We compete in both the AU US and HW US markets Our NZ Prices are always competition based: NZ US = AU US NZ AU = HW US Our Prices will support the needs of NBN and UFB
MARKET PRICE NOW Market IRU Price per 10G Unprotected US$0.8M to US$1.2M per Gbps Or an estimated 5 cents per GB of download (15 year IRU) Price declines are driven by 4 competing systems capacity expansions resale market SX is building the next price initiative to be associated with our 2012 upgrade
DOWNLOAD COST COMPARISON International data cost is about 5 cents per GB International price is not a bottleneck NZ Download Cost is significantly higher but the cost of capacity is the same
DATA CAP COMPARISON NZ Data Caps are significantly lower but the cost of capacity is the same
TB AND UNLIMITED SUPPORT TB and Unlimited plans widely available in AU now Average download per fixed subscriber is less than 10GB (Dec 2010) Lit capacity can support average downloads of up to 50 GB per subscriber. Potential capacity can support average downloads of 500 GB per subscriber (every user, every month) ISPs set Data Caps and Monthly Charges Not Southern Cross
DEMAND GROWTH Demand grew by up to 40% pa due: Increasing access speed Reducing cost of data New applications and content Changing user requirements Demand Growth is moderated by: Cache (25-30%) Contention
BROADBAND REALITIES Internet responsiveness depends on ISP set contention and access speed Data Caps are set by ISP s and reflect their market, not capacity prices Most subscribers do not need Unlimited or TB plans Capacity prices are not holding back high speed broadband Capacity supply is not holding back high speed broadband
NBN/UFB DEMAND Affects are very unclear Access Speed has already increased dramatically and will continue Move to Mobile Data (with substitution for fixed line) Fixed Line subscribers only using 15% of their average data cap in AU (44GB) Caching will continue to grow quickly (estimated at 30%) Future growth: Around 45% over the next 5 years then declining
OUR COMMITMENTS TO NZ: Expand supply ahead of demand for UFB and NBN (next capacity expansion by Mid 2012) Reduce price as the BB & Capacity market s require Price NZ US capacity no higher than AU US Price NZ AU capacity no higher than HW US Provide an extremely reliable diverse network and make protected products cost effective
THANKYOU