The significance of PPC-1

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An article in Crikey yesterday drew attention to the relative lack of media coverage over the imminent launch of PPC-1, Australia's newest undersea cable linking Sydney, Madang (PNG), and Guam. Its a project undertaken by PIPE networks (disclosure: I own shares in ASX: PWK).

PIPE has a history of shaking things up in the Aussie telco industry. The average tech consumer may know of them for their peering exchanges but just as significant, if not more so, is their dark fibre network. This is used by ISPs to connect their various DSLAM networks, meaning that if you're an iiNet, Internode or TPG user (think ADSL2+) you're more than likely traversing some PIPE fibre somewhere. (Its probably true of many other ISPs too, these are just 3 of the larger ISPs that come to mind when I think of owned & operated DSLAM networks.)

In a 2005 iiNet presentation there's a breakdown of the cost difference between using Telstra's DSL network and iiNet rolling their own:

iiNet DSLAM = improved cost base

Those costs roughly hold true to today. Here's an excerpt from from Slide 14 of iiNet's 2009 annual presentation.

iiNet ARPU and gross margins

The gross cost is essentially iiNet's cost to connect a customer to their network which would include fees paid to Telstra for access to their copper network & exchanges, as well as the cost of linking each exchange back to their core network (via services like PIPE's dark fibre).

That little bit of background was to illustrate PIPE's effect on the Australian ISP industry thus far -- they've helped to move the cost of a 1.5 Mbps service @ $55/month to something 10-15x faster at a cost of $20/month.

With the PPC-1 project they are having a similarly large impact on the other component of internet service - transmission to/from the broader (global) internet.

Less than two weeks ago Southern Cross Cables announced price drops on their services.

Prices for circuits to the US, from both Australia and New Zealand, have just been reduced by 15% bringing reductions over the last 18 months to more than 50%. "These reductions are made possible by our ongoing implementation of cost effective capacity expansions and that's great for high speed broadband".

Of course their price drops were entirely due to their improved efficiencies and little to do with PPC-1 coming online. =)

What this all means for the average internet consumer is increased value in internet plans over time. I use the term "value" here rather than "savings" as its unlikely that users will see a direct decrease in their internet costs but more than likely there will be increases in quotas offered at each price point, and for some of the less performant ISPs you should see better performance as they can now afford to buy more capacity. ;)

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This page contains a single entry by goosmurf published on August 27, 2009 12:34 PM.

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