Ross Pfeffer

Director Sales and Marketing

Southern Cross Cables Limited

26 July 2011

Presented: CommsDay NZ Summit 2011

“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”

SOUTHERN CROSS 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

MARKET MYTHS

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 COMPANY

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

OUR NETWORK

Southern Cross has 2 cables

connecting NZ to the Internet with

extremely high availability

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 LATENCY

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

OUR CAPACITY

5 cables from ANZ that can

expand supply

Existing cables can

accommodate both 40% and

60% compound growth

SUPPLY POTENTIAL

CAGR decline of 23%

Excluding volume discounts

Price Declines reflect

Capacity upgrades

Cable competition

ISP data cap wars (AU)

Resale competition

Southern Cross proactively reduces

price and provides volume discounts

to reflect capacity expansions and meet

broadband market needs.

OUR PUBLISHED PRICE

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SX Published 10G Price to USA per 1G Unprotected

(US$M)

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

OUR PRICE POLICY

– 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

MARKET PRICE NOW

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

DOWNLOAD COST COMPARISON

NZ Data Caps are significantly lower but the cost of capacity

is the same

DATA CAP COMPARISON

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

TB AND UNLIMITED SUPPORT

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

DEMAND GROWTH

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

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

NBN/UFB DEMAND

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

OUR COMMITMENTS TO NZ:

THANKYOU