[AusNOG] Pacific Fibre to cease operations..

[Mark Newton]

On Wed, Aug 01, 2012 at 03:42:46PM +1000, Martin - StudioCoast wrote:

 > This raises some interesting questions. Does this indicate a current 
 > oversupply of international capacity in Australia (at least in the short 
 > term)
 > or was it just the case of poor management?

There's always been an oversupply of capacity in Australia.

The price for transpacific capacity isn't set to manage scarcity, 
it's set according to the usual principles of "whatever the market
will bear" to attain the cable owners' profit targets.

The price then sets an artificial scarcity which is managed by 
retail pricing in the Australian internet marketplace:  Although
plenty of capacity exists, ISPs in Australia only buy the bare 
minimum of what they need because it's expensive, then they 
use quotas and shaping to control customer behaviour to make users
remain within the purchased envelope.

So the transpacific leg exhibits the economic charactistics of 
scarcity in the retail space, and the economic characteristics
of oligopoly in the wholesale space, and everyone constrains their
use for financial reasons even though currently installed cable
systems carry more capacity than Australia can feasibly use for
many years.

Care for a breadstick?

  - mark