Pipe dreams - Undersea cable will have connectivity costs

Written on the 17 June 2009

Pipe dreams - Undersea cable will have connectivity costs

Pipe Networks Limited began with a $100,000 investment between two mates in 2002. Since then it has grown into Australia’s third largest fibre network company, with a $200 million undersea cable that has the potential to cut international connectivity costs in half. With an aim to make Australia’s broadband faster and more affordable, CEO Bevan Slattery tells Brisbane Business News about an urgent need to improve internet connectivity if Australia is to keep up with the rest of the world.

WHEN a senior officer from a major telecommunications company calls you up threatening to cut you ‘off at the knees’ then you know you’re involved in some serious business.
Pipe Networks CEO Bevan Slattery will not disclose who made the aggressive phone call to him last year, but it is certainly an indication of how significant his company’s projects will be to Australia’s business infrastructure.
“Last year I received an aggressive and abusive phone call from a senior officer of a publicly listed telco, saying they’d cut us off at the knees and make it a priority to destroy a specific project of ours — I was shocked and surprised but I have a feeling that alcohol was involved,” says Slattery.

He cites the financial crisis as the company’s biggest challenge to date without question, as Pipe Networks needed to raise $100 million in project finance for an undersea cable to Guam, but the banks pulled out at the time when he was hoping for credit approvals.

“What followed was four months of insanely dark times, but then we asked the question ‘are we able to do this without the banks?’ We were able to bridge the finance with the help of a number of second and third tier internet service providers and our suppliers,” he says.

The business has come along way since 2002 with Steve Baxter on ‘an absolute shoestring’ of $50,000 each. The original goal was to set up an annuity stream so the two friends could go fishing every Friday.
But they only went fishing once.

Undersea connection
At 38, Slattery has taken to the water but in a totally different context – with an undersea dark fibre cable from Sydney to Guam he expects to be completed in July, he hints that international broadband costs to Australia could be halved and download quotas could double next year.

“We’re starting to see quotas increase now, and we’ll do four to six weeks of testing before we go live in September – we expect that early next year we’ll start to see the results.
“Currently 70 per cent of internet traffic originates outside Australia — while internationally companies have increased capacity as demand grew so rapidly, that didn’t seem to happen here.

“Whilst building an undersea cable was completely different territory for us, it actually is completely consistent with our business – once we break even with this we will start to be bringing in some quite large revenues.”
The international move comes in addition to a large domestic network that he intends to continue rolling out. The company currently has 1250km of fibre in the ground in most major capitals but in a couple of years he expects this to increase to 1500km.
“This financial year we’re forecasting a profit of $11 million after tax and next year we’re certainly not seeing any slow down as a result of market forces.”

A need for change

Slattery commends the job that Australia’s telecommunications providers and ISP networks have done in bringing the country one of the best wireless services in the world, but believes there is always room for improvement – especially when it comes to overhauling the existing copper network.

“In the next five years if we don’t start to move off the copper network then by 2020 we will start falling behind the rest of the world. We need to commence doing more than we’re doing now and take the step into fibre to the premises, or else internet connectivity in Australia could become like taking a step back in time,” he says.

“The reason why faster internet is important is not necessarily to do with downloading files, but because in the future there will be a series of applications that will require it to operate.
“People who want to use these applications as much as possible, such video on demand, high definition video and video conferences may not even be able to access them, or all their features if we stay in a copper-connected world.”
The big break came for Pipe Networks in 2003 when Slattery and Baxter decided it was cheaper to lay their own carrier of dark fibre networks than to buy it. Local Brisbane companies such as Suncorp, Flight Centre, Virgin Blue, Bank of Queensland and Credit Union Australia quickly became clients. By 2005 Pipe Networks then had the third largest telecommunications network in the country.

Baxter has since moved on to the US with Google but Slattery keeps in contact with him for business advice and is happy that business has continued to grow after his departure.
“It hasn’t been difficult since he left, which is actually a really good sign as I know that if I go the company will continue to operate normally as business is bigger than any person,” he says.

What he enjoys most about his job is seeing the company and the team grow. There’s been loyalty with clients as well and he says it feels heartening to see how committed people are to the company, which grew from the idea of two friends.
“In seven years we’ve built Australia’s third largest metropolitan fibre network, seven to eight data centres and are now building a $200 million submarine cable connecting us to the world. It’s been a high-growth company, especially considering we’ve never made any acquisitions,” he says.

“All this from our headquarters in Creek Street, so there’s been a change in the industry. A company doesn’t have to have its headquarters in Sydney, New York or Tokyo. We’ve got enough talent right here in Brisbane.”

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