Chile to Re-Launch Cable Austral Project

Chile's telecoms regulator Subtel plans to re-launch in 2H17 a failed fiber project connecting the country's southernmost regions, Subtel head Rodrigo Ramírez told BNamericas. The project fell flat in October after only one bid was presented for one of the four stretches of the 3,000km network.

Figure 9 - Cable Austral Cable Map

Source: Subtel

Ramirez said that the watchdog would launch a public consultation on December 1 to hear the opinions of the public and private sectors in an attempt to make the auction more attractive.

"We're going to launch a second tender. We'll make the necessary adjustments to the bases. We accept self-criticism. Perhaps the tender lacked more detailed discussion," he said.

Questioned about what changes might be made, Ramírez said that there could be modifications regarding the formation of consortiums, the definition of preferential use of the infrastructure by the state and the time allowed to make repairs to damaged cables in case of cuts.

"This is a bet on the future. It's is not a question of whether there is demand or not. Undoubtedly this new highway will generate demand not just for Chile but for the rest of the continent."

Much expectation was created around the project, for which the government was offering a US$100M subsidy, and which was scheduled to be awarded by January 2017.

Only one company, Conexiones y Telefonía Austral Ltda, submitted a bid for the terrestrial connection in the Magallanes region between Porvenir and Pampa Guanaco.

There were no bidders for the submarine stretches of the cable, which connect Puerto Williams to Punta Arenas, Porvenir, Puerto Natales, Caleta Tortel and Puerto Montt. The other two stretches are terrestrial, connecting Caleta Tortel to Coyhaique and Puerto Montt and Palena.

Speaking recently to the press, Alberto Bezanilla, CEO of local telecoms operator Grupo Gtd, said that the conditions of the tender had not met the company's expectations.

Gtd operates a fiber optic cable running from Puerto Montt to Coyhaique, and Bezanilla questioned the logic of building an additional cable to cover the same route.

However, the executive said that if the conditions were right for the second attempt to auction the Austral fiber, the company would consider participating.

Earlier this year, Subtel signed an MOU with the government of China that included a pledge by the Chinese to study the feasibility of building a trans-Pacific undersea cable that would land in Chile.

The opening of bids in October came the same day that the Chilean government decided to replace former Subtel head Pedro Huichalaf with Rodrigo Ramírez.

Source: BN Americas

ANALYSIS: Although, the new head of Subtel seems clueless as to why this tender failed, the writing was on the wall as soon as the terms of the tender were issued.

The requirement for bidders to have a legal establishment in Chile was onerous but not insurmountable. The poison pill was the restriction on the owners of Cable Austral from offering services, as well as operating the infrastructure. With a small addressable market to remunerate a not inconsiderable capital investment, there needs to be the ability for Cable Austral not simply to be a "carrier's carrier" but to be allowed to offer value-adding services e.g. MPLS, IP-VPN, IP-Sec etc. to provide additional revenue.

​It took a long time for the Chilean government to find the funding for Cable Austral and it is an embarrassment that Subtel failed to understand the needs of potential bidders. Sñr. Huichalaf was a necessary sacrificial lamb.