Why 7am News Moved Offshore in 1997

7am News provides news ticker service over the Internet (see above). On October 23, 1997, we were informed that 7am News was going to shutdown its New Zealand based site (www.7am.co.nz), and move all operations to a site (www.7am.com) located in the USA.

Editor of 7am News Bruce Simpson explains why his site moved offshore:

7am News moved offshore to reduce its data transfer costs and increase the bandwidth of its connection to the Internet. As a web surfer, you might wonder what's the problem with that.

The obvious problem is that NZ jobs move overseas and the brain drain from NZ continues. Less obvious is that New Zealanders now download the 7am News from the USA thus increasing import traffic on the international data links. It costs 7am News less to send their data to a NZ web surfer from the USA than from within New Zealand! However, the reverse is not true. It costs your ISP much more for data imported from the USA than data produced locally. Therefore, by moving overseas, 7am News has shifted the cost of international data transfer to its New Zealand customers.

With the current cost structure, the data-trade-deficit will only increase. NZ web surfers (and their ISP's) will continue to pay for an increasing amount of imported data, even if that data is of local origin. This will make New Zealand a client-only-nation to the USA-server in the global digital economy.

A low-cost link from New Zealand to the rest of the internet would help reduce the data-trade-deficit, but perhaps a change in the cost structure would be needed to entice the likes of 7am News back to New Zealand.

Undersea cables such as the proposed "Southern Cross" have matched fiber-pairs, one for each direction of data travel. The best use of this resource is to balance incoming and outgoing traffic. As we have seen, the current cost structure discourages content providers from using the export side and encourages them to use the import line instead of local distribution. What is required is pricing that encourages data-export and encourages local content providers to remain in New Zealand.

Last updated 24 October 1997.
© Peter H. Nelson 1997. All rights reserved.