The Telecommunications Users Association says a $71 million trans-Tasman submarine cable plan by Telecom, Vodafone and Telstra is a shrewd move that will put a stop to any other companies wanting to build their own cable.
The three companies are banding together to provide another telecommunications link between Auckland and Sydney. The new cable is expected to be operation by late 2014.
Telecom already has a 50% stake in New Zealand's sole international cable link, the Southern Cross Cable.
But chief executive Simon Moutter said on Tuesday it is not unusual for phone companies to have stakes in more than one cable.
The Telecommunications Users Association of New Zealand said it is a shrewd move by the three since it shuts the door on any third party coming up with a cable.
Chief executive Paul Brislen said it would be hard to make a business case for a cable from New Zealand to the United States, for example, because of the small population here.
He believes it also puts paid to the idea of New Zealand hosting data and exporting it to a major market such as the US.
"That model now simply won't fly ... because to send data to the US in the future, a large chunk of it would go via Australia which means added latency, added problems with the connection itself and really shoots that model in the foot."
Telecom said the planned cable is cheaper and will strengthen links into Asian markets by using Australia's existing four cables.
Vodafone, which was a customer of Pacific Fibre's aborted plans to build a second trans-Pacific undersea cable, said this new option is an attractive alternative.
Telecom's shares rose 2.5 cents to $2.28 on news of the project.