The New Zealand government's flagship ultra-fast broadband (UFB) project was called into question Wednesday after the collapse of the company that sought to break the existing monopoly on the country's only international Internet connection.

Pacific Fibre issued a statement saying it had failed to raise the 400 million NZ dollars required to fund a fiber-optic cable link to Australia and the United States, leaving Southern Cross Cable operating the only international cable connection to New Zealand.

The government is investing 1.5 billion NZ dollars in rolling out UFB to most of the country, but observers questioned whether the project was viable without the competition to lower the cost of international bandwidth.

Pacific Fibre, which launched in March 2010, had planned to build its 13,000-kilometer high-speed fibre-optic cable with investors such as the UK-based communications company Vodafone.

"We've spent millions of shareholder funds trying to get this done and despite getting some good investor support we have not been able to find the level of investment required in New Zealand initially and more broadly offshore," said chairman Sam Morgan.

The global investment market was difficult at the moment, but " we believed funding for these long term infrastructure investments would have been more readily available and were confident the business case was solid," he said in the statement.

"We started Pacific Fibre because we know how important it is to connect New Zealanders to global markets. The high cost of broadband in New Zealand makes it hard to connect globally and it is this market failure, not a technical failure, that we tried hard to solve," co-founder and director Rod Drury.

"We still cannot see how the government's investment in UFB makes sense until the price of international bandwidth is greatly reduced," Drury said in the statement.

In September 2011, Australian telecommunication research company Market Clarity reported the cost of bandwidth to the US from New Zealand as 5.8 times greater than the price paid by Australians, he said.

Communications and IT spokesperson for the main opposition Labour Party Clare Curran said the likelihood of UFB delivering new services and opportunities to New Zealand had diminished with the collapse of Pacific Fibre.

"The government promised New Zealanders a step change to the economy through fast broadband in their homes, schools and businesses and a super information highway," Curran said in a statement.

"But its 1.5-billion-NZ-dollar flagship program was always dependent on a second high-speed fiber-optic cable connecting New Zealand to Australia and California and providing much-needed competition to bring fiber prices down," she said.

"By expecting the market to deliver a second cable, the government has gambled and lost given today's announcement," she said.

"Its failure is a blow to local industry, it's a blow to the government's UFB project and it's ultimately a blow to the Kiwi consumer and business community wanting to take advantage of new technology."