Back from the Deep

22 Apr 2008

The undersea cable business continues to be stuck in a cycle of feast, famine, and feast again. New data from TeleGeography’s Global Bandwidth Research Service reveal that the undersea cable business is in the midst of a new investment boom, seven years after the first boom flooded the market with excess capacity. TeleGeography projects that at least 25 new cables, costing approximately USD6.4 billion, will be constructed between 2008 and 2010—and this figure is likely to rise as plans for a number of other proposed cables solidify. The investment boom is global, with new cables planned for every regional market, with the exception of the Atlantic.

For once, dwindling capacity is not the only reason for the new wave of construction; currently less than 25% of potential capacity on existing subsea cables on major subsea routes is active. Rather, new cable projects are forming out of a need for a broader range of restoration options in case of cable failures, the desire for more diverse routes between two destinations, and stubbornly high capacity prices in markets that have ample capacity but few competitors. While most cables are being built in response to individual carriers’ business needs, there is a real risk of oversupply in both Africa and across the Pacific.

The rapid expansion of network construction also presents a challenge for the equipment makers that are building these cables. After lying fallow for almost half a decade, equipment vendors are suddenly having to ramp up production to meet surging demand. However, these suppliers are keenly aware of the cyclical nature of the submarine cable industry and wish to avoid being left with excess manufacturing capacity once this building boom wanes.

TeleGeography’s Global Bandwidth Research Service provides the most detailed analysis of the long-haul network and submarine cable industry available—including supply, demand, costs, and pricing analysis analysis as well as profiles of 119 submarine cables and 176 network operators.

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