Submarine Cable Construction Boom Finally Over
March 12, 2003
Two years after the telecom industry
began its rapid collapse, the undersea cable building boom has finally
come to a halt. According to a report released this week by research
firm TeleGeography, the recent completion of transoceanic systems by
Tyco Telecom (NYSE: TYC) and Cable & Wireless (NYSE: CWP) marks the end
of a construction craze which increased communications capacity across
the Atlantic and Pacific over 30-fold since 1998. Only $1 billion is
scheduled to be spent on new submarine cables entering service in 2003—down from $13 billion in 2001.
"The building boom is over because existing submarine cable operators
have a great deal of upgradeable capacity available to them at
relatively low cost," said senior TeleGeography analyst Alan Mauldin. "Combined with the effects of a cautious investment environment and
a general slowdown in demand for long-haul capacity, it's unlikely that
we'll see any new cables laid across the Atlantic or Pacific before
2006."
Although the end of the building boom should help take up slack in
submarine bandwidth supply, TeleGeography's research on bandwidth demand
and prices paints a stark picture for major network operators.
Submarine bandwidth purchases increased only 30 percent in 2002, down
from over 200 percent for the past several years. Furthermore, prices
have plunged faster than planners expected four years ago—over 90
percent on many competitive routes.
| Construction Cost of Submarine Cables, 1998 - 2003 (US$ billions) |
 |
| 1998 |
$1.4 |
| 1999 |
$2.7 |
| 2000 |
$6.7 |
| 2001 |
$13.0 |
| 2002 |
$3.4 |
| 2003 |
$1.2 |
|
| Notes: Construction cost based on the year that the cable entered service. The cost of subsequent
capacity upgrades and annual operations and maintenance are excluded. |
From: International Bandwidth Volume 1:
Submarine Networks 2003
Source: TeleGeography, Inc. |
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