Submarine cable construction boom finally over, says TeleGeography

March 12, 2003-- According to a report released this week by research firm TeleGeography, the recent completion of transoceanic systems by Tyco Telecom and Cable & Wireless marks the end of a construction craze which increased communications capacity across the Atlantic and Pacific over 30-fold since 1998.

Two years after the telecommunications 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 and Cable & Wireless 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," explains TeleGeography senior 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% in 2002, down from over 200% for the past several years. Furthermore, prices have plunged faster than planners expected four years ago--over 90% 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

Note: The construction cost is based on the year that the cable entered service. The cost of subsequent capacity upgrades and annual operations and maintenance are excluded.

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