22 May 2018
The rise in subsea cable investment noted by TeleGeography a year ago has continued. It will continue to rise as content companies need more capacity
Following several years of relatively sparse submarine cable
development, 2016 ushered in a period of significant global
investment in the sector.
Cables with a combined construction cost of $4.9 billion
entered service during 2016 and 2017. Operators have set aside
an additional $8.7 billion of capex for new cables between 2018
The transpacific route leads the way with $1.8 billion of
new cable investment expected in 2018 to 2020.
Source: TeleGeography from announced contract values and
Expanding the frontiers
Content providers’ investments have largely
focused on transatlantic, transpacific, US-Latin America and
Other routes are likely to draw content provider-backed
cable construction. In particular, India-Singapore,
India-Europe and Europe-Africa may attract interest.
In some countries, content providers may not possess the
legal or regulatory authority to land cables themselves and may
need to rely on carriers or specialist companies who can
operate a cable on their behalf.
While the number of content providers involved in building
subsea cables has been limited so far to a handful of US-based
companies, new entrants are likely to emerge.
In particular, Baidu, Alibaba and Tencent from China
– sometimes collectively referred to as BATs
– are expanding their cloud computing platforms
globally. While their requirements seem relatively modest at
present, they are growing rapidly.
These content providers – or Chinese carriers
purchasing fibre pairs on their behalf – could be key
members of new cable builds in the future.
From cloud to edge
Cloud computing has funnelled an increasing amount of demand
to centralised cloud data centres, but edge computing is
emerging as a way to have some comput-ation and storage nearer
A key advantage of edge computing is the shorter distance
data must traverse, which reduces latency.
Augmented reality (AR), virtual reality (VR) and the
internet of things (IoT) are applications that stand to make
substantial use of edge computing and have a muted impact on
long-haul bandwidth demand growth.
While edge computing may seem the inverse of cloud
computing, these techniques should be viewed as complementary,
with each method employed strategically based on the tasks
Rising uSE and looming cable retirements
Even with the introduction of many new cables and the
ability for older cables to accommodate 100Gbps technology, the
growth of potential capacity has failed to outpace that of lit
As a result, the percentage of capacity that is lit on major
routes began to rise slowly between 2013 and 2017.
During this period the share of potential capacity that was
lit rose from 17% to 30% on transatlantic cables, while the
transpacific route increased from 22% to 29%.
As demand continues to rise, operators of older cables must
continue invest in capacity upgrades if they hope to remain
competitive. However, as spare capacity dwindles, operators may
soon be forced to make tough choices.
Cables with a lower-than-average upgrade ceiling will
eventually become uncompetitive as annual unit cost of
operations and maintenance exceed the annual unit price of
capacity on newer cables. Once this threshold is reached, a
cable will have reached the end of its economic life, and will
be a candidate for retirement.
Even when capacity upgrades are feasible, submarine cable
system operators must still assess whether or not upgrades on
an aging system are economically justified given its remaining