A formula for marine maintenance?
15 January 2011 | John Hibbard
How to address the finer points of negotiating cable maintenance agreements during a period of transition.
Many of the current marine maintenance agreements will come to an end in the next 18 months. Renegotiation of these agreements, which cover the use of cable ships to make repairs to systems, is bound to be tense.
The tension arises because the cable-ship owner needs to be sure that, if a ship is assigned for maintenance and limited in its ability to undertake more lucrative laying, the cost of the ship is covered even if it does no repairs. Cable-ship owners have been unwilling to take any entrepreneurial risk whereby if the number of faults was above some average they would make money but if below average, they would not have their costs covered.
But new tensions have arisen. The fall-out from the Taiwan earthquake of 2006 has seen a strong adoption of diversity and mesh networking so that alternative routes minimise the impact on service in the event of a failure. In theory, this reduces the requirement for immediate repairs, though not in locations such as the Pacific where there is only one cable. Those places with only one cable usually have small capacities, limited revenues and hence reduced capacity to pay for cable maintenance. Whereas a 1Tbps cable can cost about 40c per Mbps per 1,000km annually, a 1Gbps can cost $400 – a large figure for a party less able to pay. As systems are upgraded from 10G to 40G and even 100G, the current norm of determining the standing charge solely by length means that although business revenues burgeon, no additional contribution is made to the maintenance pool.
The FCC recently took a decision to have graduated licence fees dependent on enabled capacity, so a cable with 1Gbps pays one eighth of the fee of a cable with 100Gbps. While clearly not linear, it recognises the different capabilities to pay of smaller and larger systems. As more faults occur in a region, maintaining the mean time to recovery dictates that each ship must cover fewer cables which may necessitate an additional ship.
All the above parameters are formulaic and could be set in an equation. Choose your terms and conditions, set these against the characteristics of the cable and calculate the maintenance cost for your system, making negotiations unnecessary. Feasible? It seems so. It is just a matter of agreeing the parameters in a “universal formula” containing all the parameters.
John Hibbard is CEO of Hibbard Consulting. He can be contacted at:firstname.lastname@example.org
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