FEATURE
TRANS-PACIFIC MARKET CAPACITY:
Innovating and Adapting in the Face of Challenges
A
PTelecom sees the Trans-Pacific market changing dramatically over the next twenty-four months. In excess of 40 new fiber pairs will come into service on at least 6 new cable systems, adding over 800 Tb of capacity across the Pacific given new builds underway from HKA, PLCN, B2B, RTI, and other systems not yet announced publicly. From a routing perspective, the majority of this new capacity is planned between Hong Kong and California, yet we are now seeing the development of routes opening up directly connecting Singapore to California. The aim here it seems to be, is to address the risks associated with the Luzon Strait and the South China Seas. In the background, India has a desperate need to replace antiquated infrastructure and these new systems planned to directly connect Singapore to the United States may well provide the answer at what appears to be the right time, given the recent announcements of new builds between India and Singapore. An interesting point to consider, is with the amount of capacity coming into service Trans Pac will be massively disproportionate to the amount of Inter Asia-Capacity between Singapore, Hong Kong and Japan. This should spur on additional investment in new systems on the thickest routes in Asia, being the ‘triangle’ between Singapore, Hong Kong
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SUBMARINE TELECOMS MAGAZINE
BY ERIC HANDA
and Japan. SJC2 will simply not be enough, especially if we layer on top of current Asia – US forecast demand the current moves being made by Chinese content players reaching into South East Asia to grow their businesses, intra-Asia is a long way from being over-serviced with capacity. APTelecom anticipates Trans-Pacific pricing coming close to parity when compared to the North Atlantic in the midterm and for the first time, the North Pacific - Asia connectivity and North Atlantic connectivity will have similar pricing scenarios, yet very different demand profiles will continue to prevail. Asia - US will continue to outstrip EU - US demand due to the ever-increasing tele-density rates and need for streaming and the delivery of content in emerging markets. Our view of current pricing in the Pacific in 2019: Japan – USA: Lease 100G = US$15,000 (monthly) Japan – USA: IRU 100G = US$600,000 (IRU) Some views: • Trans Pac will see greater price decline than what has been a very consistent negative CAGR of 17.5% per annum. It could reach close to 30% or more 2021 onwards or even sooner • Traditional Trans Pac buyers are largely in a ‘wait mode’ to see what happens to price points as this new capacity