SUBSEA CABLES:
FEATURE
NO LONGER A CYCLICAL INDUSTRY? BY JOHN TIBBLES
T
he submarine cable industry is extremely active and busy as 2023 approaches. Almost twenty-five years the dot.com bubble began to deflate with catastrophic results for the subsea business. Back then demand collapsed rapidly with major telecom companies entering Chapter 11 or other bankruptcy processes. Submarine cables were one of the worst segments to suffer as telecoms investment money dried up. What little investment was left, and along with it all new talent headed for the mobile world. The results were factory closures, layoffs, insolvencies and a great deal of excess capacity both in general terms and more importantly specifically related to all those expensive subsea megabits that it seemed nobody wanted. Deja -vu?
BACK IN TIME, THE MILLENNIUM
The growth of the subsea cable business around the millennium was not just rash speculation, although that certainly happened. International commerce, global corporate networks, massive voice traffic volumes and the promise of the new ‘internet’ were essentially sound reasons as to why new systems were required. Global deregulation encouraged private venture systems alongside the traditional consortium systems. Investment capital flowed into what was seen as a high return technology ventures. But, not for the first time in business, the forecast demand was right, but the X axis was wrong. The internet was not a new business along-
side international voice but the foundation for its eclipse. In addition, mobile phones were just that, phones! They certainly were not smart. Upgrading capacity on a relatively small number of subsea systems was not unduly difficult but terrestrial extension and domestic trunk networks were not integrated with subsea to any great extent. Even worse, what was called the last mile - the Edge in today’s view was hopelessly inadequate for large scale data services and both factors held back deployment of mass digital services. Could things have been different? The panic around the Dotcom bust devastated the subsea industry. Financiers foreclosed, and many major carriers exited the industry. However, even then, on a small ‘startup’ level just a short while later a new class of customer emerged. We now know who they are, and they did need all those idle unused megabits. Collectively referred to as the OTTs or Hyperscalers, they did have bandwidth hungry services that the failing subsea network really needed. These new customers saw the opportunity to acquire capacity - at or below costs; a great opportunity for any enterprise seeking global reach. Demand for internet-based services and social networks began to grow and before long ‘Hyperscalers’ realised they would need building their own systems, no one else was going to take the risk. They had money, lots of it and a clear understanding of demand, for them there was no risk. No JANUARY 2023 | ISSUE 128
77