BACK TO THE FUTURE The Rise of the Regional Systems Market The rise in prominence of the pure wholesale-level network operator / constructor came about in the late-20th century due to the confluence of a set of specific and unique circumstances in the telecom industry. The spectacular early financial success of the private carriers’ carrier network development model was simultaneously unexpected, insufficiently understood, over sold, and misapplied during the heady days of the boom in fiberoptic submarine cable construction. The opportunity for private systems was due to confluence of rising demand of unknown proportions, the lethargy of the traditional consortium systems development model, buoyancy in the capital markets and resultant fever-pitch of investment in technology sector, and the early successes in telecom infrastructure builds in capitalizing on the opportunity to finance, build and liquidate.
By Tom Soja
Clearly the lessons learned were mis-applied and over sold, leading to an overabundance of “me too” (read: non-differentiated) strategies guiding vast new infrastructure builds fueled by easy access to credit and capital markets. Although the first mover advantage was often cited as the sine qua non of future market success, second and third mover advantage is now creating arguably larger opportunities for both new-entrant consolidators and more long-time traditional style operators to pick up the pieces and evolve the telecom business into the 21st century. Consolidation and shifting strategies have left relatively few pure-play wholesalers in the marketplace. Barring the unforeseen rapid emergence of a new “killer app” or a profound shift in telecoms usage patterns, there is sufficient capacity on the densest traffic routes to satisfy any type of realistic or believable market demand forecast for the next five16
to-ten years at a minimum. The exceptions are the Europe-Asia route, which is in the process of being addressed by SEA-ME-WE-4. However, even that initiative might fade into irrelevance as sub-regional network builds usurp the opportunity to address the same market needs. The transpacific market could see at least one new system, despite a mathematical adequacy of capacity or potential capacity (including yet-to-be implemented upgrades) on an aggregate basis.
The Mathematical Imperative The early phases of the telecom boom period were driven by a need to fill rising demand which could not met by existing facilities. While this will continue to drive new cable deployments in select markets, there will also be an opportunity for strategic and economically justified over-builds in other markets.