SEARCHING FOR A LIGHT IN THE FOG Is there a future for the troubled submarine cable industry?
by Michael Ruddy
Although the three-year period leading up to 2002 saw the highest levels of investment in undersea cable systems ever, 2001 proved to be a major disappointment for the industry, and was marked by massive layoffs, downsizing, devaluation, and bankruptcy. Consequently, the undersea cable industry enters 2002 with bated breath and low expectations. There is a widespread belief that the undersea cable market will be significantly affected by the current economic downturn. Many in the industry also suspect that the capital required for major undersea projects has dried up, at least temporarily. And the undersea industry has been particularly disheartened by the view that it suffers from an enormous oversupply of capacity, and that this oversupply will prevent any significant deployment in the near-future. 11
Effects of an Economic Slowdown on the Undersea Cable Markets The industry will indeed be negatively influenced by the current economic recession. The undersea industr y is presently and will continue to experience a slowdown in investment and spending, but as of late-2001, this slowdown had already entered its fourth quarter (no major supply contracts have been signed since January of 2001, when Cable and Wireless commissioned Alcatel to build its Apollo system). Historically, there have been only three contractions in the undersea fiber optic cable market. None of these contractions lasted longer than six quarters. Based on cable activation dates, the first contraction in undersea investment occurred in 1989 when it was off by five percent; the second occurred in 1995, when the market contracted by 15 percent; and the third took place in 1997, when