Asia Developments in Submarine Cable Networks
Introduction The shakeout in the submarine cable market in the Asia Pacific region has continued as operators, struggling to handle the changing nature of the market, confront a range of problems. The severe overprovision of undersea cables in the region five or more years ago has seen a lot of unlit fibre sitting doing nothing. More recently we have seen the emergence of VoIP services as a cheaper alternative to the traditional IDD traffic. So those providers that had been reeling under massive debt burdens and overcapacity following the global telecom slump, were hit by a wave of increased competition in the marketplace. This segment of the industry has been experiencing huge price declines – typically 30% to 40% a year. On some routes, prices have dropped by 90%. And all this has led to a string of corporate casualties.
By Paul Budde
In the last 12 months or so, however, the bad news certainly seems to be easing. And development activity has started to pick up, although so far it has been centred around a few specific events. Creating interest in 2005 we saw India’s VSNL finalising its acquisition of Tyco (overcoming some reservations in the US), and China Netcom ramping up its involvement in the sector after the acquisition of Asia Crossing (forming Asia Netcom). Also interesting has been the progress of a number of new cables on the very busy route between India and Singapore.
Paul Budde is the managing director of BuddeComm, a global independent telecommunications research and consultancy company. It operates a global network of 45 researchers and consultants. The website (www.budde.com.au) has 1,700 research reports covering 170 countries, 400 companies and 200 technologies and applications. The company operates what is believed to be the largest telecommunications research service on the Internet and has over 3,000 customers in 80 different countries.
We can expect rationalisation within the Asia Pacific undersea cable market to continue as oversupply works its way out of the system. The demand for wholesale services will continue to rise, driven in the short term by voice services, but in the longer term by data services. Asia’s booming IP-based service market will expand further, with the volume of international Voice over Internet Protocol (VoIP) traffic into and out of the region increasing and making significant inroads into the traditional IDD traffic. In the short term this shift in the market has distorted the demand for bandwidth. However, in the longer term, this will inevitably lead to demand for submarine
fibre networks to support the necessary increased bandwidth. VSNL/Tyco Following the successful bid by India’s VSNL for the acquisition of the US-based Tyco Global Network (TGN) in November 2004, the deal came under scrutiny in the US in early 2005 when some senators began urging an investigation of the national security implications involved in the sale of the Tyco submarine cable network to VSNL. The network was described as a ‘strategic asset of incalculable value to United States security and commercial interests’. The network has been carrying as much as 80% of voice and data traffic across the Pacific from the US. The senators sought a review of the network’s pending sale by the US Committee on Foreign Investment in the United States. The Tyco sale had been aggressively opposed by Crest Communications, part of the Washington-based Carlyle Group. However, by June 2005, having overcome the concerns in the US, VSNL was able to announce that it had completed the acquisition of Tyco Global Network (TGN), a move that made the operator one of the world’s largest providers of submarine cable bandwidth. Coming into 2006, VSNL has been busy expanding its global presence and activities. The operator has been setting up operations in Sri Lanka, Singapore, Europe and the US. India/Singapore India-Singapore is currently the world’s 2nd fastest growing communications route. Spurred by the burgeoning IT industry in India and a general strengthening of demand, a number of new submarine cable networks have been launched over the last few years connecting India to Singapore, in what has been a ‘bucking of the flat investment in undersea cable’ trend for the wider region.