A View of the Submarine Systems Supply Industry By Georges Krebs
Thanks to the emergence of new market drivers, the submarine system supply market is recovering. At the same time, the market is changing and many new customers have appeared. We propose to examine those new market drivers, the evolution of the customer base and the future of our challenging industry. The main market drivers For a very long time, the major market driver has been the development of international voice services provided by monopolistic operators in each country. The development was regulated and regular, in line with overall economic expansion and the more rapid growth of international trade and communications. The advent of facsimile provided a first boost to the market in the eighties. At the end of the nineties, the availability of cheap individual computers and the development of the internet have combined to provide a major new source of traffic. In parallel, the development of WDM techniques has allowed to increase massively the capacity provided by submarine cable systems. This generated enormous optimism and massive over-investment, leading to the stupendous crisis of 2000-2001 and the associated losses and bankruptcies.
Clearly, investment was excessive and ahead of the time but it should not be forgotten that even during the worst years of the crisis the traffic continued to grow. What is the situation today? We believe that there are at least four inter-related market drivers: an increased level of competition, the tremendous growth of mobile telephony, the explosion of high speed internet and the correlated increasing importance of network resilience. Let us examine briefly each of them. Increased level of competition: The deregulation of the telecommunications market continues to progress rapidly on a worldwide basis. The wave of deregulation has been particularly strong in South and Central America, including the Caribbean, but it is also gaining very strong momentum in India, Africa and the Middle East where spectacular developments have taken place recently. Everywhere, incumbent companies are trying to slow down the momentum of their competitors and access to international capacity available on existing submarine cables is one of the keys that they are holding. As a result, it is not uncommon to see new competitors building their own international submarine cable infrastructure when economically viable. Mobile telephony: For various reasons mobile telephony is the area that best exemplifies the rapid development of competition in telecom services. Obviously, one of the most lucrative segments of mobile telephony is international traffic, roaming and internet traffic.
Therefore, new mobile companies are keen to penetrate this segment and incumbents are keen to slow them down. The market has seen numerous submarine cable projects initiated by such new mobile operators. Among many others, one can mention Vodafone Malta, Reliance in India, Globacom in Nigeria, Orascom in Algeria and Pakistan, Indosat in Indonesia, etc… High Speed internet: Internet and high speed Internet are obviously the major market driver today. The number of Internet subscribers is increasing exponentially and no country, however remote, is immune from this trend. The progress of ADSL (led by Alcatel and followed by many) and FTTH technologies allows to bring ever more bandwidth to the individual subscriber and to steadily move internet services in the direction of high definition video on demand. Internet servers are still largely concentrated in the USA and the internet traffic pattern is clearly centred on the USA, requiring the use of ever more bandwidth in transatlantic and transpacific cable. New transpacific cable systems are required and are in the planning stage. Even the depressed Atlantic market is starting to revive to the extent that capacity upgrades are needed in some systems. It is becoming vital for each country and for each operator to secure very high capacity access from their country to the international network. As the number of internet users grows exponentially, we see countries building new high capacity submarine cable connections: examples include the OTE Greece to Western Europe system ( GWEN), the Morocco to France system of Maroc Telecom, and the connection of Turkey to the Med Nautilus System. 18