Signs Of Resurgent Asia-Pacific Submarine Cable Market By Paul Budde
In January last year, Paul Budde presented a view of the Asia Pacific submarine cable market as he saw it coming into 2006. He wrote then: ‘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.’ Twelve months later, he takes another look at this market and notes a substantial upturn in proposed investments in this sector, with some serious strategic planning happening. Introduction Market bouncing back After the collapse of the previous submarine cable boom (1998-2001), I predicted a new boom starting in 2008 with a ramping up period of 12 to 18 months. All the signs point to the Asia Pacific submarine cable market now moving into this new phase. I noted when writing on the topic last year that ‘the severe over-provision of undersea cables in the region five or more years ago has seen a lot of unlit fibre sitting doing nothing.’ Whilst there is certainly still a lot of fibre lying idle, the latest round of activity reflects a more complex market situation. Some of cable routes in the region are coming under considerably more pressure than others. Telegeography has estimated that
about 70% of lit capacity on the trans-Pacific route, for example, has already been purchased, noting that demand on this route grew by more than 75% last year. The rising demand for bandwidth we are witnessing within and into Asia is largely driven by China and India. Whilst other rapidly growing Asian markets are definitely part of the equation, it is the big two that the operators are trying to satisfy by building bigger and faster pipes for the surging volumes of Internet and telephone traffic produced by multinational corporations doing business with these countries. Of course, we should not overlook the significance of the traffic generated by regional and local customers. Although there is arguably still plenty of spare capacity between Asia and the US, this ‘route’ is now more than 50% controlled by one company, following VSNL’s acquisition of the Tycom trans-Pacific link in 2004/05. In fact, the VSNL network has reportedly been carrying as much as 80% of voice and data traffic across the Pacific from the US. For the last 12 months or so, there has been talk that carriers would combine to build a new cable to provide an alternative to the VSNL system. Remember the close scrutiny that the Tycom-VSNL deal underwent in the US, as sections
of the industry lobbied against the sale? As I noted last January, the Tycom network was described as a ‘strategic asset of incalculable value to United States security and commercial interests.’ Taiwan earthquake and need for system redundancy Last month’s earthquake in Taiwan was a wake-up call to the operators (some might say yet another wake-up call) as it highlighted the serious vulnerability of the existing network of cables in the Asia Pacific region to natural disasters. So much of the region was quickly reduced to zero or limited connectivity as a result of the earthquake. Service restoration took days as it was heavily dependent on actually repairing the cables, rather than switching traffic to alternative systems. The reality was there were very few options available for alternative routing of traffic. The signs were there even before this earthquake. The current shortage of direct cable capacity between China and the US, for example, has occasionally created a bottleneck for Web traffic. Also, most of the cable systems linking Japan and China are nearly full. Trans-Pacific Express (TPE) In December 2006, US operator Verizon signed an agreement with five major Asian telecom carriers to build what is described as the first high-speed transPacific undersea cable system directly linking the US and China. The proposed 18,000km cable has been given a colourful name - the Trans-Pacific Express (TPE). According to Verizon, the planned US$500 million project will offer an alternative to the single low-capacity cable that now provides the only direct link between mainland China and the US. Currently most Internet traffic between the two countries has to go through Hong Kong or Japan, at times causing transmission delays. As for the capacity of the new 10