FUTURE PRICE TRENDS for Submarine Cable Systems
A view by John Hibbar Hibbardd The introduction of DWDM technologies into long haul transoceanic fibre optic repeatered cable systems within the past five years has resulted in increases in the ultimate design capacity of submarine cable systems that are outstripping underlying growth in demand. Typically, fibre optic system designers have achieved a doubling of fibre transmission capacity every 10 months
since the mid 1990’s. Simultaneously, increases in the number of fibre pairs within the cable sheath have resulted in installed systems with design capacities that have been growing at much faster rates than the underlying growth in international traffic. The evolution of the Internet through the emergence of the World Wide Web coincided with both a very rapid increase in the level of competition in broadband 21
connectivity and with the introduction of WDM and then DWDM technologies into submarine cables. The increases in submarine cable design capacity coupled with an exploding forecast demand for the Internet attracted capital for new submarine cables to meet envisaged capacity shortfalls. This was supported by an economic view of the “virtuous cycle” of telecommunications as similar to what happened in the semiconductor industry. i.e. price falls would stimulate more demand which would trigger more price falls. Large amounts of new capital were deployed in the sector, which served to fund further technological developments. These developments contributed to greater capacity and further reductions in unit prices, which was reflected in additional demand driven largely by the Internet. It also generated greater entrepreneurial activity for building more cables of even higher capacity. This growth cycle suggests that 30-50% annual declines in unit capacity prices seen over the period both for terrestrial and for