Pacific - oversupply of cable capacity

Undersea cable boom may create capacity oversupply in Pacific, says TeleGeography

The undersea cable business continues to be stuck in a cycle of feast, famine, and feast again, according to new data from TeleGeography. The Global Bandwidth Research Service reports that the undersea cable business is in the midst of a new investment boom, seven years after the first boom flooded the market with excess capacity. Even now, less than 25 percent of potential capacity on existing subsea cables on major subsea routes is active.

TeleGeography projects that at least 25 new cables, costing approximately $6.4 billion, will be constructed between 2008 and 2010 -- and this figure is likely to rise as plans for a number of other proposed cables solidify. The investment boom is global, with new cables planned for every regional market, with the exception of the Atlantic.

For once, dwindling capacity is not the only reason for the new wave of construction. Rather, new cable projects are forming out of a need for a broader range of restoration options in case of cable failures, the desire for more diverse routes between two destinations, and stubbornly high capacity prices in markets that have ample capacity but few competitors. While most cables are being built in response to individual carriers' business needs, there is a real risk of oversupply in both Africa and across the Pacific.

The rapid expansion of network construction also presents a challenge for the equipment makers that are building these cables. After lying fallow for almost half a decade, equipment vendors are suddenly having to ramp up production to meet surging demand. However, these suppliers are keenly aware of the cyclical nature of the submarine cable industry and wish to avoid being left with excess manufacturing capacity once this building boom wanes.