Since the last peak in 2017 – when over 90,000 kilometers of cable was installed – the submarine fiber industry has observed a significant decrease in activity. The years 2019 and 2020 observed 35,000 and 52,000 kilometers of cable added, respectively. Hyperscalers – massive companies that dominate cloud services industries and have expanded into numerous related verticals as well – have had a noticeable impact on submarine cable activity in recent years. Despite continued activity from these Hyperscalers (Amazon, Facebook, Google and Microsoft for the submarine cable industry specifically) output has returned to pre-2017 levels.
Several projects that were expected to be complete by the end of 2020 have either been delayed or fallen through completely – mainly those planned to land in North America or Europe and likely due to the quarantine restrictions and economic slowdown introduced by the COVID-19 pandemic.
Global economic and political uncertainties as well, as the COVID-19 pandemic, have contributed to numerous reorganizations, acquisitions and bankruptcies throughout the industry. As the commercial outlook for the submarine fiber industry becomes less certain, expect this kind of activity to increase as companies work to strategize for potential market downturns.
Much of the observed industry growth can be attributed to the changing dynamic in system ownership seen since 2016 – when content providers begun to move from capacity purchasers to cable developers. Companies such as Facebook, Google, Microsoft and Amazon have been building new cable systems to meet their own specific infrastructure needs. This trend shows no signs of slowing down, with a significant portion of new system builds for the next several years being driven by these companies – 23 percent.
Significant system growth through 2023 will take place in the Americas, AustralAsia, EMEA and Transpacific regions. This growth is spurred on by the infrastructure demands of Hyperscalers, new routes to South America and the Caribbean, increased connectivity between Africa and Europe and new infrastructure across the Pacific to replace aging cable systems. These new projects will provide both traffic diversity and connect growing markets in South America and Africa directly and work to meet increasing end-user demand for cloud services.
Meanwhile, the Indian Ocean Pan-East Asian and Transatlantic regions maintain slow growth compared to historical trends. However, the Indian Ocean Pan-East Asian region does show higher growth compared to a year ago indicating increased market activity – especially as several new systems look to increase connectivity from India to Europe and East Asia.
For the supplier side of the industry, according to announced information on the amount of cable each company has supplied over the last five years, SubCom takes the lead. ASN produced the next most, with NEC rounding out the 3 busiest companies. These have been the three most dominant companies in recent years, being some of the few companies that can produce cable at a high enough volume to meet demand for large systems. So, while some companies had a relatively high amount of activity, they were not always supplying large systems.
Over the last couple of years, there has been a renewed interest in Transpacific routes and routes connecting Asia and South America directly to Europe. This will involve large systems, requiring thousands of kilometers of cable. Moving forward, the industry will have to rely on only three companies to tackle such large projects.
Looking forward, several new technologies coming to market could disrupt existing business and network models. Earthquake and tsunami detection utilizing existing submarine cables, ultra-low loss fiber, record breaking transoceanic capacity tests and a new push for economically sustainable cable systems are all up and coming technologies with fascinating potential.
Finally, from a financial standpoint, cash rich Hyperscalers have ensured system funding and the availability of data center providers at cable landing stations have helped to solidify commercial business opportunities of prospective systems – one of the biggest traditional roadblocks to cable system viability. However, an overall reduction in system activity indicates that non-Hyperscaler private cables may not be as viable as they once were.
Overall, the submarine cable industry is currently projected to implement $8.2 billion dollars’ worth of projects through 2023. However, according to research conducted by SubTel Forum for the SubOptic 2019 conference, only 52.2 percent of publicly announced submarine cable systems achieve the Contract in Force (CIF) status. Therefore, it is more reasonable to expect $4.3 billion dollars’ worth of projects to be completed through 2023 based on current project announcements. (Clark, 2019)
This edition of the Submarine Telecoms Market Sector Report was authored by the analysts at Submarine Telecoms Forum, Inc. It provides submarine cable system analysis for SubTel Forum’s Submarine Cable Almanac, Cable Map, Industry Report and Industry Newsfeed. For the Global Outlook edition, SubTel Forum utilizes both interviews with industry experts and its proprietary Submarine Cable Database, which was initially developed in 2013 and modified with real-time data thereafter. The database tracks 600+ current and planned domestic and international cable systems, including project information suitable for querying by owner, year, project, region, system length, capacity, landing points, installers, etc.
The Submarine Cable Database is purpose-built by SubTel Forum’s database administration team, which is powered by MySQL and retained on a cloud platform. Data is collected from the public domain and interviews with industry experts and is the most accurate, comprehensive and centralized source of information in the industry. At present, SubTel Forum’s Submarine Cable Database chronicles the work of 18 financiers, 477 cable owners, 22 system suppliers, 12 upgraders, 15 system surveyors and 25 system installers. In addition, it manages data for 600+ projects, across seven regions and 1,300+ landing points.
To accomplish this report, SubTel Forum conducted continuous data gathering throughout the year. Data assimilation and consolidation in its Submarine Cable Database was accomplished in parallel with data gathering efforts. Trending is accomplished using known data with linear growth estimates for up to three following years.
SubTel Forum collected and analyzed data derived from a variety of public, commercial and scientific sources such as company press releases, conferences papers and general news items to best analyze and project market conditions such as which regions of the world will see the highest amount of new cable system activity or how much capacity is expected to be added along specific routes. While every care is taken in preparing this report, these are our best estimates based on information provided and discussed in this industry.
For capacity growth, two different ways of determining Compound Annual Growth Rate (CAGR) are used. The first method calculates a CAGR for a given time period – e.g., a CAGR for the period 2016-2020. The second method calculates a rolling two-year CAGR to minimize extreme variance while also showing a useful year-to-year growth comparison.
For lit capacity modeling the data is primarily sourced from the annual FCC Circuit Capacity report that is released each fall. The most recent data is from the report published in the fall of 2020 and covers data through the end of 2019. (Federal Communications Commission, 2020) This data is analyzed to find global and regional trends and then the analysts at SubTel Forum model missing data points based on these trends as applicable.