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STF Analytics Capacity Pricing Report – Pricing Benchmark

By Kieran Clark, STF Analytics
August 5, 2019

STF Analytics recently published its Global Capacity Pricing Report for 2019. This report provides a detailed analysis of submarine cable capacity pricing, regional outlooks and a Pricing Benchmark for routes around the world. The prices we talk about in this report are gleaned from interviews with cable system owners and network operators and represent the most accurate snapshot of the global wholesale market.

Routes Discussed:

Transatlantic
Transpacific
Americas
Intra-Asia
EMEA to Asia

What is the Pricing Benchmark?

We developed a Pricing Benchmark model to better determine and communicate the health of routes. This model considers cost and capacity pricing factors to provide a general, quick reference score to easily understand the economic health of a particular route. We intend for this benchmark grading system to provide decision makers with an additional tool to help support their business plans.

So, what exactly do we take into account for this model? The Pricing Benchmark assumes the Annual Costs as the total systems cost divided by the standard 25-year expected life span of a cable system, assumes Available Wavelengths as the total capacity of all systems on the route divided by 100G wavelengths, assumes Lit Wavelengths as the average lit capacity percentage for the region and assumes the wholesale price of 100G wavelengths is the median for a given route to calculate Sales. This model is intended as a baseline reference and considers wholesale prices only – it does not account for value added networking services.

We combine all of these factors together and match up monthly route costs against monthly route sales to come up with a numerical ratio to determine the route's score or the Total Pricing Benchmark. We also apply this model on a per cable basis and then average them together to get the Average Pricing Benchmark because while the overall market on a route might not be economically sustainable, certain systems can still be profitable – usually brand-new systems with a large design capacity that can take advantage of providing larger volumes of capacity for a similar capital expenditure. Typically when the Total Pricing Benchmark is negative while the Average Pricing Benchmark is positive, this indicates that a route may benefit from a new cable to replace aging and costly existing infrastructure.

This metric is the first of its kind and one more way to help create an informed industry. We encourage you to take a look at this report to learn more about what is often a very opaque aspect of the submarine cable industry.

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Should you have any further questions about this report, please reach out to a member of our team below.