The OTT providers such as Amazon, Facebook, Google and Microsoft are completely transforming the submarine cable market. They are no longer reliant on Tier 1 network operators to provide capacity and are simply building the necessary infrastructure themselves. This is likely to have a long-term impact as the largest consumers of bandwidth are essentially exiting the market and creating their own network.
Oil & Gas companies are increasingly making a push for fiber connected platforms as they continue to adopt new technologies and modernize their production process to increase productivity and reduce their operating costs. This is made possible using the reliable, high bandwidth connectivity that only fiber systems can provide. Close cooperation between submarine cable suppliers and offshore Oil & Gas companies will be necessary in order to develop cutting edge networks that can meet both operational and economic requirements – all of which will provide additional business opportunities to the submarine fiber industry.
The submarine fiber market continues to grow through 2020 at a similar rate to that observed since 2016. Some regions have begun to slow their pace with fewer systems planned beyond 2021. There are some overbuild concerns considering the rapid pace of system development over the last few years, but many cable systems that are reaching the end of their economic and technological lifespans will need replacing.
As systems continue to age out on established routes like New York to London – where 77% of currently in-service systems are older than 15 years – there will be several opportunities to replace this aging infrastructure with modern cable systems. Additionally, the advent of new and disruptive technologies could prove attractive enough to build new systems on routes with cables less than 10 years old.
Lit capacity has continued to stay within historical norms with some key routes even observing an increase in lit capacity percentage. This means that despite new cables being built with huge amounts of capacity there is not necessarily a capacity overbuild. Many of the OTT backed systems – where a huge chunk of this new capacity is coming from – are not selling capacity to the open market which should further reduce fears of a capacity glut. In fact, the lack of a sizeable chunk of new capacity being added to the global network could prompt traditional telecoms carriers to build additional systems themselves to keep up with their growing capacity needs.
As always, the ability to predict the future of this industry is tenuous at best. Submarine telecoms have traditionally had a boom and bust cycle resulting in high year-to-year volatility. While there are numerous indicators that point towards healthy growth for the next 18 months even a slight push in the wrong direction can have a massive impact. Political disputes like the recent Huawei concerns with the United States are a prime example of the kind of situations that could negatively impact this industry.
While a specific, short-term outlook will always be difficult to predict, over the long term the world will always need more capacity and new cable systems to feed society’s ever-increasing need for bandwidth.
Kieran Clark, Lead Analyst
Kieran Clark is the Lead Analyst for STF Analytics, a division of Submarine Telecoms Forum, Inc. He originally joined SubTel Forum in 2013 as a Broadcast Technician to provide support for live event video streaming. He has 6+ years of live production experience and has worked alongside some of the premier organizations in video web streaming. In 2014, Kieran was promoted to Analyst and is currently responsible for the research and maintenance that supports the STF Analytics Submarine Cable Database. In 2016, he was promoted to Lead Analyst and put in charge of the newly created STF Analytics. His analysis is featured in almost the entire array of SubTel Forum publications.