Trans-Atlantic Internet cables may be filled by 2014

Growing demand may erase the bandwidth glut from the Internet boom, evening out prices

Voracious Web surfers, e-mailers and downloaders will use up the trans-Atlantic cables that were overbuilt early in this decade within the next five years, forcing carriers to invest in new ones in a market that's become used to adding bandwidth cheaply, according to research company Telegeography.

The telecommunications boom spawned so much new data capacity on fiber-optic cables across the Atlantic that the market has seen a supply glut and low prices for years, Telegeography said in a report released Monday.

That has reduced the financial incentive for carriers to invest in new cables, but they may have to do so by 2014, said Telegeography analyst Erik Kreifeldt.

"The market prices for capacity on the trans-Atlantic routes today don't support the business case for building a new cable system," Kreifeldt said. The coming shift in the industry from oversupply to scarcity is likely to rebalance the economics of cables, raising the prices that service providers pay for capacity for the first time in years, he said.

Most enterprises will be cushioned from the effects of that change, but they may see the prices they pay for bandwidth stop falling, Kreifeldt said.

The excitement over the first wave of Internet use in the late 1990s convinced some entrepreneurs that the demand for bandwidth would grow faster than it did. Dedicated international cable companies such as Global Crossing raised money and started building cables, jumping into a business that previously had been dominated by groups of carriers.

Six new trans-Atlantic cables went into service between 2000 and 2003, leading to a glut that bankrupted some of the new entrants and changed the economics of the business, Kreifeldt said. Supply has far exceeded demand for years. The combined capacity of all trans-Atlantic cables is nearly 40T bits per second (Tbps), according to Telegeography.

However, demand is likely to rise by 33 per cent per year between 2008 and 2015, Telegeography predicts. That will eat away the over-capacity by 2014, the company said. Before that happens, someone will have to lay new cable or risk not being able to accommodate more traffic.

Given the harsh climate for raising capital, it will probably be traditional groups of carriers that do this, Kreifeldt said.

Transoceanic bandwidth typically is sold in the form of wavelengths of light that travel over a particular strand of fiber, on a cable with many strands. A wavelength that can carry 10G bits per second (bps) typically costs about $US14,000, Kreifeldt said.

Service providers usually resell that big "pipe" as smaller connections.

The problem is that the price of trans-Atlantic bandwidth today only covers the incremental cost of the optical gear on either end of the cable to provision the circuit, according to Telegeography. It doesn't cover the cost of actually laying the fiber, because no one has had to do that for so long.

"We are still sort of anchored on what went on earlier in the decade," Kreifeldt said.

Advances in technology have allowed service providers to squeeze more performance out of the existing cables. They have upgraded equipment at either end of a cable, such as transponders, to improve efficiency and get more capacity out of a single wavelength.

But one problem with submarine cables is that they can only be upgraded on either end. Although the optical networks are passive to some degree, there are also undersea repeaters and amplifiers along the length of each cable.

"You're not going to be swapping that stuff out," Kreifeldt said. Submarine gear that was designed to handle 2.5G bits per second per wavelength has been upgraded for 10G bps links, but it won't be able to support the coming 100G bps technology, he said.

Even the 40G bps technology being used today on land is unproven on submarine cables.

The big carriers are probably already talking about potential new cables, Kreifeldt believes. They may have to make some deals soon, because even after the signatures are on paper, it can take 18 months to put down a cable, he said.

Meanwhile, the news is better for trans-Pacific links. New cables have gone into service across that ocean more regularly over the past few years, riding the rapid growth of Asian economies and new intra-Asian cables, Kreifeldt said.

Tags ocean cablesoptical fibreCablesinternet

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Stephen Lawson

IDG News Service

Comments

Comments are now closed.

Most Popular Reviews

Follow Us

Best Deals on GoodGearGuide

Shopping.com

Latest News Articles

Resources

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?