An Overview of International Submarine Cable Markets
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6 6 AnAn OverviewOverview ofof InternationalInternational on University, December 12, 200 on University, December 12, 200 SubmarineSubmarine CableCable MarketsMarkets Presented by: Michael Ruddy Managing Director Terabit Consulting Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost www.terabitconsulting.com 6 6 PartPart I:I: UnderstandingUnderstanding thethe on University, December 12, 200 on University, December 12, 200 ImportanceImportance ofof UnderseaUndersea CableCable NetworksNetworks Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost www.terabitconsulting.com 6 6 SubmarineSubmarine CableCable AdvantagesAdvantages RelativelyRelatively lowlow costcost (well(well underunder $1$1 billionbillion forfor aa multimulti--terabitterabit transoceanictransoceanic ringring system)system) on University, December 12, 200 on University, December 12, 200 EnormousEnormous carryingcarrying capacitycapacity (existing(existing transoceanictransoceanic networksnetworks capablecapable ofof 7+7+ TbpsTbps)) HighHigh reliabilityreliability (especially(especially inin ringring andand meshmesh configurations)configurations) andand lowlow latencylatency Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 3 www.terabitconsulting.com 6 6 TheThe FoundationFoundation ofof GlobalGlobal NetworkingNetworking TrulyTruly thethe backbonebackbone ofof US International Circuits thethe globalglobal telecomtelecom by Transmission Medium, 2006 andand datadata networknetwork 19% Undersea HaveHave beenbeen thethe on University, December 12, 200 on University, December 12, 200 1% preferred int’l. Satellite preferred int’l. transmissiontransmission mediummedium Terrestrial (Can.+Mex.) sincesince shortlyshortly afterafter thethe 80% adventadvent ofof thethe fiberfiber opticoptic cablecable inin thethe latelate-- Source: FCC, Terabit Consulting Analysis 1980s1980s Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 4 www.terabitconsulting.com 6 6 PartPart II:II: AA BriefBrief HistoryHistory ofof on University, December 12, 200 on University, December 12, 200 SubmarineSubmarine FiberFiber OpticOptic CableCable MarketsMarkets Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost www.terabitconsulting.com 6 6 2020 TurbulentTurbulent YearsYears TheThe firstfirst fiberfiber opticoptic cablescables werewere deployeddeployed inin EuropeEurope andand JapanJapan inin thethe midmid--1980s1980s –– RepeateredRepeatered andand unrepeateredunrepeatered –– ExperimentalExperimental (shark(shark bitesbites werewere aa problem!)problem!) on University, December 12, 200 on University, December 12, 200 FirstFirst transoceanictransoceanic fiberfiber opticoptic cablecable == TATTAT--88 –– RFSRFS == 19881988 –– Cost:Cost: $360$360 millionmillion –– Capacity:Capacity: 560560 MbpsMbps (3(3 STMSTM--1s);1s); “3R”“3R” repeatersrepeaters –– ConsortiumConsortium ofof 3535 carrierscarriers (AT&T(AT&T == 35%)35%) –– PointPoint--toto--PointPoint Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 6 www.terabitconsulting.com 6 6 2020 TurbulentTurbulent YearsYears (Cont’d.)(Cont’d.) FirstFirst “Private”“Private” cablecable == PTATPTAT--11 (1991)(1991) ––SprintSprint andand CableCable && WirelessWireless ––NYNEXNYNEX prohibitedprohibited fromfrom participatingparticipating on University, December 12, 200 on University, December 12, 200 byby JudgeJudge HaroldHarold GreeneGreene FLAGFLAG (1997):(1997): AA privateprivate cablecable onon aa quintessentiallyquintessentially consortiumconsortium routeroute (Europe(Europe--Asia)Asia) ––NYNEXNYNEX getsgets toto havehave aa cable,cable, finallyfinally Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 7 www.terabitconsulting.com 6 6 2020 TurbulentTurbulent YearsYears (Cont’d.)(Cont’d.) TheThe turningturning point:point: AtlanticAtlantic CrossingCrossing--11 (1998)(1998) ––AT&TAT&T outsourcesoutsources cablecable toto investorsinvestors on University, December 12, 200 on University, December 12, 200 ––PerfectPerfect timing:timing: InternetInternet boomboom andand liberalizationliberalization (especially(especially inin EU);EU); proliferationproliferation ofof competitivecompetitive operators;operators; incumbentsincumbents caughtcaught shortshort--handedhanded GlobalGlobal CrossingCrossing goesgoes globalglobal DozensDozens ofof imitatorsimitators floodflood thethe marketmarket Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 8 www.terabitconsulting.com 6 6 SubmarineSubmarine CableCable Landscape:Landscape: 20002000 GlobalGlobal CrossingCrossing 360networks360networks FLAGFLAG on University, December 12, 200 on University, December 12, 200 TycoTyco LevelLevel 33 Singtel/C2CSingtel/C2C Others:Others: TelefonicaTelefonica,, CableCable andand Wireless,Wireless, Telstra/Reach,Telstra/Reach, TCNZTCNZ (Consortia?(Consortia? WhatWhat consortia?)consortia?) Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 9 www.terabitconsulting.com Executive Telecom Briefings, Boston University, December 12, 2006 10 Cable Capital:1995 Cable Capital:1995 www.terabitconsulting.com www.terabitconsulting.com Executive Telecom Briefings, Boston University, December 12, 2006 11 Cable Capital:2000 Cable Capital:2000 www.terabitconsulting.com www.terabitconsulting.com 6 6 TheThe BubbleBubble Burst:Burst: 20012001--20022002 Bankruptcy, June 2001 360atlantic sold to Columbia Ventures Bankruptcy, January 2002 Purchase by Singapore Technologies on University, December 12, 200 on University, December 12, 200 Bankruptcy, April 2002 Sale to Reliance Group Sale of assets to Reach Reach (Telstra, PCCW) written down Bankruptcy, July 2002 Bankruptcy, November 2002 Sale to China Netcom Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 12 www.terabitconsulting.com 6 6 InvestmentInvestment inin NewNew UnderseaUndersea Systems,Systems, 19881988--20062006 ($Billions; By Ready-for-Service Date) $14 1998: AC-1 $12 1997: FLAG $10 R E B O A on University, December 12, 200 on University, December 12, 200 Early- and N $8 R Mid-1990s: G K 1988 = 1st N A R Consortium O N U I $6 I P Transoceanic T Z Era T A A Fiber Optic C L T Y U I $4 , Cable C O E N P $2 S $0 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 13 www.terabitconsulting.com 6 6 WhatWhat WentWent Wrong?Wrong? NotNot enoughenough customerscustomers forfor capacity:capacity: – CLECs couldn’t survive; RBOCs dominated local loop and consolidated BroadbandBroadband deploymentdeployment nevernever metmet expectationsexpectations (penetration(penetration remainedremained lowlow andand pricesprices remainedremained on University, December 12, 200 on University, December 12, 200 highhigh worldwide)worldwide) DemandDemand forfor underseaundersea capacitycapacity isis notnot veryvery elastic?!elastic?! – Consumers’ voice minutes went up when capacity prices dropped, but voice was only a few percent of total traffic – Otherwise, cable operators could cut prices all they wanted, but carriers still wouldn’t buy Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 14 www.terabitconsulting.com 6 6 UnableUnable toto SellSell Capacity,Capacity, thethe IndustryIndustry UnravelsUnravels CableCable operators’operators’ bankruptciesbankruptcies setset offoff downwarddownward spiralspiral DistressedDistressed assetsassets werewere acquiredacquired forfor on University, December 12, 200 on University, December 12, 200 penniespennies onon thethe dollardollar –– ImpossibleImpossible toto competecompete withwith PricePrice erosionerosion ofof 70%70% onon somesome routesroutes Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 15 www.terabitconsulting.com 6 6 PostPost--2002:2002: AA BadlyBadly--BeatenBeaten MarketMarket MarketMarket fellfell fromfrom $10+$10+ billionbillion perper yearyear toto onlyonly aa fewfew hundredhundred million,million, maximummaximum InvestorsInvestors inin southsouth AsiaAsia andand easteast AsiaAsia on University, December 12, 200 on University, December 12, 200 steppedstepped inin toto purchasepurchase globalglobal networksnetworks atat penniespennies onon thethe dollardollar YearsYears passedpassed withwith virtuallyvirtually nono activityactivity (shuttered(shuttered cablecable factories,factories, etc.)etc.) Eventually,Eventually, somesome normalcynormalcy returned…returned… Executive Telecom Briefings, Bost Executive Telecom Briefings, Bost 16 www.terabitconsulting.com Executive Telecom Briefings, Boston University, December 12, 2006 Part III:Recovery and Part III:Recovery and Market Trends Market Trends www.terabitconsulting.com www.terabitconsulting.com 6 6 SomeSome ReasonReason forfor OptimismOptimism ManyMany newnew systemssystems areare onon thethe horizonhorizon IndiaIndia andand ChinaChina == fuelingfueling demanddemand throughthrough economiceconomic growth;growth; injectinginjecting cablecable marketmarket withwith capitalcapital – Latest wave of deployment started with Sea-Me-We-4, on University, December 12, 200 on University, December 12, 200 Falcon SpeculationSpeculation seemsseems toto havehave disappeareddisappeared fromfrom thethe marketmarket – If for no other reason than: Wall St. won’t allow it CableCable operatorsoperators areare ofof aa differentdifferent qualityquality andand areare approachingapproaching thethe marketmarket withwith moremore diligencediligence CapacityCapacity isis comingcoming toto