With the growth of new submarine cables and the exponential increase in required bandwidth, consortium and private cable owners must be looking at their older cables with some concern. When these submarine cables were originally built in the mid 1990's, the expected system life was 15-20 years before they would need to be replaced.
Due to technology improvements and the financial downturn post 2000 these cables have had mid-life capacity upgrades, although they now approaching their original planned end of life. However the Operational and Maintenance cost for these cables is higher than on newer systems, primarily due to increased capacity and better wet plant technology; and the break-even point is approaching when these systems are likely to be retired, as they are simply too expensive to keep running.
The FLAG-Europe-Asia (FEA) and SMW-3 submarine cable systems were built in 1997 and 1998 respectively and were innovative and the first global fibre cable systems connecting Europe to Asia. For customers and the consortium owners, the original 15-year IRUs, where an STM-1 from Asia to Europe cost circa $1M up-front and had $50K per annum O&M charges have now time-expired, although there may be some still running for the full life time of the system. With the reduction of this high value revenue, it is extremely difficult for the older cables to compete with newer and high capacity systems on the same global route, especially on short-term leases. For some routes there is still a monopoly or duopoly, which makes the original submarine cables profitable. As an example SMW-3 is currently the only available direct sub-sea route between Singapore and Perth. That said the recent SMW-3 submarine outages have seriously impacted Internet speeds in Western Australia and hastened new submarine build projects on this route.
As a result, one outcome is that we could expect to see these older global submarine cable systems fragment into point to point regional systems, where there is less competition and diversity. For a consortium cable such as SMW-3, this may be harder to achieve as it would require consensus from the majority of consortium members, whereas Global Cloud Xchange should have an easier path in gaining agreement from some of their landing parties on their private FEA cable system.
The recent announcement by GCX of their intention to build a new submarine cable called Eagle with Eagle West from India to Europe and Eagle East between India and Hong Kong is an indication that they are looking to retire the FEA cable system. However, given the debt challenges of GCX’s parent company it is difficult to see how they will attract funding.
On the Atlantic, TAT-14 which was constructed in 2001 remains the only true consortium trans-Atlantic cable system. TAT-14 suffers the same problems of growing old as its Europe to Asian "cousins", but does not have the luxury of multiple and linear landing stations in a number of countries. With a Northern and Southern trans-Atlantic route it is difficult to see a strong rationale for the Southern route, given the high trans-Atlantic capacity available on the newer cables such as GTT Express, MAREA and AEC-1. These new cables are also supplemented by the middle-age trans-Atlantic cable systems including Apollo and GTT which provide additional diversity.
North European carriers, especially the Nordics still favour TAT-14 as their direct access across the Atlantic to the US and some owners have invested heavily in the TAT-14 network upgrades. The Northern leg of TAT-14 does have a unique route, but new submarine cables are now in the planning stage which will provide diverse and high capacity on this route to the Nordic countries, especially Denmark which is seen as a new data centre hub. Retiring the TAT-14 system because of the high O&M costs and poor overall performance depends on at least a majority vote of the owners and even if they were to agree, the complexity of the retirement arrangements could take two or more years to come into effect.
In conclusion, it will be interesting to see what happens with these older submarine cable systems going forward and whether they simply get switched off, are segmented into regional point to point systems or are allowed to fade away. However one thing is clear is that the dynamics of large consortium cables with 20+ carrier owners is no longer applicable. A new consortium model is evolving around mini-consortium submarine cables involving some telecom operators, but also private network operators including content providers such as Google, Microsoft and Facebook. Private submarine cables are still likely to be built, but again probably only as regional solutions with point to point connectivity and stubbed Branching Units for prospective investors/customers.