BuddeBlog

The collapse of the dotcom boom also caused the downfall of parts of the submarine cable market. However, at that time in the early 00s we predicted that there would be a new boom around 2008. We were reasonably confident in this, as the submarine market is fairly predictable, due to its relatively lengthy planning and building cycles.

There was actually nothing wrong with the concept behind the dotcom era, but, as is now being demonstrated in the subprime housing market, greed can take over in the financial sector and ruin things, for a time at least.

Dotcom was all about new applications that would generate the next level of revenues for the ICT industry.

The subscription-based model for telephony and Internet services was approaching its due-by date and new models were needed. The dotcomers had the right vision at the time, but the infrastructure needed to deliver those applications was not available. And without the necessary national infrastructure the demand for international traffic declined, creating havoc in the submarine telecoms market.

But then broadband infrastructure became more available and applications such as Google, YouTube, MySpace and FaceBook became overnight successes. Then, of course, the demand for international networks returned and in 2007 new submarine networks started to appear on the agenda. On the Pacific route for example traffic is doubling every two years.

However, by then the telecoms business model had changed and those involved in the new market didn’t wish to operate in the international market in the same way the cosy cartels had been doing for over one hundred and fifty (!) years. But changes are also arriving in this market. For example, in relation to the proposed Unity Cable between Japan and the US, consortium members like Pacnet are allowed to operate fibre pairs independently in the system.

Companies like Google now depend for their revenue, and therefore their financial results, on people having access to good quality broadband, and that particular Internet media company – now one of the largest companies on earth – has a great deal of clout.

They are not at all interested in the old cartels; they want competition and innovation that will result in low cost access to their applications. Australia, in particular, is – due to a lack of competition in this market - suffering from relatively high international access charges. Because the Internet is an international system the telcos and ISPs who deliver local access are faced with very high international access bills, which they naturally pass on to their customers. This makes these services more expensive in Australia than in markets where there is more competition.

With its participation in the Unity Cable, Google is set to become a strategic player in the submarine business. It certainly doesn’t want to become a telco, but it is using its money and influence to steer the telco industry in the direction it wants. And, as well as being good for Google, this will also be good for future telco applications developments.

The company is in the same position regarding the US spectrum auctions, in relation to more competitive local access networks (eg wireless). The telcos would like to maintain the status quo, with them being the gatekeepers and toll collectors. But this is stifling competition and innovation, and we need companies the size of Google, News Limited and Microsoft to liberate us from the iron grip the incumbent telcos presently have on this market.

On that same Unity Cable Pacnet is one of the other players in the submarine consortium. This company is an international infrastructure operator, but it also has a thriving ISP business and, like Google, the latter requires good and affordable access to advance along the lines mentioned above.

The Pacnet combination of being involved in both international submarine networks and ISP business makes sense from that perspective. Over the last few years they moved their ISP business away from the consumer market to the business market and in that move they have also become a major provider of IP-based solutions, serving the carrier market as well as large enterprises and SMEs. However in coming years they may have to make a decision about which way to jump. Once the submarine business has become commoditised again it is in the interest of the ISP arm to seek the best possible deal, even though that may not be achieved through its own internationals infrastructure business.

The submarine telecoms industry is undergoing a transformation, and the two new developments around Google and PacNet are only the tip of the iceberg. Many more changes will follow and these will lead to a much healthier international telecoms environment than we have seen in the past.

Paul Budde

See also:

• Asia - Infrastructure - Submarine Cables
• Global - Infrastructure - Submarine Cable Revival
• Technology - Infrastructure - Long Distance 1 - Fibre, WDM’
• Technology - Infrastructure - Long Distance 2 - Fibre, Modulation, Amplification and 40Gbs
• Technology - Infrastructure - Long Distance 3 - SDH SONET OTN RPR GMPLS

This entry was posted on Monday, March 17th, 2008 at 2:22 pm and is filed under BuddeBlog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.