Article originally published in Submarine Telecoms Forum, January 2018

Subsea cables support approximately $10 trillion worth of business globally every day, which includes financial institutions that settle transactions on these digital superhighways virtually every millisecond. These undersea arteries of global communications are so essential to the world’s commerce that between 2017 and 2018, investments in new subsea cable construction will reach approximately $7.5 billion.

Subsea cable investments are largely being driven by demand from cloud providers, who are increasingly dominating traffic. Cloud is fast becoming dominant in the enterprise, with RightScale’s annual survey reporting that 95 percent of companies are now using some form of cloud computing. Meanwhile, as emerging technologies begin to put major pressure on multinational organizations – including the tsunami of data that billions of connected devices and the Internet of Things will generate, to say nothing of the rise in traffic from Over-the-Top (OTT) content providers – subsea cables have never been more essential. Approximately 70 percent of transatlantic subsea cable traffic alone is now content related.

Subsea fibre-optic cables traverse thousands and even tens of thousands of kilometers to deliver valuable information between countries and continents. The underlying network of subsea cables wiring the globe is driving ubiquitous connectivity and new business and is anticipated to grow as subsea networks become increasingly important to promoting global economic expansion. Subsea networks
are valued not only by the businesses that are building and operating them for profit, but also by national governments across the globe.

Beyond the transatlantic, transpacific and Asia-Pacific routes, growth of the global subsea cable market is expected to thrive in other key regions such as Africa, Southeast Asia and Latin America. In the bigger picture, many of the factors that have driven submarine capacity investment
over the last several years are similar to the terrestrial market. These drivers include an increase in global bandwidth demand, the need to meet the latency requirements of financial services institutions, and the enormous influence of webscale content providers such
as Google, Facebook and Microsoft. In fact, TeleGeography estimated that in 2016 these content providers accounted for 38 percent of total worldwide international bandwidth consumption.

As we’ve witnessed, increasing bandwidth requirements have led several webscale content providers to progress from being submarine cable system customers to owners. The past several years has seen Google taking ownership stakes in such systems as the transpacific cable FASTER, the South-East Asia Japan Cable, and Unity Cable System in Asia, as well the Monet cable linking the U.S. to Brazil. Microsoft and Facebook partnered to construct the MAREA transatlantic cable system. While Microsoft also has an equity position in the New Cross Pacific system and Facebook owns a piece of the Asia Pacific Gateway network.

Among traditional subsea cable customers are service providers who seek to meet the growing need for international bandwidth among financial institutions, particularly traders. As has been the case with new regional terrestrial networks connecting global financial centers, the quest for lower latency has become a catalyst for new submarine cable builds as well.

Improvements in Dense Wavelength Division Multiplexing (DWDM) technology has helped existing cable operators substantially increase the capacity of existing routes in order to extend the life of existing systems. However, overall capacity will eventually max out on older cables and on many routes total capacity will still not be sufficient to meet demand. The design life of submarine cables remains approximately 25 years, so many cable systems will eventually be withdrawn as maintenance costs increase and competitors offer more for less, enabled by developments in low-loss fibre and other technology improvements.

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