Under Pacific, an optical bubble rises

It is with an increasing regularity you come across news items that point to a new sub-sea cable being plotted or another old one being upgraded, a trend that could add up to a boom in the optical sub sea sector.

For now it may seem like good news for the likes of Alcatel-Lucent, NEC, and Fujitsu, the good times are not going to last forever. Look behind the news, and total up the recent capacity additions on some routers, it all starts to resemble an old fashioned bubble: one of 1990s vintage.

It was in 1996-1997 time frames we saw the world being crisscrossed by optical cables, laid down on the ocean floors by specialized ships that were in as much demand as a new Bentley. At the time, the demand for International bandwidth was driven by simple Internet connections, wireless and wire line voice traffic. The increase in demand resulted in many players moving into the sub-sea business, resulting in surfeit of capacity, a situation made worse by increased competition and declining prices.

Ten years later – it is the YouTubes of the world who are driving demand. The build out in the sub sea sector is in sharp contrast to the state of terrestrial networks, where there has been little build-up.

Instead of adding more cables, carriers such as Level 3, and Global Crossing are using next generation optical gear from companies like Infinera to send more bandwidth over their existing fiber, cheaply. The sub-sea sector doesn’t have its Infineras as yet, and that is why experts believe we are seeing an increase in the number of cables being laid under sea.

Alan Mauldin, who tracks the sub-sea sector for the research group, Telegeography, tells us that the big growth in demand for bandwidth is coming from the growing popularity of Internet video. Some of that video traffic, of course, comes as a result of ever increasing popularity of the peer to peer sharing networks, that are not being viewed too kindly by RIAA and MPAA.

The Internet video traffic is getting a boost from a sharp increase in the number of broadband connections. Point Topic, a UK-based research firm puts the total number of broadband subscribers at 281.5 million up over 31% in the 12 months ending December 2006. Asia and Europe are two primary bright spots in this broadband planet.

Whatever the reasons, the build-up is happening across the board: Mediterranean, in Africa, and in Asia. Here is a list of some of the cable upgrades that happened in 2006:

1. VSNL Transpacific, which at year-end 2005 had capacity of 460 Gbps and by year end, that capacity had leapt up to 960 Gbps. (Potential Capacity – 7,680 Gbps)

2. South America-1, which is a Telefonica-owned ring around South America, that saw its capacity double to 160 Gbps by end of 2006. (Potential Capacity – 1,920 Gbps)

3. SAT-3/WASC, a consortium cable from Europe down the West African coast to South Africa, tripled its capacity by end of 2006 to 120 Gbps. (Potential Capacity – 185 Gbps)

4. FLAG Atlantic-1 increased its capacity from 320 Gbps at end of 2005 to 530 Gbps. (Potential Capacity – 2400 Gbps)

5. EAC, an Intra-Asian system owned by Asia Netcom saw its capacity increase to 160 Gbps at end of 2006. (Potential Capacity – 2,560 Gbps)

Some of the upgrades and installations are justified, especially in underserved areas such as Africa. Mauldin points out some of the upgrades such as the Atlas Offshore cable between Morocco and France or the East Africa Marine System between Kenya and the UAE, are desperately needed.

However, the largest amount of construction activity is happening on the trans Pacific route, one which is getting as crowded as the trans-Atlantic corridor was in the last bubble. According to Telegeography estimates, only 18% of the potential trans-Pacific capacity is lit at present.

The total potential capacity on existing cables is about 17 terabits per second (Tbps), but since a whopping 75 percent of that potential capacity is on one single cable – VSNL Transpacific – global carriers are looking for second and third sources.

As a result, four new cables are being proposed that would increase the potential capacity to about 39.8 Tbps. Of the four, only one has a certain future – Trans Pacific Express (TPE) that is likely to go live in the third quarter of 2008, and will connect China, Korea, and Taiwan to the U.S. (We wrote about this previously.) This cable is likely to replace the old China-US Cable.

The other three cables are the Asia America Gateway (AAG) project, the EAC Pacific and FLAG NGN-Pacific. Call us, once bitten twice shy, but this is beginning to look crazy.

The real craziness of the whole undersea market can be summed up in one word: Maldives. “Did you know that the Maldives of all place now has not one but two brand spanking new cables? One goes to India and one goes to Sri Lanka,” says Telegeography’s Mauldin.

Sure the builders have different names and the money is not American, but the foolishness is still the same.