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Google this month said it will build three new undersea cable routes to be completed in 2019, bringing to 11 the number of cables in which the company has invested since 2010.
Google's multimillion-dollar move isn't unusual anymore, even though undersea cable builds were historically driven by individual telecom operators or consortiums that then sold optical wavelength services to their customers.
The big four content providers -- Google, Amazon, Microsoft and Facebook -- are increasingly financing undersea cable routes to enable fast, high-capacity data connections around the globe, particularly to locations where they have built data centers. Yet, these changes in the submarine networking market worry telecom operators that fear the big content providers have more money to invest in undersea cable, leaving the traditional players at a disadvantage.
Not only are 1 Gb, 10 Gb and 100 Gb wavelength service prices declining year over year, according to trend data from telecommunications research and consulting firm TeleGeography, but each time a new undersea cable goes live, 100 Gb wavelength prices drop quicker as more bandwidth becomes available at the high end of the market.
Yet, the news isn't all bad for telecom operators, according to Michael Bisaha, senior analyst at TeleGeography, based in Carlsbad, Calif. Speaking at a recent webinar, he said the big content providers shouldn't always be viewed as competitors taking over the undersea market, because they aren't always financing entire cable builds. Moreover, content providers may finance only a portion of a cable, so telecom operators have opportunities to get onto a shared cable system and use that to stretch their investment capital, he said.
Michael Bisahasenior analyst at TeleGeography
Content providers that have consistently invested in cable routes are on the routes where they have their major content hubs or cloud hubs, largely in the United States, Western Europe and some in Asia, Bisaha said. But that doesn't mean they only need primary undersea routes. They still need diverse routes, and when their needs don't meet the threshold of investing in a whole cable, they might need wavelengths or shared spectrum to specific geographies that they may buy from a telecom operator, he added.
"There are definitely opportunities to compete with or cater to the content players," Bisaha said, adding that content providers are primarily buying or investing in cables on the major routes that connect their primary hubs.
"The existence of one content provider on a cable doesn't necessarily preclude the need for the wholesale providers beyond those cable routes," Bisaha added.
Undersea cable pricing trends
Apart from the influence content providers are having on the high end of the undersea cable market, the growing need for bandwidth is also driving the 10 Gb wavelength market, where prices dropped from 2014 through 2017 at an average compound annual rate of 20% to 25%, according to TeleGeography data. Bisaha said he expects the downward pricing trend to continue for both 10 Gb and 100 Gb wavelengths.
Even as 100 Gb wavelength prices drop, steeper "shocks to the 100 [Gb] system" tend to coincide with new content-provider-sponsored cables coming online, Bisaha said. Increased participation of content companies influences the 100 Gb market more than in the 10 Gb or the 1 Gb markets.
Still, global undersea cable prices aren't falling uniformly in all areas. Less popular subsea routes may have higher transport rates than those for major hubs. "While the range in different geographies may indeed continue to shrink, we don't expect them to completely disappear," Bisaha said.
Many enterprises are more dependent on undersea cables than they realize for remaining online and in business.