Supply chain issues and geopolitics have halted the usual steep falls in subsea cable prices – but with a surge in new investment, that may soon change.
(Source: Sybille Reuter/Alamy Stock Photo)Brianna Boudreau, senior research manager at TeleGeography, said demand growth was outpacing price declines on major routes."Supply chain issues and political challenges have dramatically slowed price erosion globally and have us for the first time asking ourselves 'are prices actually increasing?'" she told an online event Wednesday.She said one factor was market maturity, with 100G already well established."But a larger part of it is delays in new network projects and upgrades to existing systems that have limited supply."Upgrades that used to take six to 12 weeks are now taking more than 35 weeks to complete, she said.The other big factor is the rising geopolitical temperature.The US will not land any cables direct from China, including Hong Kong, causing the cancelation or re-routing of several cable systems in recent years. The US and Australia have also caused delays in Pacific cable builds because of actual or potential Chinese involvement.Surge in cable investmentBoudreau said the leveling out in prices has also meant that the price differences between regions have remained fairly constant.However, she notes that the pricing gap between 100G and the more mature 10G fell by about a quarter, most likely because 100G prices declined at a faster rate due to heavy capacity demands.Want to know more? Sign up to get our dedicated newsletters direct to your inbox.After the slowed expansion in capacity during the COVID years, a rebound in cable investment is now underway. In Asia-Pacific alone, around $4.2 billion in upgrades or new builds is planned over the next two years, Boudreau said.She said the industry expectation is that the extra capacity will help bandwidth pricing return to its traditional levels of decline, but in reality, the impact would vary across the different routes and markets.For example, direct routes would enjoy latency cost improvements that could be reflected in pricing, while those adding fresh or unique capacity on an under-served route may be able to charge a price premium.The level of competition and whether the new capacity is being offered by an existing or new player would also impact the price trend, she said."While network delays are keeping prices fairly stable in the short term, no one expects these supply issues to last forever."Related posts:OTTs and geopolitics rule the waves in subsea cable worldIntra-Asia Internet demand overtakes trans-Pacific routesUS officials reject subsea connection to Hong Kong over security worries— Robert Clark, contributing editor, special to Light Reading
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