Another telco supply-chain shortage: cable ships
Here's another shortage in the supply chain: cable ships.
It's an open secret in the submarine cable industry that supply of the vessels that lay undersea fiber and carry out maintenance is close to a breaking point.
There's a waiting list until 2025 for cable-laying ships, says Mike Constable, chief strategy officer of HMN Technologies, the former Huawei Marine company.
He told the recent Submarine Networks conference that the industry is "going through unprecedented times in terms of scarcity of this asset."
"This is something the industry has struggled [with] for some time. Everyone expects the Internet to be free."
He said a cable vessel costs US$80-$100 million to build, with annual running costs of around $12-$14 million.
With rising interest rates and shortages of key back-deck equipment, "it's a very challenging time to do new builds."
The availability of cable maintenance ships is also extremely tight, with the global fleet having to service a rapidly growing number of cables in the water.
"Who is building these assets and where do the economics lie in bringing these assets to the market? That's a substantial challenge," Constable said.
Gavin Tully, managing partner at Pioneer Consulting, says the aging maintenance vessels, each typically around 30 to 40 years old, could become a crisis in the industry.
Ships are booked up to three years into the future with a narrow window.
'Crisis of our own making'
"When sourcing parts is a problem, you have a domino effect … that cascades through the entire industry, " Tully warned.
He described it as "a crisis of our own making – we have squeezed cost and fat out of suppliers."
He said the need to win the business of hyperscalers with the lowest cost per bit is driving competition between the fiber systems suppliers.
"At the top, hyperscalers tend to make decisions based on price, because there are only three global suppliers who can work with them," Tully said in a written response to Light Reading.
Competition between suppliers had squeezed prices through the entire supply chain, leading to inevitable shortcuts and a fall in quality.
"Quality has dropped considerably in the past few years across the board as suppliers cut staff while expanding factory output.
"Hyperscalers want three to five cables on their critical routes so if one fails it's not seen as a major problem."
The industry economics are unlikely to change, he said. "There's very little incentive baked into the industry for anything else."
The needs of hyperscalers will continue to drive down prices, while there is little likelihood of marine construction companies accelerating their ship-building.
"Although a new [ship] may appear every now and again, I believe the norm in the industry is going to be using 20- to 30-year-old vessels. It's simply too difficult to make money from a ship."
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— Robert Clark, contributing editor, special to Light Reading