Investment in new submarine cables has surged in recent years. Despite some fluctuations, new cable investment has averaged over $2 billion per year in the past eight years.
With demand continuing to rise at an exponential rate, the value of new submarine cables entering service from 2024-2026 is forecasted to reach over $10 billion.
Construction Cost of Submarine Cables
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Notes: Total construction costs of all international and domestic submarine cables entering service in designated years. Construction costs exclude the cost of subsequent capacity upgrades and annual operational costs. 2024-2026 construction costs based on announced contract values and TeleGeography estimates. Not all planned cables may be constructed.
The amount of potential capacity the newest generation of cables will provide is incredible.
The chart below shows that several major routes will see their potential capacity more than double once new cables are completed.
Existing and Planned Potential Cable Capacity by Route
Notes: Planned cable capacity on announced values and TeleGeography estimates. Not all planned cables may be constructed.
Reasons for New Submarine Cables
There are numerous reasons for the surge in new cables around the world. Here are a few influential factors:
- Scarcity of potential capacity and fiber pairs. The most fundamental driver for new cable construction is the limited availability of potential capacity. Demand continues to rise at an exponential rate and could soon lead to capacity exhaustion without new cable investment.
- Ownership economics. Content providers are the largest users of bandwidth. As their scale rises on a route, they eventually become reluctant to lease wavelengths or purchase wavelength IRUs on existing cables. Instead, content providers with sufficient demand have begun acquiring capacity at cost by investing in new cables.
- Route diversity. Consumers of submarine cable capacity purchase bandwidth on multiple cable systems. Creating mesh networks is important to provide a high level of network availability.
- Reducing equipment costs. As their bandwidth requirements continue to surge, operators are concerned with the cost of adding capacity. By building new cables with massive capacities, network operators can achieve lower unit costs compared to lower-capacity legacy cables.
- Replacing aging cables. The need for new cables is also related to the expected retirement of aging cables.
But that’s not all.
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Paul Brodsky
Paul Brodsky is a Senior Research Manager at TeleGeography. He is part of the network, internet, cloud, and voice research team. His regional expertise includes Europe, Africa, and the Middle East.