In this episode of the TeleGeography Explains the Internet podcast, senior analyst Lane Burdette takes listeners on a deep dive into the complex world of submarine cable economics.
Lane breaks down:
Here are some key takeaways from the conversation.
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Submarine cable systems consist of two main components: the "wet plant" (everything underwater) and "dry plant" (shore-based infrastructure). The wet plant includes the cable itself—roughly the size of a garden hose containing optical fibers thinner than human hair—plus repeaters that amplify the signal every 60-80 kilometers. The dry plant encompasses cable landing stations, power-feeding equipment, and transmission gear.
Building these systems requires enormous capital investments. A transatlantic cable spanning 7,000 kilometers costs around $250 million, while trans-Pacific routes can reach $400 million. The cable itself varies dramatically in cost—from $6,000 to $20,000 per kilometer—depending on factors like the number of fiber pairs (now typically 16-24 pairs) and armoring requirements near shore where cables face the highest risk of damage from fishing activities and ship anchors.
Repeaters add another $200,000 each, with dozens required for transoceanic routes. Landing stations can cost millions more, though operators can save money by using existing facilities. Beyond hardware, projects require years of planning, environmental surveys, and navigating complex permitting processes across multiple jurisdictions.
The submarine cable industry has undergone a dramatic transformation over the past 15 years. In 2010, traditional telecommunications companies like AT&T and Telstra used about 75% of international bandwidth and led most cable construction through consortiums that shared costs and capacity.
Today, content providers—Google, Meta, Amazon, Microsoft—have flipped this equation, now consuming 75% of international bandwidth. Their massive scale and deep pockets have enabled them to build cables independently rather than joining consortiums. On the Atlantic, 100% of planned new cables are content provider-led, while the Pacific sees 80% content provider investment.
Traditional cable operators make money by selling capacity to carriers, ISPs, and enterprises through two main contract types: shorter-term leases (1-5 years) that allow buyers to benefit from falling prices, and longer Indefeasible Rights of Use (IRUs) lasting 10-20 years that provide price certainty and appear as assets on balance sheets.
Services come in two forms: "lit" wavelength services where the cable owner provides transmission equipment, and "dark fiber," where buyers install their own equipment. Dark fiber remains rare and typically involves large customers who become anchor tenants during the planning phase.
Pricing varies dramatically by route based on supply and competition rather than distance. The heavily supplied transatlantic route commands lower prices than trans-Pacific routes, despite the Pacific's greater distance and construction costs. As new cables enter service, they create supply surges that drive prices down further, while older cables eventually become uneconomical after about 25 years as new technology delivers far greater capacity.
The industry faces an interesting paradox: bandwidth demand doubles every three years, but prices continuously fall as supply increases even faster. This dynamic has historically worked out favorably, with growing demand offsetting declining unit prices.
However, content providers building their own infrastructure creates parallel markets. These companies don't sell capacity commercially—they're not trying to become telecom operators—which removes demand from traditional wholesale markets while not necessarily adding competitive supply.
Looking ahead, the industry expects continued massive investment, with planned spending reaching $4 billion annually through the late 2020s—double the current $2 billion pace. This build-out reflects both growing bandwidth needs and the technological reality that until innovations like multi-core fiber become commercially viable, meeting demand requires laying more cables.
The submarine cable industry exemplifies infrastructure that's "consumed like a public good but produced like a private one." While regulatory delays and market timing risks can devastate project economics—since cables earn their highest revenues when first entering service—the fundamental economics remain attractive for connecting our increasingly digital world.
How do we understand and address the challenges facing the submarine cable maintenance sector? That's what Mike Constable of Infra Analytics and TeleGeography’s Lane Burdette and Alan Mauldin lay out in this landmark report. Download the report here.
Where are submarine cable stations located? What is the average number of cables per CLS? This analysis by Lane Burdette summarizes the data from TeleGeography’s new cable landing station (CLS) database. View and save the report.
Data and analysis on long-haul networks and the undersea cable market, with forecasts of international bandwidth supply, demand, prices, and revenues. Take a look at the platform here.
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