Changing the tide: Revised subsea strategies accommodate future need

For providers with aspirations greater than servicing one region, an undersea fiber optic link is needed. And undersea strategies now are being forced to change.

Fueled by equipment improvements and the need to offer more than mere connectivity, service providers must alter their business plans or risk extinction or sale.

Global Crossing, which launched what became a highly successful company overnight, originally held only one critical asset: an undersea link between New York and London. The company grew those assets to include additional undersea connectivity but more recently took a new direction. Its continent-to-continent connectivity was not enough, so the company adopted a broader plan to serve other carriers and retail customers on a city-to-city and building-to-building basis.

"Now [service providers] want to provide the whole enchilada," said Fahri Diner, president of Qtera, a subsidiary of Nortel Networks. "Subsea is a big part of that."

Other factors also have altered the competitive waterscape. The apparent dissolution of potential Global Crossing competitor Project Oxygen before it dropped a single cable indicates that the strategy of supporting a company solely on undersea connectivity is not enough. Project Oxygen representatives did not confirm or deny the company's demise.

In addition to changes in undersea network connectivity, undersea equipment strategies are altering, too. "At one time, subsea links were the bottleneck, but that is definitely changing," Diner said.

"[Undersea cables] didn't used to be a big deal," said Randy Dunbar, vice president of marketing for Level 3 Communications. "Someone like AT&T would just drop a cable and not worry about it for a long time."

But unlike terrestrial networks, where carriers build upgradeable networks and pull the latest fiber through empty conduits, undersea fiber drops are more complex.

"Once it's down, it's down," Dunbar said. "People used to think of the life of the cable [capacity] in decades, but with companies such as Nortel and Juniper bringing the cost per unit of capacity down so much, the useful life of a cable will drop, too."

The shorter life span of cable has changed the economics of undersea fiber deployments, said Michael Ruddy, senior fiber optic analyst for Pioneer Consulting. "[Cables] are becoming economically obsolete in about five to seven years. The overall operational cost might just make it cheaper to purchase capacity on a new system. You see providers put $800 million into a project and then just donate it and walk away."

Level 3 has adopted a build, sell and rebuild strategy to facilitate change undersea. The company recently sold $306 million worth of pan-European metropolitan, intercity fiber and trans-Atlantic capacity to Nextlink Communications. In two separate deals earlier this year, Level 3 partnered with Global Crossing to build a 1.28 Tb/s trans-Atlantic cable and sold Viatel 25% ownership interest in the trans-Atlantic cable now under construction.

Partnerships prevent Level 3's build, sell and rebuild strategy from eating its profits. Dunbar did not specify how long Level 3 keeps a cable, and the company doesn't have a set lifespan for fiber. But to stay ahead and help extend the life of the undersea cables, the provider installs the most advanced equipment and fiber possible, he said.

"The technology we put in subsea is the most advanced, and it is typically a precursor to what we do terrestrially," he said. "We try to construct Ferrari-like subsea systems because [undersea links] are simply not upgradeable. We look at different architectures for subsea as well to keep the cost per unit down."