Telegeography put out a nice article yesterday about the state of transatlantic bandwidth. While supply and demand have been largely in balance over the last few years, they point out that pricing remains too low to justify new cables and the current systems will hit their theoretical maximums in 2014. When the bubble burst, the dollars it took to build these cables was mostly written off. The 'balance' right now is on an incremental basis, when you add in the costs of actually laying a new cable across the Atlantic the numbers don't add up.
They do add up in the Pacific, because pricing there is still much higher. That's why TPE got built and why other projects seem to have legs there. But in the Atlantic, an unstable situation is brewing. Traffic is growing steadily and pricing is holding firm, but no more fiber is coming anytime soon. Economics 101 says that means either pricing must go up or technology must advance in ways that change the economics. Are we due for a shortage?
Actually, it wouldn't be a shortage. What we have right now remains a glut, we just don't call it that because it isn't as bad as it used to be. If people aren't willing to pay pricing for bandwidth that will support a new transatlantic cable, then it's just not going to get built. It will stop being a glut when transatlantic bandwidth can be sold for more than it really costs to build, not what it cost to buy out of BK court. So such a shortage might actually be what we need to bring supply and demand back into a real balance. Of course, it could overshoot the mark, but it wouldn't be the end of the world. People would simply have to find ways to utilize their bandwidth more efficiently for a while.
But I don't actually think it will work out that way. Technological advancements such as 40G and eventually 100G on submarine cables may be unproven and problematic today, but I submit that is largely because nobody is really trying. After all, if someone were selling it today, it wouldn't really be needed yet would it? At some point though, the prospect of rising prices and a looming shortage become powerful incentives. Before prices rise too far, someone will work the kinks out of the next generation of equipment - and upgrading has a somewhat shorter time scale. That will not only push the 'crisis' further into the future, but it will also increase the total earning power of potential future cables. We'll get back into balance eventually, if there even is such a thing in this business.