Transatlantic Pricing Stable, Transpacific Pricing – Not So Much

June 7th, 2010 by · 3 Comments

According to Telegeography, prices have been amazingly stable on the New York to London route, with the cost of a 10Gbps wavelength falling just 3% over the past year.  Seeing that number in single digits is quite a sight after the past decade of steady and sometimes torrential price erosion.  It is perhaps another indication that despite the arrival of 40G, carriers can only get so far with electronics upgrades and no longer view supply as inexhaustible.  At some point, there will have to be new cables planned and built, but while prices are stable they are apparently still too low to justify such a build.

In the Pacific, however, prices have been pressured over the past year.  The LA-Tokyo has seen annualized price declines of 21%, while on the Tokyo-Singapore route the number is some 50%.  Unity and AAG have been online for only half of that time, which makes me wonder what a full year of the current availability of transpacific capacity will bring.   And yet, transpacific pricing remains five times that of transatlantic pricing, which was the justification for the upgrades and new cables constructed over the past few years in that part of the world.

One can’t expect transpacific pricing to ever equal transatlantic pricing of course, the distances are greater as are the technical challenges.  However, it looks to me as if the gap is set to narrow substantially in the next couple of years.  I wonder just how much pricing pressure was built into the spreadsheets justifying each of those new cables?  Ah well, as a consumer who spends quite a bit of time in Asia, I hope that those pricing declines lead to better connectivity overall.

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Categories: Undersea cables

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3 Comments So Far

  • SPGC says:

    Not sure why you you think TransPac won’t reach TransAt, unit price wise. Incrementally, the underlying costs are not that different (maybe a couple years behind) and we do have several new wholesalers in the market which is never pretty. Furthermore none of them have exclusive rights over any of the new routes and the race for capital outlay cover will be brutal (IMHO), especially as the owners of the “old” systems have plenty of capacity headroom and less concern about cash recovery. Let’s see.

  • Anon says:

    The capital investment on a transpacific cable is significantly larger than transatlantic, as is the O&M, so I doubt they will converge. Sure there are new entrants and new distressed assets (eg PC1), but this is also the case on the Atlantic side. Eventually the amount of money you are being asked to sell a 10G wave for does not justify the return on the wet portion you need or the cost of lighting the capacity. The floor for this on the Pacific is higher than the Atlantic.

  • SPGC says:

    Anon – I hope your belief in rationality proves correct, I am not so optimistic.

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