Sunil Tagare put out a great piece yesterday on the submarine cable industry's unique ability to spend money, and it got me to thinking that there is a strange juxtaposition here. Somehow we as a global society have gotten to this place where it's ok to gamble on fiber a mile or two under the waves, but horrifyingly risky to put it a few feet underground.
Think about these projects, some done, some ongoing, some still on the drawing board: BRICS, Emerald Atlantis, WASACE, TPE, AAG, Telebras-1, Unity, SEACOM, Arctic Fibre, Polarnet, WACS, GBI, South Atlantic Express, Pacific Fibre ... I could go on. Some of these will work out fantastically, some will not, but all of them take some sort of leap of faith a decade or more in length to put in place.
But propose a new longhaul route in the US, like Allied Fiber has for instance, and investors want practically no risk at all or else it'll be the bubble all over again. On the access side of the tracks, Verizon is dropping a ball nobody else was even brave to pick up in the first place for similar reasons. In between, metro fiber is finding investment but only because it *does* give those no-risk returns currently. Ask a network operator to leave that comfort zone and you'll find few takers. Can't blame the operators though, they're responding to the money and the money guys are skittish.
I find it all quite strange though, because submarine fiber is inherently more risky. It's hard to upgrade or to add more endpoints, and it's always somewhat at the mercy of the next big build using the latest fiber and gear. You spend all the money up front, and then hope you projected it right while you wait for the next decade or two to unfold. With terrestrial infrastructure, you can change your business model, go after more markets you previously bypassed, blow new fiber into spare conduit, upgrade the gear without hiring a boat and waiting 6 months, etc.
Why are we so timid on land as compared to undersea? Why is the world willing to build 50Tbps or whatever it is to Africa *before* the terrestrial infrastructure to distribute even a tiny fraction of it out of the landing stations has even been designed, yet it thinks building fiber to the home in 90% of the US and Europe is economic insanity and copper will just have to do until 2020?
There are exceptions of course. Zayo's FTT initiative was definitely brave when they started it several years back, and Google is at least trying to show us how it's done in Kansas City. And in the transatlantic arena, there is still remarkable restraint relative to other regions - with Hibernia making a move based on a very clear financial-vertical latency objective and Iceland seeking a way off the sidelines with Emerald Express.
I'm not saying build it like we used to in '99, it's just that maybe the industry's risk tolerance is a bit out of kilter right now. Sometimes overcompensating one way, and sometimes the other.
I suppose part of it is government backing. Lots of these submarine cables (not all) are getting pushed by the public sector. The proposed BRICS cable, for example, seems like a political plan not an economic one. And the US broadband stimulus certainly got more than a few middle-mile projects going that wouldn't have otherwise.
But these days so much of the market seems so willing to throw billions of risky dollars at bizarre mobile apps, and so skittish about whether one will get a 2, 3 or 4 year payback from fiber that will be accessible a few feed underground for a few decades with revenues that don't depend on this week's fad.
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