drg_logo-globe1Last year, global demand for new submarine cables expanded rapidly, and a variety of new players noticeably established their role in driving and steering new undersea network construction. As a result, investor interest in new undersea opportunities increased. DRG has been pleased to be called upon to continue supporting its established clients as well as new up-and-comers.

Throughout 2016, the DRG team was supporting clients in a variety of capacities. Here are just a few highlights:

  • We performed due diligence on several large undersea cable related investment opportunities, some of which culminated in new investments or funded cables;
  • We supported the initial procurement work for clients that allowed them to move from feasibility to in-force supply contracts,
  • We expanded our ongoing project management support to include three new undersea system projects, one upgrade project, and terrestrial network solutions for another, which together stretch several tens of thousands of kilometers involving connectivity between and among Asia, Americas and Europe.;
  • We continued to support our ongoing clients with specialty engineering support focused on cable station planning/engineering and route planning;
  • We introduced our clients to potential financial sources and supported development of investment opportunity data and reports; ; and
  • We launched a new relationship with United Cable Company (UCC) that enables us to support capacity sales for our clients—a critical component from project start-up to full operations.

With these and our other accomplishments, we feel that we have moved even closer to being your “One-Stop-Shop” for planning, developing, procuring, implementing and operating a submarine cable system.

The Cable Industry in 2017

We at DRG see 2017 as even more exciting than 2016. While cables being laid right now provide increased diversity and global connectivity, new technology is allowing the construction of cables with even greater capacity potential. However, none of these cables will have the limitless supply of capacity which the market has been expecting for the last 15 years. The Shannon limit also imposes constraints on the potential of network upgradability. How the market dynamics continue to shift, both from the standpoint of new cable-construction and capacity sales/pricing, is not easy to predict, but we see three trends:

  • OTT fiber pair ownership in new cable systems will be a pivotal element of most cables’ financial success;
  • Cables will fill faster than ever before but price erosion will continue, which means that return on the base investment will need to be assured within the early years of a cable’s lifetime; and
  • Capacity pricing will need to remain meaningfully higher than the combined cost of upgrade and OA&M.

We are also seeing the continuing evolution of new engineering approaches to deliver undersea cable capacity. Diligent attention to cable engineering through new routes, historically-believed to be less attractive, is a must. While open networks have created opportunities for owners to manage their own assets better, this also leaves them technically responsible for the integration of wet and dry system design. New architectures undersea, with switchable OADMs, broader-bandwidth amplifiers, and enhanced supervisory networks, all suggest a need for thorough qualification of new designs and attention to production quality control.