Wiring for Tomorrow: Undersea Fiber Cables

The first undersea cable, which was laid for telegraph, was laid in 1851 between England and France. In 1956 the first coax cable—called transatlantic link (TAT-1)—went in. TAT-1 had the capacity to carry 35 conversations over 64Kbps channels.

The first fiber undersea cable, laid in 1988, was called TAT-8 and could support 4,000 voice channels. But undersea use of fiber didn't take off until 1994, when optical amplifiers were introduced. By the end of 1998, some 23 million miles of fiber-optic cable had been laid through out the world, by dozens of companies, at tremendous cost. By mid-1999 the total transatlantic bandwidth was 3Tbps, compared to just 100Gbps in 1998. By the end of 2001, we are likely to reach6Tbps. Between Asia and Europe, in 1997, we had bandwidth of 11Gbps; by 1999, we had 21Gbps;and by 2003, we should have 321Gbps. You can see that a great deal of spending has been done on fiber-optic cable, all over the world.

Fiber technology breakthroughs are having a profound impact on service providers, and that's witnessed by the constantly changing prices for intercontinental capacity. The construction cost of 64Kbps circuits has dropped from almost US$1,500 in 1988, to US$300 in 1995, to just a couple dollars per line today. When operators purchase undersea capacity, they pay two charges. The first isa one-time charge for the bandwidth—the indefeasible right of use. The second is an ongoing operations, administration, and maintenance charge that's recurring for the maintenance vessels that service the cable, and this is typically 3% to 5% of the total purchase cost.

The economic shifts look like this for a capacity of 155Mbps: At the start of 1997, it would have costUS$20 million; in 1998, it was down to US$10 million; in early 2000, it was down to US$2 to US$3million; and in 2001, it's expected to be at US$1 million. The operations, administration, and maintenance charges have remained the same because the contracts originally called for the calculation of those charges based on the cable length as well as the bandwidth, so as you increased your bandwidth, your operations, administration, and maintenance charges increased. Those agreements were recently changed so that you are only charged the operations, administration, and maintenance costs for the length of the cable. Hence, as you expand capacity, the maintenance charge is dropped.