Hi Gottfried,
Re: so it makes sense to look way ahead and bury much that won't be lit till years later.
I cannot concur with this view. The generations of fiber optic race on at greater than Moore's Law delta. The net result is that fiber that was laid in 1999, much of which is still unlit, is now obsolete because it will not match the latest in opto-electronic components at the termination points of fiber optic networks. Very much the same as trying to upgrade a component in a PC rather than replacing the entire box. Everything moves in lockstep, and the mere presence of a fiber strand in the ground is no guarantee of usability.
Re: This is especially obvious with fiber in the oceans.
The situation in the submarine market is very fluid. (Pun intended.) While the incumbents, T, WCOM and the PTTs add bandwidth incrementally to their club lines, i.e. FLAG, others like GX came in with the idea adding tremendously to the bandwidth capacity as a competitive measure against their more staid and conservative brethren. The net result has been a price war in which no one wins. While a couple of years ago, GX was booking IRUs out to 10 years or so, now all of these are being re-negotiated at greatly diminished rates, and for much shorter periods of time. The industry is caught up in the syndrome of profitless prosperity. They can make some money, but never enough to satisfy a robust ROE or IRR calculation, IMO. In plain language, we are now obsoleting plant that hasn't had a chance to pay for itself.
Best, Ray |
