Mar, 2002 : Hope for Bandwidth Providers Exists, says TeleGeography
📅 - Five years of frenzied network construction have resultedin a 21-fold increase in trans-Atlantic bandwidth and a 23-fold increase intrans-Pacific bandwidth, according to a recent report from research groupTeleGeography, Inc. (telegeography.com). Companies such as Global Crossing blazed trails across the world's oceans, but suffered when demand failed to increase as quickly as hoped.
"Ambitious network builders, such as Global Crossing, were caught betweenfalling prices, slowing demand, and difficult debt covenants," said AlanMauldin, research analyst at TeleGeography. After spending billions toconstruct their networks, the companies' costs could not easily be recoupedwith capacity prices declining 50 percent or more each year.
In the past year, investor sentiment has shifted from irrational exuberanceto profound skepticism. However, TeleGeography's research indicates that,although far less spectacular than once assumed, bandwidth demand growthremains robust. According to estimates based on reported capacity sales, theamount of purchased transoceanic submarine bandwidth roughly doubled in 2000and 2001.
TeleGeography's recent report, entitled "Submarine Bandwidth 2002,"documents a number of factors that may provide hope for the bandwidthindustry:
Internet network bandwidth, which accounts for the majority ofcapacity purchases, roughly quadrupled in 1998 and 1999 and tripled from2000 to 2001.There are growing indications that bandwidth prices are finallystabilizing on some routes, particularly on trans-Atlantic routes.Construction of new cables has slowed sharply, with only two cablesscheduled to be deployed during 2002, one each in the Atlantic and Pacific.
"In the short term, demand could not keep up with the extraordinaryincreases in network capacity," explained Mauldin. "The current marketturmoil obscures the fact that demand for bandwidth has continued to growrapidly."
Once the market chaos finally does subside, investors will likely perceivewhat no one wanted to admit in the 1990s: when stripped of its "new economy"glamour, the old rules of competition still apply to the bandwidth industry.As with most companies in competitive markets, the surviving bandwidthsuppliers will likely earn a respectable, if unspectacular, return on theirinvestments.
The inaugural edition of the "Submarine Bandwidth" report builds onTeleGeography's previous research on undersea bandwidth supply and demand,initiated in the "International Bandwidth" series. The new report quantifiespresent and future capacity supply and demand; offers a primer on bandwidthproducts, contracts, and technology; reviews data on cable construction,upgrade, and maintenance costs; and presents detailed pricing data forcircuits and wavelengths. The second half of "Submarine Bandwidth" presentsdetailed profiles of 68 undersea cable networks.
"Ambitious network builders, such as Global Crossing, were caught betweenfalling prices, slowing demand, and difficult debt covenants," said AlanMauldin, research analyst at TeleGeography. After spending billions toconstruct their networks, the companies' costs could not easily be recoupedwith capacity prices declining 50 percent or more each year.
In the past year, investor sentiment has shifted from irrational exuberanceto profound skepticism. However, TeleGeography's research indicates that,although far less spectacular than once assumed, bandwidth demand growthremains robust. According to estimates based on reported capacity sales, theamount of purchased transoceanic submarine bandwidth roughly doubled in 2000and 2001.
TeleGeography's recent report, entitled "Submarine Bandwidth 2002,"documents a number of factors that may provide hope for the bandwidthindustry:
Internet network bandwidth, which accounts for the majority ofcapacity purchases, roughly quadrupled in 1998 and 1999 and tripled from2000 to 2001.There are growing indications that bandwidth prices are finallystabilizing on some routes, particularly on trans-Atlantic routes.Construction of new cables has slowed sharply, with only two cablesscheduled to be deployed during 2002, one each in the Atlantic and Pacific.
"In the short term, demand could not keep up with the extraordinaryincreases in network capacity," explained Mauldin. "The current marketturmoil obscures the fact that demand for bandwidth has continued to growrapidly."
Once the market chaos finally does subside, investors will likely perceivewhat no one wanted to admit in the 1990s: when stripped of its "new economy"glamour, the old rules of competition still apply to the bandwidth industry.As with most companies in competitive markets, the surviving bandwidthsuppliers will likely earn a respectable, if unspectacular, return on theirinvestments.
The inaugural edition of the "Submarine Bandwidth" report builds onTeleGeography's previous research on undersea bandwidth supply and demand,initiated in the "International Bandwidth" series. The new report quantifiespresent and future capacity supply and demand; offers a primer on bandwidthproducts, contracts, and technology; reviews data on cable construction,upgrade, and maintenance costs; and presents detailed pricing data forcircuits and wavelengths. The second half of "Submarine Bandwidth" presentsdetailed profiles of 68 undersea cable networks.
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