Capacity Purchaser’s Pricing Dilemma
Until now, purchasers of submarine cable capacity have had only a few basic choices: join a consortium build or buy / lease capacity from a private cable or from a consortium member. But there are significant issues with these approaches.
Consortium cables sometimes do not offer solutions for certain types of wholesale purchasers. For example:
- Smaller consortium members may end up purchasing much larger capacity amounts than they need and/or owning a percentage of the entire system, not simply the route(s) they need;
- Administrative costs can be high;
- Decision-making can be slow;
- Timing and amount of capacity upgrades are often dependent upon unanimous consortium agreement;
- Consortium members have joint and several liability; and
- Ownership interests are largely unmarketable.
Existing private cables also may have problems, including the following:
Existing private cables also can create issues for the parties that do not own the cables. Pricing is dictated by a small collection of carriers, and that pricing often does not correspond to market demand for the route. This is due to the fact that a private cable is typically owned by a carrier that also owns other large networks and operating businesses in specific domestic markets. These other networks / businesses may include terrestrial backbones, metro fiber rings, mobile networks data centers, and other terrestrial infrastructure; and these domestic businesses are usually much larger than the submarine cable business. Frequently the primary purpose of the private submarine cable is to provide capacity on a transoceanic route for the subsidiaries and affiliates of the cable owner, which makes the sale of capacity on the system to unaffiliated entities a distant secondary priority. In fact, a large operator with multiple telecom businesses often has a vested interest in NOT selling capacity to third parties on the route even if it has the available capacity, because to do so increases international competition in the domestic market in which the private cable owner operates its primary businesses.
Seaborn Networks offers an independent operator model that enables consortium-like pricing but with much more flexibility: smaller minimum purchases; takedown of capacity on a “pay as you grow” basis; independence in decision-making; and purchase only the route(s) needed.
Providing deeply discounted pricing of capacity by itself is not a solution for all subsea routes around the world. But a flexible business model that is responsive on a route by route basis to the needs of the relevant wholesale market with attractive spectrum offerings is very effective on select routes. Our approach succeeds because we have a thorough understanding of the needs of large capacity purchasers, the costs to build and operate subsea networks, and the costs and market dynamics of available alternatives.
Contact us to discuss your capacity needs. We look forward to hearing from you.