My Crystall Ball On Africa's Subsea Cables

The advent of 2Africa and Equiano cables will make the older African cables like WACS, ACE, and MainOne stranded assets in those markets where they compete head-to-head against the former. Both 2Africa and Equiano are much higher capacity systems; this means a lower cost per bit. There are big economies of scale in network equipment. But the biggest difference is that high capacity does not entail higher subsea maintenance charges. The annual fees paid to the cable ships do not depend on lit capacity. It is quite possible that Equiano pays far less than WACS due to Google's bargaining power and the fact the cable is buried deeper and avoids the dangerous subterranean canyons where a disproportionate number of African subsea faults happen. The maintenance charge is effectively insurance which should reflect the degree of risk. So Equino's cost per bit as a function of the fixed annual repair fee could be much less than for ACE, MainOne, and WACS. Equiano's design transmission rate is 144 Tbps versus WACS at 14.5 Tbps, but if it has lower operating expenses as is likely, then it is almost game over for the older cables. Clearly there will be some demand for the older cables as route diversity complements. But this limited by the fact that many of them are down a significant portion of each year. 

The other pending event on the horizon is steep price declines for those routes which Equiano and 2Africa compete. There will be over 300 Tbps available soon between Lagos/Capetown, Capetown/Lisbon, and Lisbon/Lagos. I predict 10Gs will fall into the miud single digits and 100Gs mid-teens. It may take a couple years, but it is inevitable. Resistance is Futile.

My last point suggests that wholesale providers will be forced to lower their operating expenses. The only place where they can make a difference is staff. So there will be pressure to re-engineer the internal work flow so that fewer people are required. Reinventing the carrier will be the name of the game. Lean and mean is the only way to prosper in the New World Order. 😀 




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