Being in the submarine fiber optic cable industry is a lot like being a Boston Red Sox fan – no matter how well things are going, you are always convinced that disaster is right around the corner.

Right now in the industry, there is a lot of talk of imminent disaster, even though the industry is witnessing some of its best times.  We all know why this is happening.  Many of us experienced the collapse of the market 15 years ago and none of us want to go through that again. 

Given this backdrop, we felt it timely to comment on the issue.  Back in 2011, we decided to take on the question of the boom and bust nature of the submarine fiber optic cable market, as those of you who subscribe to our Radar Screen Report are well aware.  At that time, the market was in a surprisingly steady period; something not typical for submarine cables.  This period lasted from 2009 to 2013.  Demand was stable, but at a low level.  Some projects could and did get funded, but not enough for the industry to thrive.  Still, it wasn’t a bust either.  There were few bankruptcies and, overall, the market grew.  The industry may not have been thriving, but it was surviving.

In 2011 in the Radar Screen Report, supplemented by the daily news in the NewsFeed, we began identifying and monitoring the driving and constraining forces acting on demand.  These had reached an equilibrium from 2009-2013, resulting in the consistent but lackluster demand noted above. 

In 2014, this equilibrium was broken by several factors that together made financing more accessible to submarine cable developers.  This had the effect of allowing a wave of new cable projects to get funded, well beyond anything seen in the previous five years. 

Over the past two-and-one-half years, a new equilibrium seems to have developed.  This one is considerably higher than the 2009-2013 period but still well below the spike seen in 2014.  Again, this change can be largely attributed to the greater availability of financing, the lack of which was a major constraining factor before 2014.  So the move of the availability of financing from constrainer to driver was a fundamental change in the submarine fiber optic cable market. 

So what does all this mean for the question of disaster on the horizon?  As it took a fundamental change in the factors impacting the market to create the current high demand levels in the industry, it will take a similarly fundamental alteration to bring about a collapse.  There are many scenarios that potentially could cause a change in demand factors and we are monitoring events that impact those factors daily, but to date we have not seen convincing evidence that such a change is imminent. 

Red Sox fans are in a perpetual state of worry of impending doom, even after winning a World Series.  The submarine fiber optic cable industry may not be quite as bad as that, but it is always a good idea to be vigilant.  We will keep monitoring the key factors in the submarine cable market and reporting on them in the NewsFeed and Radar Screen Report.