New player joins transoceanic-cable game

New player joins transoceanic-cable game

STEPHEN HARDY

With international long-haul carriers around the world crying for bandwidth, particularly as liberalization in Europe joins exploding demand in the Far East, it seems that a week doesn`t go by without the announcement of a new submarine fiber-optic cable venture. The most recent entrant in the field, Neptune Communications, llc, hopes to move quickly to establish a niche for itself before the boom goes bust.

Neptune Ventures I, llc, and The Carlyle Group venture capital firm formed Neptune Communications, llc, Fairfax, VA, to develop seven cable landing licenses that its principals acquired from the Federal Communications Commission over the past three years. Donald J. Schroeder serves as president and chief executive of the new company, and David W. Walker and David L. Chew are executive vice presidents. Both Schroeder and Walker have extensive experience in submarine fiber-optic cable systems and have worked together most recently on the Northstar Cable System and the Fiberoptic Link Around the Globe (flag) project (see Lightwave, October 1996, page 1).

The new company will arrange the financing for, as well as plan and develop, a series of submarine fiber-optic cable systems across both the Atlantic and Pacific Oceans (see figure). Once these systems are in place, Neptune Communications also will perform sales and marketing, implementation, operation, and maintenance functions.

According to Schroeder, the company hopes to take advantage of an anticipated explosion of competition sparked by the 1996 Telecommunications Act in the United States and the World Trade Organization telecommunications agreements that should bring competition to service provision worldwide. "We believe that every carrier will be forced to efficient capital deployment, especially when faced with competition," Schroeder explains. "Our intention is to attempt to provide a menu of alternatives that would be far more responsive than the conventional way that these systems have been marketed."

The conventional way includes a partnership among service providers, who would enjoy exclusive access to the cable system in exchange for financing its development. Neptune Communications hopes to provide capacity on a basis similar to the "carrier`s carrier" concept, say Lightwave sources.

This does not mean that Neptune Communications plans to build the systems unilaterally. Schroeder says the company has begun negotiations with several potential partners, although he declines to provide details because of proprietary considerations. He does say that some partners would likely come from the service-provider and equipment-vendor communities.

Without such partnerships in place, it is difficult to determine the technological parameters of each of the networks, says Schroeder. However, Neptune Communications envisions ring configurations for both its Atlantic and Pacific systems, as well as the use of wavelength-division multiplexing.

A key part of Neptune Communications` strategy is putting the cable systems into operation quickly. "We feel a need to move as soon as possible and hope that in 1998, we will have at least one system up and running," Schroeder says.

The company has the resources to achieve such an aggressive timetable, he states. "In several respects, we believe that we can get to market as quickly as anybody," Schroeder says. "We think that we can move very quickly because of our extensive experience in the procurement of these systems and also the arrangements necessary on land as well for landing rights and interconnection."

Hurdles remain

This experience will allow the company to streamline operations, he adds. "I can only tell you that what took us a year and a half to get to in the flag cable system, we think we can get to in a matter of...days," Schroeder claims.

The company will need all of that experience if it is to meet its aggressive schedule. While it has expertise and capital, it does not have two other essential ingredients necessary for success: the additional partners that Schroeder is now assembling and the foreign landing rights necessary to complement its U.S. licenses.

How quickly Neptune Communications can break ground on its first system remains a matter of conjecture. "Don claims he can get financing in place real quickly," says Tom Soja, an analyst at Kessler Marketing Intelligence Corp., Newport, RI. "And if that`s the case, we should see something fairly shortly."

Still, the company faces a few hurdles that may not be readily apparent. For example, says Soja, the bumper crop of submarine cable projects may make it difficult to find suppliers. For example, two systems, Gemini and Atlantic Crossing-1 (see Lightwave, June 1997, page 7), have recently been announced for traffic between the United States and Europe, while sea-me-we-3 (see Lightwave, May 1997, page 7) represents but one of several Asian submarine systems.

"There`s a question of whose technology he`s going to use, how cheaply he can get it, and whether he`s going for low cost or high capacity, or both," says Soja. "Now, Atlantic Crossing is allied with at&t ssi and Gemini is allied with Alcatel. And from what I can determine, both of those suppliers are fairly well booked up for next year, between those two Atlantic projects and other projects like the Pan-American and sea-me-we-3. I don`t know if they can supply him with a system in the 1998 time frame or not."

Japanese companies such as Kokusai Denshin Denwa Submarine Cable Systems or nec might fill the void. "Now, there`s also a new supplier on the market that has a repeater, and that`s Pirelli," Soja adds. "But it`s untried in the transoceanic distances. In fact, its first system is going in now--the Roma-Palermo line--with a repeater."

As a result of these hurdles, Neptune Communications may find itself a step behind the competition. "He can`t possibly beat Gemini or Atlantic Crossing to market at this point," stated Soja, who has done work for the Atlantic Crossing project.

Still, that doesn`t doom the company to failure. "Most carriers are looking for more capacity across the Atlantic. There`s really a serious shortage right now," offers Soja. "There is a market out there for third-party supplied systems to act as carrier`s carriers, to provide capacity, especially to the large carriers who otherwise would have to take a bigger share than they really need for a consortium-style cable because the smaller carriers aren`t going to purchase that much."

The smaller carriers represent an equally viable market for Neptune Communications` future services, asserts Schroeder. "What we see are new market entrants around the world that will begin with limited facility requirements and limited facility holdings," he explains. "And they will be attempting to compete with incumbent participants who have a portfolio of holdings based on the existing facility in place today. And again, I see each market participant having a different set of individual requirements, and so we hope to hold ourselves out with a menu of alternatives that would allow all participants to benefit from these systems in the future." q