LIT CAPACITY

Since 2015, major submarine cable routes have averaged 18 percent lit of total design capacity. A large capacity buffer is designed for cable systems to deal with sudden spikes in demand, such as handling rerouted traffic due to a cable fault.

Transatlantic Region

Transatlantic routes are the most competitive globally – especially those connecting the two biggest economic hubs in the world of New York and London – and carry traffic between the highly developed economies and technology markets of North America and Europe.

The Transatlantic region has seen low to moderate design capacity growth during the period 2016-2020 at a CAGR of 16 percent due to regular upgrades and a new system each year for the period 2015-2018 and one new system in 2020. (Figure 25) This is down from last year where the CAGR for the period 2015-2019 was 22.9 percent. On average, the Transatlantic route has maintained a lit capacity at 23 percent of total for this five-year period, well over the global average of 18 percent. The last two years have seen 27.3 and 36.8 percent, respectively. Additionally, lit capacity has increased at a CAGR of 40.9 percent during this period, indicating that demand is greatly outpacing capacity build out.

Based on publicly announced information, lit capacity growth in the Transatlantic region is currently projected to outpace design capacity growth by 2025. (Figure 26) While there is still time for systems for 2025 to be developed, that window is closing considering a typical submarine cable project takes 2-3 years to implement. The meteoric rise in bandwidth demand is driven by individuals and businesses continuing to switch to cloud and web based services as they have since the start of COVID.

However, with the advent of 400G technology and high fiber pair count systems (16 to 24 or more) it is possible that design capacity will be able to stay ahead of demand through system upgrades and new systems announced over the next 12-18 months.

Transpacific Region

As in the Transatlantic region, Hyperscalers continue to expand their infrastructure across the Pacific and account for a significant portion of new system builds. Systems along this route connect the economies of the United States and Canada with Australia and East Asia.

The Transpacific has observed similar growth to that of the Transatlantic with 16.6 percent CAGR for the period 2016-2020. This is about the same last year where the CAGR for the period 2015-2019 was 15.7 percent. The region has maintained an average of 29.4 percent lit capacity during this time – noticeably higher than global averages. (Figure 27) In 2015, lit capacity was as low as 15 percent, indicating a short-term capacity overbuild in this region that has only recently begun to recede with 2019 and 2020 observing lit capacities of 29.3 and 47 percent, respectively. As in the Transatlantic region, Hyperscalers continue to expand their infrastructure across the

Pacific and account for a majority of new system builds.

As one of the more competitive regions in the world – with a diverse number and type of both systems and customers – the Transpacific is expected to increase from its CAGR of 26.6 percent to 27.3 percent through 2025 based on publicly announced system information. (Figure 28) While lit capacity is not currently expected to outpace design capacity by 2025 as in the Transatlantic, based on currently available information lit capacity may reach as high as 69.7%. More systems need to be developed and additional upgrades performed along Transpacific routes to stay ahead of this steep rise in demand.

Americas Region

The Americas region has seen significant growth in the last few years, almost quadrupling in total capacity from 233.5 Tbps. in 2016 to 803.5 Tbps in 2020 along major routes. This region has observed a CAGR of 27.9 percent for the period 2016-2020. (Figure 29) This is about the same as last year where the CAGR for the period 20152019 was 28.5 percent.

The region has maintained an average yearly lit capacity of 9.4 percent, far below the global average. Much of this growth had been expected to derive from growing markets in Latin America developing new systems and capacity upgrades to the United States. However, this growth has not been realized yet and may be due to current economic and political issues through Central and South America.

Hyperscalers again continue to be the primary drivers of new systems along this route adding several high-capacity systems in

2017 and 2018 that increased the total capacity along this route by over 160 percent from 2016. Typically, Hyperscalers had partnered with traditional telecoms carriers that add this capacity to the general market but now they are primarily building cables entirely for their own use. However, Google has sold a fiber pair to Sparkle on the Curie submarine cable system in 2020 and another fiber pair to Lumen on Grace Hopper across the Atlantic earlier this year, showing that Hyperscalers may be willing to monetize these assets.

Based on publicly announced system information this route will observe a design capacity CAGR of just 8.4 percent for the period 2019-2023. (Figure 30) This indicates a potentially significant slowdown in new capacity demand as much of the existing infrastructure remains unlit.

Growth in this region is typically fueled by markets in Latin America – Brazil, Argentina, and Chile amongst others – and helped by the expansion of Hyperscalers in South America. However, due to persistent economic and political uncertainty in the region and a possible overbuild over the last several years the normal demand drivers for systems in this region have been absent. Much of the new bandwidth slated to be in place by 2025 is along a route serving just the East Coast of the United States where demand is still rising.

INTRA-ASIA REGION

Growth along this route depends on huge infrastructure builds connecting major hubs throughout Asia and Southeast Asia – something that does not happen every year.

The Intra-Asia route has maintained minimal to moderate design capacity growth since 2016 with a design capacity CAGR of 17 percent for the period 2016-2020. (Figure 31) This is down slightly from last year where the CAGR for the period 2015-2019 was 19.5 percent. Lit capacity falls below global trends at

12.4 percent of total design capacity.

Over 700 Tbps capacity is already available along these routes and over 1,000 Tbps will be added through 2025, adding a sizeable increase of 143 percent. This capacity growth is driven by several cables over 140 Tbps in capacity being developed in the region through 2025. As demand increases across the Pacific especially between Asia, Australia and the United States there is potential for lit capacity to grow significantly as more traffic is being routed to and from Asia.

Based on publicly announced planned system information this route will observe a design capacity CAGR of 18.8 percent for the period 2021-2025. (Figure 32). STF