Bandwidth Glut Looming For Telecom Industry.

Financial risks are growing for the Internet backbone industry thanks to a looming bandwidth glut, according to a new article by telecom magazine, America’s Network.

In the America’s Network Feb. 1 cover story, “The Coming Bandwidth Bubble Burst,” Group Editorial Director Grahame Lynch finds that many of the assumptions which have driven global fiber backbone rollouts don’t stand up to scrutiny. Among the article’s findings:

— Bandwidth demand is doubling every year, not every 90 days. This is high, but still a figure 700% lower than popularly assumed.

— So much bandwidth is currently available that major carriers are negotiating price cuts between 47% and 72% on backbone bandwidth contracts.

— 7 Tbit/s of global submarine cable capacity are coming online this year, even though current cable utilization measures just 100 Gbit/s.

— On some international routes where new cables are being installed, demand is actually falling as foreign countries develop their own local peering infrastructure and avoid the need for U.S. Internet links.

— The number of active Internet users in the United States may be actually declining.

The article quotes executives and researchers from AT&T, Global Crossing, Telstra and Level 3 on the prospects for the backbone industry. The growing consensus? Some planned systems won’t be built and financial risks are growing. Smaller systems with limited reach such as FLAG have been marked down heavily by financial markets to the extent that they are trading at a negative worth.

Even the largest providers such as Global Crossing and Level 3 have seen their stock prices drop by more than 70% from their 2000 highs.

“There’s no doubt that cables are being rolled out across the world without a lot of research actually being conducted into demand,” said Lynch. “One example is a planned cable connecting two impoverished Indian coastal cities and the 4 million population of Singapore, which will have a capacity four times the total of global submarine cable demand,” he continued.

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