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Wednesday, May 12, 2004

New Undersea Cable Projects Face Some Old Problems via NYTimes

Announcements came in February and March that two new large cables would be built under the Indian Ocean, the Persian Gulf and the Mediterranean Sea to connect East Asia with Europe via the Middle East.The projects - the Falcon cable financed privately by Flag Telecom and the Sea-Me-We 4 line built by a consortium of global telephone companies led by Singapore Telecommunications - are nothing if not ambitious. The cables, which were several years in the planning, will stretch more than 9,300 miles, touching some of the more underserved parts of the globe. Flag did not announce a price tag for its project, but the consortium said it would spend $500 million on its line.Internet use is surging in many of the countries to be served by the cables - particularly in India, where Western companies are shifting some of their data businesses. And demand for high-speed connections will certainly grow in places like Bangladesh and some countries in the Persian Gulf that have had little access to global undersea networks.But the operators of the new cable lines face the same problems that sank many competitors. Chief among them is that the amount of capacity being added far outpaces growth in Internet use and demand for long-haul lines. Until this changes, prices will slide, making it harder for investors to recoup the hundreds of millions of dollars they are putting into these projects.The submarine cable industry's woes have a silver lining, though. Rock-bottom prices on cable leases mean that phone companies and Internet providers can offer cheaper long-distance calls and Internet connections, a boon to consumers and corporations. That, in turn, is helping increase Internet use - which in turn is good news for companies that depend on online sales and other activities.

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