Corporate Blog

Telecommunication Cables: To Retire or Not to Retire

Telecommunication Cables:  To Retire or Not to Retire

With the proliferation of new, high capacity cable systems and the excitement that surrounds bringing these cables into service, the question of what to do with older systems is not necessarily the most interesting topic. Nonetheless, the question of when to retire an older cable system is one that many of us in the industry will be called upon to address. A bit over a year ago, OSI was asked to evaluate an older cable and determine whether continued operation made sense. While the details of that analysis remain private, some of the key questions are relevant to any similar analysis.

The first question is usually the technical viability of the cable system. Does it continue to provide an acceptable quality of service? Rarely, if ever, does the system itself begin to fail. Cable systems were built to last 25 years and there is every indication that fiber optic systems can operate for much longer (assuming the capacity being delivered is still enough – we’ll get to that shortly). Questions of technical viability are more likely to arise from ongoing repair costs which arise from external faults. Clearly, a cable that is suffering from ongoing faults is less desirable than one that does not. Whether the faults arise from problems in the installation, choice of route, or some other factor, this can be a critical factor in deciding to retire a cable.

Assuming the cable system is still operating well, the next question is that of commercial viability. Here, a proper financial analysis should be undertaken, including projected cash flows of revenue and operating costs and the impact of writing off any remaining depreciation in the cable system. Pay particular attention to the expiration of any revenue sources. Some older cables may remain financially viable until the IRUs and circuit leases terminate, at which point there is little hope for renewing STM-1 leases that cost as much as a 10G circuit does today. Other long-term agreements, such as facility leases, may weigh on the cost side and have costs associated with terminating them. Understanding all of these is necessary to have a full view of commercial viability.

The third, and often most important question, is what are the options for replacement? If a new cable has already been built, that’s great. But what if a new cable needs to be fully funded? That is the most expensive and often the most difficult option. Can the existing cable be upgraded with new terminal equipment? Is there a business case for that? Other options such as replacing the repeaters, reuse of another out-of-service cable, or Medium Earth Orbit (MEO) satellite service might work in certain cases. Should the old cable be kept as a backup route? This might be feasible if O&M costs can be reduced, perhaps by removing the cable from any marine maintenance agreements, it is, after all, only a backup.

The answers to these questions will all depend on the specific situation. The main lesson is to examine all the details, both technical and commercial, in order to support a decision. In the case that OSI reviewed, an opportunity arose to join a larger project and the owners elected for that option. No announcement has been made regarding the older cable, so we assume it continues to carry whatever capacity leases remain.

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