Submarine cable equipment underdogs prepare to shake up the market

Samantha Bookman, FierceTelecomThis week, we take a look at five smaller providers in the submarine cable equipment supplier space, in the latest installment of The Contenders.

The submarine cable systems market doesn't get much attention beyond those within its specific telecommunications segment. With the exception of those times that a significant cable cut--such as a recent slew of outages in March off Egypt--impacts countries across a region, submarine cabling rarely makes the news.

The perception of subsea cable systems as a quiet corner of the market is coming to an end, however. Cable outages bring to the forefront the fact that more than 95 percent of all Internet traffic travels between continents via submarine networks. And ever-increasing attention is being paid to how much it costs for data to travel along these networks.

According to Sunil Tagare, a submarine cable expert and one-man force in the subsea market, the cost to send data over high-speed networks, particularly in the Asia-Pacific region, can range from $5 to as high as $20 per megabit.

A number of factors are behind this wide price range, and equipment is one of those factors. Subsea cable equipment has to be hardened against the environment in which it operates, raising costs; deployment can be time-consuming and challenging; and more.

That's one reason why The Contenders is putting the spotlight on submarine cable systems equipment suppliers. But another issue is lurking in the background: the equipment supplier segment may be on the verge of rapid change.

Currently, Alcatel-Lucent (NYSE: ALU) holds the largest percentage of the equipment supplier market, followed closely by TE Subcom, with NEC in third place. On the surface, it appears these heavyweights aren't going anywhere. Behind this trio are a slew of equipment suppliers, most holding well below 1 percent of the market and competing with each other for a solid niche.

What has the submarine supplier market's attention is Alcatel-Lucent's ongoing attempt to sell off its submarine unit. If this happens--and there are no indications that it will be sold anytime soon, despite rumors of a few companies sniffing around--the equipment segment could be in for a shakeup.

The five companies profiled in our feature are clearly positioning themselves to take a bigger share of the market. Xtera Communications, for example, has scaled itself up from equipment supplier to turnkey submarine systems supplier, gaining membership in the International Cable Protection Committee this year. Ciena (Nasdaq: CIEN) and Infinera (Nasdaq: INFN) are utilizing their expertise and position in terrestrial networking to bridge key pain points in submarine networks. NEC, of course, holds a strong position as a turnkey supplier, but Huawei Marine Networks is in the background with strong backing from Chinese companies.

There are other equipment suppliers that did not make our list, but which could have an impact on the space as well. Let us know your thoughts in the comments section.--Sam

Take a look at our Contenders picks in the submarine equipment supplier market here.