The submarine carriage industry is experiencing some of its highest growth since before the tech bubble burst, according to Tyco Telecoms CEO and President David Coughlan. Appearing in Australia for the launch of the Pipe Networks Sydney-Guam PPC-1 cable, Coughlan said the hunger for capacity was so great companies were ordering upgrades before cables were even completed – but added he does not fear another bubble burst.

“The [takeup] of capacity is growing at double-digit rates, virtually everywhere,” he told CommsDay. “We have a number of systems, including PPC-1, that before they’ve even finished being built they’re actually ordering upgrades.”

Coughlan said cable operators were lighting up capacity quicker than ever before. “We build a system that’s capable of 256 waves, but day one we probably only light 12 of those...well Pipe now has just ordered their second upgrade. So that means before the system ever goes live it’s been sold out... And this is happening on more and more systems, where traditionally what you did was lit maybe 10% and two years later you came and lit another 10%. We’re now getting people who say ‘Well, I’ll light that first 10%’ and ten months into the project they’re asking for another 10%.”

But despite the exponential growth in take-up, Coughlan does not fear a bubble. “We saw a run up in the late 90s before the telecom bust. I think the big difference between that and what we’re seeing now is people are putting a lot more time into business plans – that was a build it and they will come model, and some of them didn’t come. This seems to be much more of a business-dynamic model where most of our customers are saying ‘we’re not going to bring this contract into force until we get a certain amount of pre-sales’. It’s a much more measured step.”

“The fact that very few systems collapsed during the financial downturn shows there’s an underlying business need, whereas in the past it was pure speculation. And I think also applications are finally catching up to the demand that people were projecting.”

He said that there had been a shift from ambitious global cable builds to regionally-focussed networks. “If you look at what that bubble was, there were four companies building massive global networks throughout the Pacific and Atlantic... what you’re seeing now is... they tend to be more regional systems,” he said. “In 1997 Bevan [Slattery, Pipe CEO] would have built from Australia to the US, but he built to Guam and partnered with Tyco – that’s the change.”

NEW FUNDING MODELS TO SURVIVE DOWNTURN: Coughlin said Tyco had been happy to alter its usual financing contracts to make PPC-1 a reality. When the project was A$80m short of funding just over a year ago, Tyco rearranged its contracts to ensure the build could be completed. “What we were able to do was make what I would consider very fair trades on contract issues, upgrade issues, and adjust billing milestones to better tailor with customers getting the money,” Coughlin said. “We didn’t give them funding per se, but what we did was we broke out of the mould... and that’s something that in the financial crisis we had to do with a couple of customers, and it worked very well.”