Tom Vest wrote:
So if they don't have a billion or so dollars stored away somewhere,
they're
selling below replacement value.
With very few exceptions there's no "they"; the old "they" is gone, the
new "they" didn't take over until fairly recently, didn't bankroll the
original construction, and isn't bearing the financing costs of that
construction.
Round this neck of the woods we call em "banks" and they've generally
been around for a few centuries and some of them, current financial
shifts notwithstanding, expect to be around for a while yet! It's these
folk that have the task of pricing risk and the greater the risk the
more expensive the capital, of course.
The situation Mark was alluding to was a persistent theme of the
submarine cable conferences a couple of years back, where folk were
telling each other that the retail IP market got itself hooked on access
to wholesale submarine transit assets at distressed prices and the
proposition was being made that this business model of flogging off
bankrupt assets for cents in the dollar simply didn't allow for further
construction to be cost effective for investors. If further investment
were going to happen then the retail market needed to flow back dollars
not cents to investors.
But life goes on, more fibre strands have been lit, more DWDM systems
have been reconditioned to support more lambdas and some more cable
systems have been proposed and some have been built. Predictions of the
demise of the industry were, of course, exaggerated. But the major flow
on from the current generation of DWDM submarine cable systems, as
expressed in the impact or pricing at the retail level, to me looks like
its been fully realized and unless we see a new means of cramming a
couple of orders of magnitude more bits into a long distance submarine
fibre pair without spending a couple of orders of magnitude more dollars
then we are back to the constant unit price proposition where more bits
requires more money.
Which is a roundabout way of saying that I'm very sceptical of Tom's
exponential optimism in this particular area of infrastructure investment:-)
regards,
Geoff
