With the cost of fibre rising around 70% since March 2021 and demand for the cables higher than ever, national rollout plans could be at risk of
With the coronavirus pandemic highlighting just how crucial connectivity is to a modern society, the rapid rollout of fibre networks has become a cornerstone of government economic rejuvenation strategies around the world.
But with the pace of fibre rollouts increasing in most markets around the world, cracks are beginning to appear in the fibre supply chain that could threaten the achievability of these ambitious goals.
According to market research firm Cru Group, fibre prices are soaring, having risen by 70% in the year followed March 2021, the highest level since July 2019.
“Given that the cost of deployment has suddenly doubled, there are now questions around whether countries are going to be able to meet targets set for infrastructure build, and whether this could have an impact on global connectivity,” said Michael Finch, an analyst at Cru, as reported in the Financial Times.
Europe, India, and China have been most heavily affected by the price hikes, while the US has proved somewhat more resilient; prices rose just 2% in the US, though this is still the first price increase in a decade, with the market having enjoyed a reduction in price every year since 2012.
Naturally, part of the reason for the increase in fibre prices is the global economic situation, with inflation running rampant on a global scale. However, there are more specific factors in this case, with Cru suggesting that part of the price increase can be traced to helium plant outages in Russia and the US have seen the price of helium increase by 135% in the past two years.
Helium is a key part of the fibre optic cable manufacturing process, where it is used in its liquid form to cool newly formed silica strands. Creating an inert, all-helium environment during the early stages of fibre creation serves to avoid the development of air bubbles within the delicate strands, which can ruin their effectiveness.
Interestingly, helium also plays a key role in the creation of semiconductors, another industry that has had major supply chain struggles in recent years, with major knock-on effects to the telecoms industry and beyond.
But it is not only helium shortages that are pushing up the cost of fibre, with Cru noting that, silicon tetrachloride, another key component in fibre manufacturing, has also risen in price by 50%.
As a result of these shortages, fibre production is struggling to keep up with the enormous demand, with prices fluctuating on an almost daily basis.
“In some cases, it’s so erratic you need to check it by the day,” Martijn Blanken, chief executive of Exa Infrastructure told the Financial Times. “We add clauses with our clients so that we’re not liable for these price hikes.”
As is so often the case in times of scarcity, those with the deepest pockets will be best positioned to mitigate the shortage’s impact, able to afford the premium pricing and ordering in bulk. For smaller cable operators, on the other hand, lead times for fibre have increased to between 20 weeks and a year in some cases.
What impact this imbalance will potentially have on market competitiveness is unclear, but its immediate impact is to throw some of the largest national network rollout plans into jeopardy.
Many European countries, including the UK, have ambitious fibre rollout targets for 2025, which would require the telecoms industry to continue accelerating their deployment speed over the next two years. With fibre prices spiking, it remains to be seen how effectively operators can maintain the pace of their network rollouts.
How is the scarcity of fibre impacting fibre rollouts across the USA? Find out from the experts at the inaugural Connected America conference next year