5th Workshop on "SMART Cable Systems: Latest
Developments and Designing the Wet
Demonstrator Project"
(Dubai, UAE, 17-18 April 2016)
The Business Case
for Inclusion of Sensors in
Commercial Undersea Systems
David Ross,
Chairman, David Ross Group
dross@davidrossgroup.com
Commercial undersea system ownership –
what kind of business is this?
• Major infrastructure construction project
• Requires highly specialized technology and extensive expertise
• Extremely capital intensive – difficult to finance
• Years of planning and heavy expenditure before receiving revenues
• Politically sensitive – Licenses and permits may be difficult
• Ultimately capable of generating significant income over many years
Characteristic Cumulative Cash Flow for a
Hypothetical Undersea System
Cumulative Cash Flow $M
250.0
200.0
150.0
100.0
50.0
Without Sensors
0.0
-50.0
1
2
3
4
5
6
7
8
9
10
-100.0
With Sensors
-150.0
-200.0
Planning
& Financing
Implemen
tation
Operations
11
12
13
14
15 Years from Start
Sources of Revenue for a Commercial
Undersea System
Fiber Pair Sales
Payment prior to system RFS date (new
system) or at contract signing (existing
system)
Indefeasible Right of Use (IRU) contract
(typically 15 years)
Payment at contract signing
Capacity Lease
Payment monthly
Operation and Maintenance
(fiber pair and IRU holders)
Payment quarterly
SENSOR SYSTEMS WILL NEED TO ESTABLISH ANALOGOUS PAYMENT METHODS TO COVER
UP-FRONT AND ONGOING COSTS AND RISKS
Who might provide funding for undersea
sensor installation and operation?
• Users of sensor data tend to be government agencies or
institutions funded by governments.
• There is a long history of national governments participating
in the development of undersea systems, especially in
developing areas, usually through some form of public-private
partnership in which governments provide impetus and
funding.
• Multilateral institutions, also funded by governments, provide
a potential means of funding for the common good.
The Need for Rigorous Qualification
• Because the undersea system is so capital intensive and the risks
already significant, owners are understandably disinclined to
introduce new costs and risks into their projects.
• At the very least, owners will demand that sensor products be
subjected to the same rigorous qualification methods the systems
themselves undergo:
–
–
–
–
System simulation by computer
System simulation in the Laboratory
Understanding of possible failure modes
At-sea handling, laying, recovery, and operational testing by major
system suppliers
Summary
• The commercial undersea cable business depends on the
ability to raise large amounts of capital, which can be
difficult at best.
• Sensors, while aiding the common good, may only add to the
difficulty by adding new costs, risks or delays.
• The path to success would seem to involve:
– Rigorous qualification of any new technology by the major system
suppliers who would be installing the systems
– Development of payment terms to compensate system owners for
capital and operational costs
– Enlisting the aid of governments and multilateral institutions for
financial support.