The telecommunications boom spawned so much new data capacity on fiber-optic cables across the Atlantic that the market has seen a supply glut and low prices for years, Telegeography said in a report released Monday. That has reduced the financial incentive for carriers to invest in new cables, but they may have to do so by 2014, said Telegeography analyst Erik Kreifeldt.

"The market prices for capacity on the trans-Atlantic routes today don't support the business case for building a new cable system," Kreifeldt said. The coming shift in the industry from oversupply to scarcity is likely to rebalance the economics of cables, raising the prices that service providers pay for capacity for the first time in years, he said. Most enterprises will be cushioned from the effects of that change, but they may see the prices they pay for bandwidth stop falling, Kreifeldt said.

The excitement over the first wave of Internet use in the late 1990s convinced some entrepreneurs that the demand for bandwidth would grow faster than it did. Dedicated international cable companies such as Global Crossing raised money and started building cables, jumping into a business that previously had been dominated by groups of carriers. Six new trans-Atlantic cables went into service between 2000 and 2003, leading to a glut that bankrupted some of the new entrants and changed the economics of the business, Kreifeldt said. Supply has far exceeded demand for years. The combined capacity of all trans-Atlantic cables is nearly 40T bits per second (Tbps), according to Telegeography.

However, demand is likely to rise by 33 percent per year between 2008 and 2015, Telegeography predicts. That will eat away the over-capacity by 2014, the company said. Before that happens, someone will have to lay new cable or risk not being able to accommodate more traffic. Given the harsh climate for raising capital, it will probably be traditional groups of carriers that do this, Kreifeldt said.

Transoceanic bandwidth typically is sold in the form of wavelengths of light that travel over a particular strand of fiber, on a cable with many strands. A wavelength that can carry 10G bits per second (bps) typically costs about $14,000, Kreifeldt said. Service providers usually resell that big "pipe" as smaller connections.