It's All About the Network

Yes, Iceland is an island in the middle of the North Atlantic. Through history this has proven to be an immense measure of protection and a throttle on outside influences. One wonders if and how the pervasive connectivity brought in the modern day will change the country.

The modern age of communication in Iceland started in 1994 with the construction of the CANTAT 3 cable. This cable had a capacity of 7.5 Gbps and allowed Iceland a more stable and larger connection than had ever been achieved through previous cable, satellite, and radio links.

CANTAT 3 was supplemented by FARICE 1 in 2004 with 100x the capacity, although only a small portion of that capacity has been put into service.

In recent years, Iceland has pushed to expand network capacity even further with the installation of "Danice" and "Greenland Connect" as well as study of additional cables to the US and Ireland.

Unfortunately, these cables are very expensive to construct. Since the capital costs are large, the cost of capacity is also very high. So there is something of a conundrum-the capacity exists to connect Iceland to the world and support growth of new industry, but the economics still need some work.

In the post 2001 telecom bust, many cable operators went bankrupt leading to a re-marking of assets. This, combined with a glut of capacity drove the cost of network between New York and London to a level that promoted vast changes in how data is stored and transmitted. In the end, this drove tremendous network growth and finally brought the cable operators to profitability.

This is what needs to happen in Iceland. They need to figure out how to deliver capacity to Europe for less than 2,500 EUR and to the US for less than $5k per 10 Gbps wave. If these points can be met, they will open up a broad range of business possibilities involving Iceland.

So the secret is to develop pricing models based on ultimate capacity and utilization and not on early cost recovery.