China to be hub in pounds 750m worldwide cable link

MATHEW HORSMAN

Plans for a $1.2bn (pounds 750m) 17,000-mile submarine fibre-optic cable linking China to the rest of the world are expected to be announced within days.

The Fiberoptic Link Around the Globe, Flag, will be operational by 1997, linking Europe, the Middle East and Asia.

It is backed by Nynex of the US, Marueni Corporation of Japan and several Middle Eastern banking groups. The project is likely to be financed through a mixture of debt and equity, with Nynex taking the management role.

Flag has reached agreements with 45 telecommunications carriers, including companies in the Cable & Wireless federation and Deutsche Telekom, to supply fixed capacity for the transmission of voice, data and video signals on the broadband cable.

An agreement with China Telecom, the state-owned telecoms authority, was reached last month, establishing Shanghai as one of 12 landing points in Asia, the Middle East and Europe.

The Chinese telecommunications market is expanding at about 50 per cent per year.

In the UK, the consortium is working with Mercury to develop a landing point at Porthcurno in Cornwall. Flag has also held talks with BT that may lead to a contract to supply capacity.

John Parry, president of Nynex Network Systems, said the venture would break even once about 30 per cent of the capacity had been taken up. He believed that this target could be achieved within two years. As many as 60 carriers are expected to sign up by the end of the year.

Mr Parry expects to see growth coming from key areas such as video conferencing - allowing meetings to take place between offices separated by thousands of miles. Flag's use of so-called broadband technology makes it ideal for simultaneous video and audio transmission.

Unlike most cable operators, Flag is pricing its transmission services according to market demand rather than setting a fixed cost per kilometre. The consortium said it would be able to provide additional capacity to carriers on demand.

The cable will complement existing lines across the Pacific and Atlantic, allowing telecoms carriers to choose alternatives to satellite links. It will compete directly with planned low-orbit satellite systems now in the planning stages.