By Eric Auchard

FRANKFURT (Reuters) - Nokia's Alcatel Submarine Networks (ASN) said on Wednesday it set a new record for cable transmission capacity for communications traffic - doubling its previous levels - as the company responds to a pick-up in demand from Internet firms.

The top supplier of undersea cable networks said that with the company's research arm, Nokia Bell Labs, it had demonstrated in lab tests a 65 terabit-per-second transmission using dual-band fiber amplifiers - the equivalent of streaming 10 million high-definition TV channels simultaneously.

The subsea cable business, which makes global Internet links possible, has long been subject to both big advances in technology and dramatic capacity gluts, which, in turn, helps drive further demand by slashing network costs, analysts say.

Nokia, which bought ASN earlier this year as part of its 15.6 billion-euro ($17.5 billion) acquisition of French telecom equipment maker Alcatel, has said it is considering its strategic options for the business.

UBS predicted on Wednesday it would eventually be sold.

Market research firm Telegeography estimates the market is poised to see an explosion of new cable deployments worth more than $8.1 billion over the next three years.

Google, Microsoft and Facebook are no longer just customers but have begun to back cable-building ventures of their own, joining traditional subsea cable project consortia made up of telecom operators or government backers.

"The Internet players are driving demand across the Atlantic and Pacific, within Asia to some degree and between Latin America and the United States," said Alan Mauldin, research director at Telegeography.

While only three subsea networks worth $490 million were deployed in 2015, 33 networks are set to be built within the next three years, Telegeography predicts.

Another forecaster, Terabit Consulting, predicts up to $22.4 billion could be spent in coming years across 155 projects, although only a third of these, worth around $6.3 billion, are likely to be built in the next two to three years, it says.

SEEKING A BUYER

Alcatel Submarine is the market leader in undersea cable networks with a 47 percent share of the market in the decade up to 2014, according to market research firm Terabit Consulting.

Nokia does not disclose specific results for ASN, saying only that it enjoyed year-on-year growth in revenue and gross profit in the latest quarter, partly offset by weakness in its terrestrial cable business, known as Radio Frequency Systems.

Rivals include U.S.-based TE SubCom, with 30 percent and NEC with 12 percent. Smaller rivals range from Fujitsu with 4 percent to Huawei Marine with 2 percent to Ericsson, with just 1 percent share in 2014.

ASN has been effectively up for sale for years. Potential bidders including European private equity funds and the French sovereign wealth fund Fonds Strategique d'Investissement were eyeing the company in 2013 but no deal was reached.

Alcatel considered a stock market flotation of the submarine unit last year before it was sold with the rest of Alcatel to Nokia.

However, because of the sensitive role such cables play in global communications, any buyer must meet stringent national security criteria from Western governments for any deal to be completed, complicating the search for buyers.

($1 = 0.8928 euros)

(Reporting by Eric Auchard; Editing by Edwina Gibbs and Adrian Croft)