Hyperscalers and geopolitics now rule the brave new world of the submarine cable industry.
The powerful OTT players and the inescapable specter of global politics have become the major drivers of this small but distinct sector of the telecom market.
They also captured a good deal of mindshare at the Submarine Networks World conference, which convened in Singapore this week for the first time in three years.
A decade ago, big OTTs accounted for a fraction of global traffic. Now, they carry more than 70% of all Internet data and are the biggest investors in new cable systems.
In particular, Google and Meta, whose global ad-driven businesses require low latency, are the most aggressive in rolling out subsea capacity.
One conference panel asked if it was possible to build a new cable without a hyperscaler as an investor. The consensus answer is yes, but it depends on the route.
"The reality is it's very helpful if they're foundation investors," said Paul Abfalter, head of North Asia and global wholesale for Telstra.
Demand over time
For thick routes such as trans-Pacific or trans-Atlantic routes, it would be very hard to build a cable system "without being able to factor in a lot of demand over time from hyperscalers," he said.
But that doesn't extend to regions like Asia-Pacific, which are complex, with many different markets and all kinds of risks.
"They're not going to build on every single route."
Telstra's own business with big content providers is growing year to year, he said, reflecting a wide industry view that OTTs are mostly good long-term customers who need carriers and independent operators to ensure their vast audience reach.
But not even Google and Meta can evade the realities of rising geopolitical tensions.
The Biden Administration has continued the Trump-era bans on US cables connecting directly to China, resulting in the cancellation of several completed cable segments.
Now, "even hyperscalers want diversity of routes," noted Laurie Miller, CEO of Southern Cross Cable.
Benny Choo, EVP at RTI Cables, which has a cable system across the Pacific that links Japan and Australia, said the company was surprised to find customers approaching it for capacity.
"Our intention had been not to compete with leaders but provide an alternative. It dawned on us that latency was not such a priority – they just wanted connectivity," he said.
RTI is one of the victims of the US hard line on China cables, as it was forced to abandon a new cable from Hong Kong to Guam.
"There's a billion dollars lying on the seabed," Choo said. "Volcanoes are more predictable than geopolitics."
But the uncertainty in east Asia is opening opportunities elsewhere. Australian entrepreneur Bevan Slattery is taking advantage of the China tensions to build a new system from Oman to Mumbai and Australia.
"There could be some problems in the South China Sea. So I'm avoiding the South China Sea and Malacca Strait and I'm just going to go straight across the Indian Ocean," he said.
Demand is also shifting to new Asian hubs, such as Korea, Taiwan, Japan and the Philippines.
"The Philippines used to be a challenge. But they don't mind a challenge, and connectivity has improved," said Choo, who believes it could become the next major hub.
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— Robert Clark, contributing editor, special to Light Reading