September 28, 2023
Global subsea cable operators are grappling with their future role in an industry now dominated by Meta and Alphabet.
Industry execs at the annual submarine industry conference in Singapore this week expressed conflicted views. No one denies the gains the industry has made from OTT investment over the past decade, but they are battling to keep their place in a business where hyperscalers consume around 70% to 80% of bandwidth.
"It depends on what day you catch me whether I think hyperscalers are good or bad, although overall I think they've been a benefit," said Jim Fagan, CEO of wholesaler Aqua Comms.
These benefits include funding for new systems, which is becoming increasingly hard to come by; the stimulation of even more cable-building in order to provide diversity; and the traffic from the hyperscale businesses that fills their cables.
So what's eating these cable guys?
One aspect is the global digital divide, according to Elaine Stafford, managing director of DRG Undersea Consulting. "I actually worry quite a lot about Google and Facebook dominating the global landscape and controlling the evolution in a way which doesn't recognize the importance of development," she told Light Reading.
Exiting the business
She acknowledges that the big players have been at the forefront in bringing connectivity to Africa and other developing regions. But she also suspects "they'll leave others to solve the problems" of smaller countries. "It's harder for any of those smaller guys – even harder today than it ever was given the environment – to do something for themselves," she adds.
A more pressing problem for cable operators is that the enormous presence of the OTTs on international capacity routes has driven them to the margins. According to Carine Romanetti, head of networks strategy and submarine systems at Orange, industry consolidation is taking place as a result of exits by cable players and telcos.
She told a panel: "As an operator, we want to remain in the game, so we have to partner with those new players. I must say that in order to do that, there is a concern because all this capacity is bringing the market price down."
One cable that has captured the industry's attention is Meta's Anjana system, running from Myrtle Beach, South Carolina, to Santander in Spain. It's the largest ever submarine cable, with design capacity of 24 fiber pairs at 20 Tbit/s per pair, and is due to come into service in late 2024.
"I understand the technology gain would drive down the cost per gigabit. But I guess the risk is that it only works if you actually fill the system," said Chris Bayly, Aqua Comms' chief commercial officer.
He said Aqua has barely filled the single fiber pair on its AEC-1 transatlantic cable, launched in 2016. Potentially a 24-pair system like Anjana could grow to 96 fiber pairs by upgrading to four-core, he says. "So I guess the risk is if you were to build out, who uses 96 fiber pairs on the Atlantic? I don't know the answer to that."
Romanetti said once a big new cable was in the water, it made all other cables uneconomic. "When you have one cable that is between 16 and 24 fiber pairs, all the other cables become economically obsolete because you have the same cost of maintenance, and therefore you need additional cables or diversity," she said.
"And therefore you cannot build a cable with lower fiber pair count or otherwise you are already obsolete. So it's kind of a course where that never ends," she added.
In another panel session, Ubaid Younus, network investment manager at Meta, pushed back at the criticisms.
He pointed out that since the deployment of the first Google cable in 2010, cable investment has continually escalated – from $4 billion in 2010-2015 to $8 billion in 2015-20, $11 billion in the current period and $17 billion forecast for 2025-2030.
He also argued Meta's traffic is more about machine-to-machine connection and largely does not overlap with the cable providers. "I think the content, cloud and application providers are not competing; they are complementing this industry," he said.
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