The submarine cable sector does not often get the attention of other parts of the network, but deep below the surface, a shakeup is happening.
Yes, we all know a lot of new cables are being planned, built and activated. We also all know that many existing cables are in the process of being upgraded to 100G and beyond. But those well-understood trends are only part of the story; another part has more to do with who is putting up the money to build them, and why.
Google (Nasdaq: GOOG) last month was revealed as an investor in yet another submarine cable, at least its fourth in the last six years. As with Google's other subsea ventures, this US-to-Brazil cable is being financed by a consortium that also includes traditional telecom carriers. Also, this past summer, the Web giant became part of the FASTER submarine cable project in Asia. (See TE SubCom Tapped for US-Brazil Cable and Google's Game for Another Subsea Project.)
Subsea market watchers believe Google is not the only non-traditional carrier interested in subsea investments. Much as giants of the content sector have taken increasing financial interest in the data center and wireless sectors, they are also looking to dip their toes into subsea.
"We're at a turning point in networking," says Hunter Newby, CEO of Allied Fiber LLC , which operates a carrier-neutral dark fiber network linking submarine landing points and access networks. "There were only a few companies that owned subsea systems before. Now, there is the potential for a lot of non-traditional carriers buying in. We will see a consortium at some point that doesn't have a traditional carrier involved."
Google is not the only Web giant throwing its money into the oceans. Facebook is an investor in the Asia Pacific Gateway, and is seen as a potential investor in other projects, or even as a buyer of a company already operating submarine cables. (See Facebook Invests in Subsea Cable and Could Tata Be Facebook's Next M&A Target?)
Also, Microsoft Corp. (Nasdaq: MSFT), which in September committed to buy capacity on the planned Seabras-1, another cable linking the US and Brazil, is a likely candidate to invest in a project, as are several other global Web players with massive private network and data center needs. (Lookin' at you, Amazon.)
"Participating in new builds allows cable investors to receive dark fiber or dark spectrum at cost," says Tim Stronge, vice president of research at consulting firm TeleGeography Inc. "The buyer can use this fiber to light wavelengths for their internal networks as they see fit. For really big users of capacity, this strategy is cheaper than leasing wavelengths."
Yet despite having deep pockets, none of these companies are expected to build or buy their own submarine cables, independent of consortium partners. So we are unlikely to see Google cast its own lot in the submarine cable market the way it has in the terrestrial residential broadband market with Google Fiber -- at least not anytime soon.
"It's conceivable Google could buy a cable," Stronge says, "but there's not a drawback to just investing in cable, unless you can't find partners to invest with."
Newby adds, "Google built and owns Google Fiber, but subsea is a different business. The consortium model has worked in the subsea business for a long time. I don't know if it makes sense economically for Google to build its own cable. They want control of the lit fiber, and [investing in cable projects] allows them to graduate from leasing it."
Seeing the name of a company like Google on the investor list for a cable also must give other investors in that cable a sense of security in their investments, because they know that at least one Web giant is lined up to buy capacity on the cable. "Investors in submarine cables often want to see capacity pre-sold before they commit any money," Stronge says.
— Dan O'Shea, Managing Editor, Light Reading