Facebook and Google attracted headlines earlier this month over their plans to jointly build a 120Tbit/s subsea cable across the north Pacific.
The two Internet giants plan to build the largest undersea cable across the planet's biggest ocean, joining up with little-known Hong Kong company Pacific Light Data Communication and vendor TE Subcom.
The Pacific Light Cable Network (PLCN), which will run from Los Angeles to Hong Kong at a cost of approximately $400 million, is due for completion in 2018.
But it's part of a bigger story about the OTT players' growing dominance of the global capacity business.
The big Internet firms account for most of the new cable builds and are about to overtake operators as the biggest carriers of bandwidth.
According to TeleGeography Inc. , they already carry most of the traffic on the Atlantic route.
That's not including the massive MAREA cable, now being built by Facebook and Microsoft Corp. (Nasdaq: MSFT). The 160Tbit/s link will land in Bilbao, Spain, south of the traditional cable routes, to provide direct access to continental Europe.
TeleGeography research director Alan Mauldin estimates that private networks account for 39% of global traffic today and will likely account for the majority by 2019.
But "it could certainly be sooner," he adds. "The pace of growth these content providers are experiencing is incredible and it's difficult to know how it will trend."
Eric Handa, CEO of consultancy AP Telecom, believes the OTT players' role will increase. "We're really at the onset of a lot of the OTT operators going to continue to incubate and help facilitate new systems on new routes."
"It's simply a question of cost economics," he adds. "They need this capacity at the lowest premium cost. It effectively makes sense to build it on your own."
The PLCN is Google (Nasdaq: GOOG)'s sixth major submarine cable. The 60Tbit/s FASTER trans-Pacific system, currently the biggest Pacific system, and built in partnership with operators including KDDI Corp. and China Telecom Corp. Ltd. (NYSE: CHA), has just gone into service.
These new systems are part of a new-build phase in the highly cyclical bandwidth business following several years in which fresh capacity came mostly from upgrades.
Due to come into service from Los Angeles in the next two years are the SEA-US cable that goes to Indonesia and Guam; the Hawaiki, to Australia and New Zealand; and the New Cross Pacific that runs to China, Japan and is backed by Microsoft.
Mauldin says bandwidth demand on most routes has been growing at a rate of 40% or more for the past five years.
If that level is maintained, even with this spurt of expansion, trans-Pacific capacity will be exhausted by the end of 2022. A capacity crunch is highly unlikely, however, and already a number of new systems are under discussion, Mauldin says.
He points out that, despite their growing dominance ,the OTT providers still source some capacity from long-haul providers.
However, the problem for the wholesale carriers is that "demand is growing at a slower pace though overall, compared to the content providers' demand."
— Robert Clark, contributing editor, special to Light Reading