APTelecom travels globally about 300 days a year. We are always on the road and on the go seeing clients and attending industry events. Overall, the biggest developments since Submarine Networks EMEA 2019 has been the geo-political events of the US–China Trade war, Brexit, and the concern for 2020’s global equity markets. Normally when oil prices are high this input cost leads to more submarine cables being built in the GCC (Gulf Cooperation Council) region. From a specific industry perspective, the largest development was on the positive side, with many new systems emerging in the Pacific and Atlantic markets. On a down note, the Brazil–US route globally saw its first restructure filing in the form of Chapter 11, and it remains to be seen if this hurt other operators looking for creditors in the entire subsea space or if this is a one-off event on a cyclical basis and not a structural issue for the entire sector.
APTelecom sees submarine cables playing an ever more important role in the coming years as traffic becomes more direct (i.e., less dependent on traditional hub and spoke routes of the USA, UK, Japan, etc..). For example, the Southern Hemisphere is well positioned to continue to build modern and cost-effective high-end transmission capacity with the rest of the world. This connectivity will promote further trade and commerce and redefine routing traffic in the very near future.
In which regions do you expect to see the most activity in the coming months?
Submarine cables in the last five years have played a vitally important role in making the world a closer place. Today, submarine cables are making the world an even closer village due to high-speed, instant, and effective communications. Submarine cables continue to carry the majority of financial transactions, social media, government communications, and commerce on an unprecedented level. For many readers that grew up with a small radio or black and white television prior to the current technological revolution that’s taken place – be it cell phones, high speed broadband at home, streaming videos, and near perfect 4K connections from half way around the world – they can better appreciate these developments compared to the younger generation that has always grown up with the advanced technology of today.
Submarine cable capacity, for reasons of diversity in avoiding points of failure and “enabling always on” networks, is critical for banking and finance, aviation, and various other industries that will use cloud computing, artificial intelligence (AI), and seize on the upcoming 4th Industrial Revolution of automation. Networks are critical to delivering software and services in an advanced and in many cases near real time basis, which could have only been imagined some 50 years ago. In many areas of technology, we are approaching Shannon’s law and the theoretical capacity that is possible to deliver over submarine and terrestrial cables. Current market pricing continues to decline in line with Moore’s Law, yet the increase in computing power, doubling and in some cases tripling with advanced line cards and LTE, is simply a testament to the research and development in action. Many global submarine routes only offer 100G interfaces, replacing the old STM-4 and 10Gs of bygone days.
Specifically, the Atlantic and Pacific regions will see the most activity in the months ahead, as new systems replace older networks.
What predictions do you have for the subsea sector over the course of the next 12-18 months?
As CEO of APTelecom, its with tremendous pleasure and pride that I support many existing and new submarine cable systems in the Asia Pacific, Africa, LATAM, and Atlantic regions. The Arctic region will likely have a system built in less than five years and the Southern Hemisphere will continue to seek diversity, enabling the creation of new hubs around the world that rival the likes of Los Angeles, London, New York, and Tokyo. Pressure is building for more cost-effective cables using new raw materials, as well as SDN (software-defined network) and cloud-based applications that require five to seven paths on one particular route to have secure, diverse, and reliable transmission services linking countries around the world. In addition, we will see the first 1Tb interface, enabling the step-up from the Gb level of capacity purchases. It is possible that fibre pair purchases become the standard unit of purchase, but this is likely some 3–5 years away, rather than 12–18 months.
India has a desperate need to replace antiquated infrastructure and the new systems planned to directly connect Singapore to the US may well provide the answer at what appears to be the right time, given the recent announcements of new builds between India and Singapore. A connection from the UK to India is also highly likely, possibly in the form of a EIG-2 (Europe India Gateway) or similar.
An interesting point to consider is, with the amount of capacity coming into service, Trans Pac will be massively disproportional to the amount of Inter Asia capacity between Singapore, Hong Kong, and Japan. This should spur on additional investment in new systems on the thickest routes in Asia: the ‘triangle’ between Singapore, Hong Kong, and Japan. With the current Asia–US forecast demand and the current moves being made by Chinese content players reaching into South East Asia to grow their businesses, intra-Asia is a long way from being over-serviced with capacity.
Some trends from the event that we see in the market:
• Swapping by non-traditional players is becoming more of a currency and this trend should gather additional momentum as these new systems come into service.
• Ownership economics and a cost + model continue to be sought on new builds for quarter pair spectrum buyers and above.
• Diversity remains key, yet finding diverse landings are proving more challenging, especially in locations that are small in land mass – i.e., Singapore. Other parts of Asia may fill this void as concerns remain over SPOF (single points of failure). There is certainly potential for Malaysia and Thailand to act as a bypass to Singapore on routes from India destined for Hong Kong and Japan.
• Entitlements such as upgrade rights are becoming more important.
• Many pairs may not be used initially, and this offers unique challenges in meeting capital recovery targets and O&M obligations over the life of the planned new systems coming into service in the Trans-Pacific.
• APTelecom sees a migration to 400G and 1Tb Super Channels within 3–5 years or less. This will also add to compound capital recovery targets for system developers.
• Myanmar, Vietnam, Thailand, and Indonesia remain in need of new and diverse supply and are currently underserved.
• Future demand of IoT, M2M, UGC and, in particular, AI and eGames will drive consumption.
• 5G impacts are going to be felt in 2020 and beyond in the Asia Pacific region and will serve to also drive demand intra-Asia and across the Pacific immensely.
This is the 2nd year that APTelecom has been involved with Submarine Networks EMEA – why is the event important for you and the wider industry?
APTelecom see’s tremendous repeat value with the Submarine Networks EMEA conference. It’s timely and in London, which helps draw a UK, European, and North American audience.
The venue is excellent and flight and hotel connections to London remain very easy for all participants. APTelecom was very proud to sponsor the event and has since closed two deals that originated in 2019 while attending Submarine Networks EMEA. Thank you!