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Networks & Infrastructure
PTC 07: Sub Telecom Boom, Bust, Boom?
Industry Cautiously Positive, But Some Fret
by Stephen McClelland
Could it be the good old times again for the submarine
telecom community? Fresh from a major bust – probably the
most severe of any sector in telecom – more or less everyone
sees growth, with new projects in prospects and expansion
generally in an area not seen since the height of the dotcom
boom. “There are certainly a lot of new projects on the
drawing board,” says John Hibbard, an industry consultant,
based in Australia. “Some of those will not be realized, but
some will be.”
Many observers remain cautious given that the industry has
essentially spent the last four years in a state of hibernation,
or, for many major projects that entered Chapter 11 soon
after they were built, outright deep freeze. The reason for the
apparent recovery, however, remains relatively evident. In
spite of the overbuilt cable infrastructure spanning the planet,
internet traffic has kept on growing and growing and growing,
posting annual increases of 100%. This all finds its way by
various routés to the very backbones supporting global
telecom. Entering the telecom downturn, network providers lit
a proportion of their fibre facility but that lit capacity has
essentially been used up on key routes. Now, is the time for
additional facility either through new build or through upgrade
of existing infrastructure. Either way, more money needs to
be spent.
The new growth scenarios are nothing so much as a tribute to
those executives who were relentlessly optimistic about what
the growth of broadband would do to the raw infrastructure
demand worldwide. And this has in turn driven spurred new
projects in many regions, particularly connecting those parts
of Asia-Pacific that have continued to exhibit enormous
domestic growth. And there is huge traffic pull from the US to
east Asia as new internet services catch on in Japan, Korea
and perhaps even China. “We see an increase of 1Gbps
demand per month,” says KDDI’s Vice President and General
Manager of Corporate Technology, Yutaka Yasuda, “because
of YouTube-like services that are attracting the Japanese
market.”
Some of these projects also reflect regional or local needs
that finally bring underserved communities into the telecom
and internet community. Alcatel, for example, is laying
Gondwana-1, a so-called thin route cable, from New Caledonia
to Australia, and a similar technology cable to Morocco from
Mediterranean Europe. “Wet costs [the submerged
component of the cable system] account for between 45% to
60% of total costs, so it makes sense to minimize these [with
technologies such as thin route]” says Alcatel Submarine
Network’s Marc Fullenbaum.
One intriguing by-product of the downturn, in fact, has been
to make players far more creative and ingenious in how they
think about projects. A particularly interesting example is the
wholesale re-use of a major but recently decommissioned
submarine cable in the Pacific, recovered and reused as a new
link between Australia and Papua New Guinea. Hibbard, who
was involved in the project, says it is the first example of a
long length of cable being used in this way. He estimates that
the procedure cost only 30% of what a new build would have
cost, and suggests that the same techniques could be used in
other regions of the world and perhaps ten cable systems
could be repurposed.
Elsewhere, other expertise has been spun-off and resulted –
indirectly in the development of young companies and start-
ups specializing in particular business opportunities, or
established vendors extending their portfolios. Various
intriguing developments continue to suggest that more can
be squeezed out of cable performance. US-based Xtera says
it has a portfolio of patented expertise in driving much more
performance and extending the range of short haul
unrepeatered cables using Raman amplification techniques,
whilst Azea Networks in the UK has made a business from
continually refining the capacity potential and upgrading
cables in service. Other vendors such as NEC are looking
closely at Ethernet terminal technologies that will make it
easier and cheaper to directly connect submarine cables into
telecom networks.
But several executives suggest that the make-or-buy decision
where new builds were rejected in favour of clever refinements
in upgrading existing technology may be a fine point as
pricing power of capacity on some key routes seems to have
recovered to the point where operator users are
contemplating building their own systems. There have been
some extremely large projects made public too. Amongst the
most high profile have been announcements by Asian
network operators for new major trans-Pacific builds. At the
end of 2006, Chinese operators China Telecom, China
Netcom and China Unicom joined Chunghwa Telecom, Korea
Telecom and Verizon Business in a consortium that will build
the Trans-Pacific Express (TPE) cable, a major project linking
the US mainland and China via South Korea and Taiwan. The
system is planned to be ready for service in the third quarter
of 2008.
Other cable systems are also well past the planning stage. On
Monday this week, Asia Netcom, a regional cable operator in
east Asia, announced plans to build a complete trans-Pacific
system in a 23 500km infrastructure featuring a ringed design
circling the ocean. Scheduled for completion in July 2008, the
ring will consist of a northern route from Japan to the US and
a southern route linking Philippines to the mainland US via
Guam and Hawaii. The system – designated EAC Pacific - will
use relatively state of the art technology of 4 fibre pairs each
capable of supporting a minimum design capacity of
2.56Tbps using 64 wavelength DWDM technology with 10Gbps
per wavelength capability.
“There is clearly a need for more [route] diversity between
Asia and the US,” said Bill Barney, CEO of Asia Netcom in
making the announcement, a reference to the painful
aftermath of the Taiwan earthquake that managed to sever
an entire group of major cable systems on Boxing Day, 2006.
Six out of seven cable systems passing through the Luzon
Strait were badly damaged by the earthquake measured at
7.1 on the Richter Scale, essentially knocking out internet
capability between north and south Asia and the US. The fact
that armoured cable systems buried in the sea floor can be
so easily disrupted has clearly shocked telecom operators
whose customers immediately saw their internet connectivity
demolished. The industry may have suffered, but it hardly
been bad for the repair business and serves to remind the
rest of the telecom sector – which might have just taken the
submarine telecom segment for granted – that more capacity
and more options are probably a good thing.
Big projects such as these come with big price tags; building a
transoceanic system is at least a USD 500 million endeavour.
And they seem to be good for most in the submarine telecom
industry, and it is evident that there is a marked
improvement in sentiment amongst specialist vendors, who
are responding to the upturn and taking facilities and people
out of the mothballed condition they were placed in during the
downturn.
But some executives fear it could lead to a repetition of the
overbuild - and subsequent collapse - featured in the dotcom
boom, and essentially condemn the industry to an ongoing
boom-bust cycle vicious in its intensity. One CEO of an
existing major cable system in Asia-Pacific remarks: “the
problem is not in forecasting the traffic: we can do that quite
accurately and the underlying demand keeps growing; the
problem is knowing how many players are going to jump in
and what the price points [of the services] will be.” Eyes may
roll and old-timers say they have seen it all before, but for
the moment, most executives in this sector seem happy to
be talking once again about future possibilities and high
growth markets.
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