Some themes never change, in the undersea or long haul transport business: new cables are lightly loaded, but eventually reach capacity, requiring upgrades; prices per unit keep falling and demand is driven by over the top application providers.
But one important change has happened. “Content providers are removing a large portion of the customer base,” says Brianna Boudreau, TeleGeography senior analyst. That “makes the rest of the market extremely competitive.”
In other words, despite huge increases in capacity requirements every year, most of that growth is “private capacity,” used directly by the likes of Google and Facebook, and not part of the “public networks” market (that capacity is not purchased from a public networks supplier).
“Now networks are being built by hyperscalers,” says Tim Stronge, TeleGeography VP. That is a historic change.
On Latin American routes, about 70 percent of total traffic now moves over private networks. In other words, only about 30 percent of undersea, long haul traffic actually is sold to customers who use “public” networks, according to Erick Contag, Globenet CEO.
On trans-Pacific routes, OTT app providers also are driving demand, accounting for about 33 percent of lit demand on the “public” networks, says Jonathan Kriegel, CEO Docomo Pacific.
On trans-Pacific routes, OTT app providers also are driving demand, accounting for about 33 percent of lit demand on the “public” networks, says Jonathan Kriegel, CEO Docomo Pacific.
In effect, there now are three major business models in the subsea business: resale, presale or organic use, according to Michael Rieger, TE Sub Com VP. Resale is what we used to call the public networks model of selling capacity and services to business or consumer end users, either wholesale or retail.
Presale is another model in the subsea business, where anchor tenants agree to buy capacity in advance, before the network is built. That is a form of long-term wholesale or investment sharing. “Everyone becomes a partner,” says Nigel Bayliff, Acqua Comms CEO.
The newest model is private networks, where an entity (typically an application provider) builds a network entirely for its own organic use.
Most undersea cable systems serving Latin America, for example, presently are running at no more than 20 percent utilization, according to Erick Contag, Globenet CEO, but will run out of capacity by 2023.
Demand for capacity is growing about 40 percent per year, driven largely by capacity demand from OTT app providers.
Demand for capacity is growing about 40 percent per year, driven largely by capacity demand from OTT app providers.
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