Submarine Telecoms INDUSTRY REPORT 2012
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submarine telecoms INDUSTRY REPORT 2012 1 Submarine Cable Industry Report Issue 1 July 2012 Copyright © 2012 by Submarine Telecoms Forum, Inc. All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the publisher except in the case of brief quotations embodied in critical articles and reviews. Submarine Telecoms Forum, Inc. 21495 Ridgetop Circle Suite 201 Sterling, Virginia 20166 USA www.subtelforum.com ISSN: applied for 2 Disclaimer: While every care is taken in preparation of this publication, the publishers cannot be held responsible for the accuracy of the information herein, or any errors which may occur in advertising or editorial content, or any consequence arising from any errors or omissions, and the editor reserves the right to edit any advertising or editorial material submitted for publication. If you have a suggestion, please let us know by emailing [email protected]. 3 Table of Contents 1.0 Introduction 13 2.0 Worldwide Market Analysis and Outlook 14 2.1 Connecting the Unconnected 14 2.2 Overview of Historical System Investment 15 2.3 2008 to 2012 Systems in Review 16 2.4 Systems Investment Beyond 2012 17 2.5 Decommissioning 18 3.0 Supplier Analysis 20 3.1 System Suppliers 20 3.2 Upgrade Suppliers 20 4.0 Ownership Analysis 23 4.1 Financing of Current Submarine Systems 23 4.2 Financing of Proposed Submarine Systems 23 5.0 Recent Events and Potential Impact on Submarine Cables 26 5.1 Macroeconomic Environment 26 5.2 Cable Protection Rules and International Water Rulings 26 6.0 Technology 32 6.1 Overview 32 6.2 Upgrades 32 6.3 Terminal Equipment 32 6.4 Wet Plant 33 6.5 Other Advances 34 7.0 Regional Market Analysis and Capacity Outlook 36 7.1 Transatlantic 36 7.1.1 Bandwidth and Capacity 36 7.1.2 New Systems 38 7.2 Transpacific 39 7.2.1 Bandwidth and Capacity 39 7.2.2 New Systems 41 7.3 North America-South America 42 7.3.1 Bandwidth and Capacity 42 4 7.3.2 New Systems 43 7.4 Sub-Saharan Africa 46 7.4.1 Bandwidth and Capacity 46 7.4.2 New Systems 48 7.5 South Asia and Middle East 48 7.5.1 Bandwidth and Capacity 48 7.5.2 New Systems 51 7.6 Australia and New Zealand 53 7.6.1 Bandwidth and Capacity 53 7.6.2 New Systems 54 7.7 Polar Route 55 8.0 Conclusion 58 List of Figures Investment in New Submarine Fiber Optic Projects, 1987-2012 15 Investment in New Submarine Fiber Optic Projects by Region, 2008- 16 2012 Proposed Submarine Fiber Optic Projects 17 Credible (“High-Activity” and “Medium-Activity”) Proposed 18 Submarine Fiber Optic Projects by Region Financing of New Submarine Fiber Optic Systems, 2008-2012 23 Financing of Credible (“High-Activity” and “Medium-Activity”) 24 Proposed Submarine Fiber Optic Projects Forecasted Lit Capacity Requirement vs. Current Demonstrated 37 Design Capacity of Transatlantic Systems Forecasted Lit Capacity Requirement vs. Current Demonstrated 39 Design Capacity of Transpacific Systems Chinese International Internet Bandwidth by Operator, Year-End 2011 42 List of Tables Civilian-Inhabited Sovereign States and Territories Without 14 International Fiber Optic Connectivity as of Mid-2012 Market Share for Supply of New Submarine Fiber Optic Systems, 20 2012 and Beyond 5 Key Submarine Upgrade and Redeployment Projects for Equipment 21 Suppliers Existing Transatlantic Cable Systems 36 Proposed Transatlantic Cable Systems 38 Existing Transpacific Cable Systems 40 Proposed Transpacific Cable Systems 41 Existing US-Brazil Cable Systems 42 Proposed Latin American Systems 43 Existing West African Systems 46 Existing East African Systems 46 Proposed Sub-Saharan African Systems 48 Existing South Asian Intercontinental Systems 51 Proposed South Asian Intercontinental Systems 51 Existing Australia and New Zealand Systems 53 Proposed Australia and New Zealand Systems 54 Proposed Polar Systems 55 List of Sponsors Alcatel-Lucent alcatel-lucent.com 19 AP Telecom aptelecom.net 22 Cyta Global cytaglobal.com 25 Great Eastern Group greateasterngroup.com 31 Huawei Marine Networks Co., Ltd. huaweimarine.com 35 SubOptic suboptic.org 8 TE SubCom subcom.com 45 Telecom Egypt telecomegypt.com.eg 52 Terabit Consulting terabitconsulting.com 12 WFN Strategies wfnstrategies.com 57 6 Foreword or a number of years SubOptic has been looking to undertake interim activities between our conference events, which are typically held Fevery three years, to provide a better service to our entire community of interest. Whilst we have maintained the interval between our events at a period long enough for there to be significant developments to discuss, we have long recognised that an annual report which provides a snapshot of the state of the many sectors within our industry, could be of major interest and value to our entire community, especially if it were to be freely available. We are therefore very happy to support this initiative from Submarine Telecoms Forum along with Terabit Consulting, which we hope will provide a good, credible indicator of how the industry is developing to meet new challenges, both from the demand and the supply areas, and from external factors both natural and manmade. There are, of course, risks in trying to produce such a report, and I am sure there will be some discussion as to whether it is totally accurate or whether it has managed to capture the key activities and decisions which are helping to shape our industry, which is so critical to the economy of the globe. We think, however, that the debate that such a report will stimulate could be good for the industry and help to raise our profile amongst the many outside our immediate community, who still do not recognise how important Undersea Fibre Optic Communication cables are to our global economy. And of course there will always be the next Annual Industry Report where such matters can be adjusted as the inevitable changes occur. There will also be next spring, SubOptic 2013 in Paris, where the industry as a whole comes together to discuss and debate the future of our industry, which will form the foundation, we hope, for future Annual Industry Reports. Well done to Submarine Telecoms Forum for taking this initiative. Fiona Beck President of the SubOptic Executive Committee and President and CEO of Southern Cross Cable Network 7 The Premier Event for the Industry For full details go to www.suboptic.org Executive Summary s the world has become increasingly connected since the dawn of the internet age in the mid-1990s, there has been a massive Aundertaking to “plug-in” every nation. As of mid-2012, only 21 nations and territories remain isolated from fibre optic connectivity, though projects are underway in many of these markets at the time of this writing. Since 2008, the submarine cable market has been in a new cycle, the third of the fiber optic era, dominated by carriers investing in developing markets such as Africa, India, and China. Approximately $10 billion worth of investment in new projects has occurred during this five- year period, and there are currently $25.6 billion in new projects being actively pursued by various sponsors. Although market share was somewhat uneven in recent years, the near- term outlook is more equitable, with each of four major new-system suppliers garnering a 20 to 25 percent share of credible projects in the near-term. Meanwhile, capacity upgrades have become one of the most important aspects of the industry, providing a consistent source of growth. Carriers, both in consortia and on their own, have been the greatest source of capital for cable projects, but private investors have returned and government/Development Finance Institution (DFI) interest is steadily growing. Macroeconomic shocks have had remarkably little impact on demand for international capacity for the end user, but at the carrier level, the ability to purchase bandwidth and invest in new systems has been impacted. The most profound impact of macroeconomic developments on the demand for new systems has been the tightening of capital from the project finance community. Other events such as the strengthening of cable protection laws and the growing importance of the United Nations Convention on the Law of the Sea have also impacted the submarine cable industry. Advances in optical transmission technology have recently returned to a more natural pattern after the burst of the dot-com bubble. Many technologies offering the ability to increase data rate, channel count and overall capacity have come to market. Owners and purchasers of submarine cable systems must consider potential upgrades, new terminal equipment technology, new wet plant technology, and several other recent advances. 9 Breaking submarine investment into regions provides useful market insight. The transatlantic market is overwhelmingly wholesale-oriented and will soon have gone ten years without a new, direct cable system between North America and Europe. It has become commoditized and democratized, but its reputed oversupply is not as dire as widely claimed. The business case for a new transatlantic wholesale cable continues to be a tough sell to financiers; to differentiate themselves, new projects rely on low latency, renewable energy sources, and the expansion of connectivity beyond North America and Western Europe. The transpacific market suffered a shock with the activation of three new systems between 2008 and 2010, and without new deployment, a transpacific capacity shortage is a real possibility within three years. China and Japan will be the pillars of East Asian bandwidth demand as next-generation intra-Asian systems (SJC, ASE, and APG) will change transpacific market dynamics.