Submarine cable operators optimistic about future demand

Wednesday, October 19, 2016

Companies involved in building or operating submarine cables connecting Brazil are not concerned about over capacity. On the contrary, they are more worried about falling short of meeting future demand.

Being able to predict which applications will be driving data demand in the next 5-10 years is difficult, but what is certain is that demand will continue to rise, not stagnate.

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Speaking on a panel at this week's Futurecom ICT conference in São Paulo, Brazil, Seaborn Networks CEO Larry Schwartz said the market would not see a repeat of the glut in capacity that occurred in the 1990s - and led companies such as Global Crossing into bankruptcy.

"In the 90s the telecoms market was not wrong about predicting growth, they just got the timing wrong," said Schwartz, whose company is building the US$500mn Seabras-1 subsea fiber optic cable connecting New York and São Paulo.

"It's a question of waiting for demand to kick in," he said, adding that investors were much better informed today about the nature of these projects.

"We have every confidence that the next five to 10 years will be just as fascinating as the last decade and that there will be new content providers like Google and Facebook, which we can't even begin to imagine yet," he said, alluding to the potential of the Internet of Things, 5G and augmented and virtual realities.

Erick Contag, CEO of Brazilian submarine cable operator Globenet referred to Facebook's announcement last week that it will provide support for streaming videos on Facebook to Apple TV and Google Chromecast.

This sort of traffic would require more bandwidth than all of what Youtube has consumed in the last 10 years, he noted.

Globenet owns and operates a submarine cable network that spans more than 23,500km providing extensive coverage in South America and connecting to the US.

"Eight years ago, forecasts were based on the growth of voice and the iPhone. If you only use the market research you have today you'd never take any risks," Contag said.

The executive pointed out how OTT players like Facebook and Google are experimenting with new means of connecting the millions based on their own predictions: Google's Loon project is placing hot air balloons in the stratosphere to provide internet, while Facebook's Aquila project is experimenting with internet drones.

Rafael Arranz, COO of Telefonica's infrastructure unit Telxius, commented, "we don't know what the next big thing will be but traffic will be higher than what has been forecast."

Arranz pointed out that three years ago Netflix's traffic in Brazil was practically zero, while today it is the third largest driver of traffic. He also underscored the importance of sharing and not necessarily owning infrastructure.

Schwartz also highlighted the opportunities for traffic on Seabras' network, which will connect two major financial centers - São Paulo and New York - and added that a greater number of routes are likely to lead to lower prices.

Antonio Nunes, CEO of Angola Cables, which is building the first cable crossing the South Atlantic linking Africa and South America, pointed out that once complete it will be the most direct route connecting São Paulo and Singapore. It will also provide a more direct route to the US for South Africa, which currently needs to route through Europe.

Marcelo Almeida Nunes, partner strategy assistant with Brazilian ISP Algar Telecom, cautioned that the notorious bureaucracy in Brazil is an impediment for any future projects.

He said that projects such as undersea cable construction have to jump through multiple hoops and obtain authorization from bodies that are not even very familiar with the benefits of such projects, such as the navy.

Algar Telecom is a joint stakeholder along with Angola Cables, Google, and Uruguayan state telecom company Antel, in Monet, a planned submarine cable that will deliver over 60 terabits of capacity between the US and Brazil and which is scheduled for completion in 2017.