Submarine Telecoms Market Sector Report – Data Center & OTT Providers 2018

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This report provides a detailed overview of the changing trends in the submarine telecoms industry brought about by the involvement of data center and OTT Providers.

Executive Summary

The world continues to consume more and more bandwidth as digital activity for both enterprise and consumer applications move to “the cloud”. The companies behind these services – including the likes of Facebook, Google and Microsoft – continue to grow at nearly astronomical rates in an effort to keep up with demand – presenting numerous opportunities for the submarine fiber industry to provide new infrastructure for the growing digital economy.

Data Center and OTT providers are an increasingly integral part of the submarine cable system development process. OTT providers like Facebook, Google, Microsoft – and Amazon in the near future – are moving from capacity purchasers to cable owners. Meanwhile, data center providers work to bridge the gap between the cable landing station and backhaul or interconnection services in an attempt to maximize network efficiency and throughput for their customers by attempting to bring once disparate infrastructure into a single facility. More closely integrating data center and cable landing facilities cuts down on network latency and increases data security.

Not only are these new players now driving where cables are going, they are helping to push along new innovations inside of the cable systems themselves. New transmission technology to handle higher capacity wavelengths, increased fiber counts for more overall system capacity and streamlined network management and the push for open systems leading to shared system architecture are just a small sampling of new technologies and ideas these providers are backing.

Additionally, these non-traditional actors are encouraging new routes and growing new markets. South America and Africa are two prime examples of regions changing as a result of the efforts from data center and OTT providers. In particular, Facebook, Google and Microsoft can be the cornerstone of a cable system project that would otherwise never get past the planning stages. Because of both their infrastructure needs and their growing influence, these three companies have been responsible for 43 percent of all submarine cable system builds since 2016.

Another major change OTT providers have brought to global networks is shifting the focus from city to city connections to data center to data center connections. Unlike an Equinix or an Interxion, companies like Facebook, Google and Microsoft do not necessarily need to build infrastructure in locations with a variety of interconnect options. Instead, they favor locations that provide economic and cost saving benefits to reduce the operational expenditure impact of their data center facilities. The arrival of a major OTT provider not only brings new telecoms infrastructure to a region but also the cloud services that company provides.

The International Data Corporation estimates worldwide Public Cloud Services Spending will reach $180 billion USD in 2018 – an increase of 23.7 percent over 2017. All this reinforces the idea that the cloud is here to stay and will need even more infrastructure to support massive growth in already established markets – let alone new ones.

As with any market sector involving tech, long term outlook remains cloudy at best. Numerous tech companies like Facebook, Twitter, Snapchat and Amazon have suffered major blows in the past few months in both privacy and long-term profitability concerns resulting from declining user counts, weak earnings guidance from multiple companies and, in the case of Facebook, uncomfortable inquiries in front of the United States Congress about data privacy. However, the immediate future promises a wealth of opportunity for the submarine telecoms industry as the top tier OTT providers continue to demand new infrastructure at a rapid pace to meet their bandwidth needs – almost in spite of the recent uncertainty in the tech sector at large.

Table of Contents

Executive Summary
Methodology

1. Data Center Provider Overview
1.1 Data Center Facilities
1.2 Closer Integration Between Land and Sea

2. Over-The-Top Provider Overview
2.1 Owners Not Customers
2.2 Impact on Submarine Fiber Systems

3. Future Outlook
3.1 Potential New Markets
3.2 Supplier Challenges
3.3 Transformation of Global Networks

Afterword
List of Figure/Works Cited

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