SubTel Forum Issue #12 - Addressing the Future of the Submarine Cable Industry

FORUM

SubmarineTelecoms

An international forum for the expression of ideas and opinions pertaining to the submarine telecoms industry

Issue 12 January 2004 1

Contents Issue 12 January 2004

Editors Exordium

3

NewsNow

4

Maintenance News

7

Emails to the Editor

8

Executive Forum Matthew Milstead

9

Addressing the Future of the Submarine Cable Industry Alan Robinson

11

Alchemy Revisited Basil Demeroutis, Ian Fletcher and Steve Wells

14

You get futher with a Carrot and a Big Stick Rogan Hollis

18

Marine AssetManagement Graham Cooper

22

SBSS award Marine Officer Supply Contract to Subserv Pro

23

List of Advertisers Cable & Wireless OFS

4,5,31 6

Global Marine

7,8

SubOptic 2004

13

GReat Eastern Group

16

PTC 2004

17

BJ Marketing Comunications

19

STF Reprints

20

Nexus

21

Fugro

23

WFN Strategies

25

Nets and the Internet Steven Shamburek

24

CTC

27

ICPC Call for Papers

26

Lloyd’s Register

27

Gigantic Leap in Network Capacity for Australian Researchers

28

EGS

29

Tracking the Cableships

33 Caldwell Marine International

32

Letter to a Friend Jean Devos

36

STF Marketplace

32

Diary

37

Tyco Telecommunications

35

2

Submarine Telecoms Forum is published quarterly by WFN Strategies, L.L.C. The publication may not be reproduced or transmitted in any form, in whole or in part, without the permission of the publishers. Liability: 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.

Submarine Telecoms Forum is an independent commercial publication, serving as a freely accessible forum for professionals in industries connected with submarine optical fibre technologies and techniques. The publisher cannot be held responsible for any views expressed by contributors, and the editor reserves the right to edit any advertising or editorial material submitted for publication. © WFN Strategies L.L.C., 2004 Contributions are welcomed. Please forward to the Managing Editor: Wayne F. Nielsen, WFN Strategies, 19471 Youngs Cliff Road, Suite 100, Potomac Falls, Virginia 20165, USA. Tel: +[1] 703 444-2527, Fax:+[1] 703 444-3047.

Email: WNielsen@SubTelForum.com General Advertising Tel: +[1] 703 444 2527 Email: Advertising@SubTelForum.com

Exordium

January’s issue marks the start of yet another year, and all the hope that that entails.

In talking with some, 2003 was a “good riddance” kind of year, and 2004 may be only marginally better than its predecessor.

Lots of opinions tell us the nimble will survive, but the voracious T-Rex was once quite agile in its day. Possibly those that best endure a market cratering, are those small creatures who can hide in the crags and eke out a subsistence on non-traditional fare.

Perhaps, like the crocodile, a small number of the superior meat-eating reptiles will carry on. But also, new species may appear – smaller, swift carnivores that savage the giants in their weakened state, and become the dominant species – before turning on each other.

There are also considerable positive signs, some of which you will read in the first instalment of Executive Forum, encompassing key industry players’ perspectives on the market. In addition, Alan Robinson gives a countdown to SubOptic, while Graham Cooper discusses customers’ asset awareness. Rogan Hollis outlines ACMA 2004 and Steve Wells and Basil Demeroutis reveal what future business models will get financing.

Whether a herding herbivore, or a solitary hunter, 2004 should be a most interesting year, and as Dr. Seuss once opined, “And you’ll know, once your necktie’s back under your chin and Norval has waved you Godspeed with his fin, you’re in pretty good shape for the shape you are in!”

Happy and Prosperous New Year.

Advertising - Europe/ME/Africa - Hildegard Peltier Tel: +[33] 1 47 82 61 74 Email: HPeltier@SubTelForum.com Designed and produced by Ted Breeze BJ Marketing Communications, Colchester, UK..

Wayne Nielsen

3

A brief synopsis of current news items from NewsNow, the weekly news feed available on the Submarine Telecoms Forum website.

ALPAL-2 To Link Algeria To The Internet

Equant Adds DSL Services To Five Countries

Global Crossing Emerges From Chapter 11

Algerie Telecom has appointed Telefonica International Wholesale Services as its provider for international access to Internet.

Equant has expanded its Managed DSL Access to five additional European countries, bringing its total country availability to 13.

www.subtelforum.com/NewsNow/23_november_2003.htm

www.subtelforum.com/NewsNow/4_january_2004.htm

Singapore Technologies Telemedia (ST Telemedia) and Global Crossing announced that they have consummated their purchase agreement, allowing a newly restructured Global Crossing to emerge from Chapter 11 proceedings. www.subtelforum.com/NewsNow/14_december_2003.htm

Burkina Faso To Connect To Neighbors, SAT-3 Alcatel has announced the signing of contracts with ONATEL, the first national operator in Burkina Faso, to modernize the transmission network and interconnect Burkina Faso with neighboring countries as well as getting access to the submarine cable SAT-3.

Flag Files Report, Reduces Debt FLAG Telecom has announced that it has filed with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the period ended September 30, 2003. www.subtelforum.com/NewsNow/23_november_2003.htm

www.subtelforum.com/NewsNow/7_december_2003.htm

Global Crossing Extends Dsl Services Global Crossing announced continued extension of digital subscriber line access to its Global Crossing IP VPN Service™, Frame Relay, and Dedicated Internet Access , enabling multinationals to significantly lower their access costs. www.subtelforum.com/NewsNow/4_january_2004.htm

FLAG Schedule Vote On January 12

Global Crossing Sells DS-3s To Canadian Carrier

Caldwell Marine International of Toms River NJ has been awarded a Standby Maintenance and Repair contract by Cross Sound Cable LLC (CSC) of Westborough MA.

FLAG Telecom has announced that its special shareholders meeting to vote on the amalgamation of FLAG Telecom and Reliance Gateway will be held on 12 January 2004.

www.subtelforum.com/NewsNow/4_january_2004.htm

www.subtelforum.com/NewsNow/4_january_2004.htm

Global Crossing is providing Navigata Communications, a Canadian telecoms provider serving businesses worldwide and Canadian carriers and government agencies, with four high-speed voice service connections (DS-3s). www.subtelforum.com/NewsNow/4_january_2004.htm

Caldwell Marine International Awarded Contract

From business case to operation, from satellite networks to submarine, from Alaska to Bahrain to New Zealand

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Upgrade Contract for South American Undersea Fiber Optic Network Awarded to Tyco Telecommunications India Takes Steps To Spur Telecoms Growth Concessions won by Indian cellular operators for their support of licensing laws should push the sector to the kind of growth seen in China, analysts said. www.subtelforum.com/NewsNow/4_january_2004.htm

New World, China Netcom Enter Agreement To seize the huge opportunities presented by the “Closer Economic Partnership Arrangement” , New World Telecommunications Limited and China Netcom- Guangdong Communications Corporation Limited have entered into an “International Telecommunications Service Agreement.”

Tyco Telecommunications Selected by KT to Provide Connectivity between Korea and the West Coast of the US Tyco Telecommunications, a leading provider of international wholesale network transport and communications services, today announced a multi-million dollar contract for diverse 10Gb/s Wavelengths with KT Corporation (KT), Korea’s largest incumbent telecom operator and a leading supplier of broadband services. www.subtelforum.com/NewsNow/4_january_2004.htm

www.subtelforum.com/NewsNow/16_november_2003.htm

United States, Russia, China Link Up

Spanish Cable Television Operators Buy Capacity

The U.S. National Science Foundation (NSF), a broad consortium of Russian ministries and science organizations and the Chinese Academy of Sciences (CAS) announced the start of operations for the first round-the-world computer network ring, for joint scientific and educational projects.

T-Systems’ Spanish division of International Carrier Sales and Solutions (ICSS) has signed a 2m Euro deal with a consortium of cable operators to provide them with a combined 1.5 Mbps of IP transit. www.subtelforum.com/NewsNow/23_november_2003.htm

www.subtelforum.com/NewsNow/4_january_2004.htm

Telefonica International Wholesale Services and Tyco Telecommunications have signed a contract for a network upgrade for the Emergia Cable System, Telefonica’s undersea fiber optic ring network that connects Central, North, and South America. www.subtelforum.com/NewsNow/4_january_2004.htm

Verizon Completes Fiber-To-The-Premises Vendor Selections By Choosing Corning And Three Other Companies Verizon took another step forward in its plan to begin deploying fiber- to-the-premises (FTTP) systems next year by completing the selection of equipment manufacturers and suppliers for the project. www.subtelforum.com/NewsNow/4_january_2004.htm

Video Agreement Announced Intelsat and Level 3 Communications, Inc. have announced an agreement to launch a new video delivery network to serve North American broadcast customers. www.subtelforum.com/NewsNow/23_november_2003.htm

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MAINTENANCE NEWS AJC Operates Australia’s Largest Capacity Communications Connection To The Rest Of The World The company sought changes to the original loan repayment schedule, to better align income and outgoings in difficult market conditions. www.subtelforum.com/NewsNow/14_december_2003.htm

Australia Japan Cable Ensures Operational Stability Australia Japan Cable (AJC) has announced the successful completion of negotiations with its bankers to reschedule repayment terms for the operation’s financing.

Farice Completed

Madagascar Looks at New Cable

The Farice Submarine Cable System was successfully completed by Pirelli on 29 November 2003 and handed over to FARICE Hf, a joint venture between Iceland Telecom and Faroese Telecom that will use the system as the main infrastructure for their international traffic needs for Internet, voice and data transmission.

The Government of the Republic of Madagascar has commissioned the first phase of a project to connect Madagascar to the international telecommunications network via a new submarine fiber optic cable.

www.subtelforum.com/NewsNow/14_december_2003.htm

Fugro Acquires Thales GeoSolutions Acquisition of Thales GeoSolutions strengthens Fugro’s position as a global player in the oil and gas services industry www.subtelforum.com/NewsNow/23_november_2003.htm

www.subtelforum.com/NewsNow/14_december_2003.htm

www.subtelforum.com/NewsNow/7_december_2003.htm

Mobile Operator Mediterranean Cable Orascom Telecom, the largest GSM operator in the Middle East, Africa, and the Indian subcontinent, has contracted with the David Ross Group (DRG) to support their efforts to build a new submarine fiber optic telecommunications network to connect Orascom’s North African wireless networks to Europe. www.subtelforum.com/NewsNow/7_december_2003.htm

ICPC Call for Papers E-Marine Invites Insurance Tenders on Cable Ships Etisalat’s E-Marine unit, which installs and maintains cables in the Persian Gulf, is inviting tenders for insurance on its two cable ships – the Etisalat and the Umm Al Anber.

The International Cable Protection Committee (ICPC) is organizing its next Plenary meeting which will take place in Cannes, France during the period 6 – 8 April 2004 inclusive.

www.subtelforum.com/NewsNow/16_november_2003.htm

www.subtelforum.com/NewsNow/14_december_2003.htm

MOU for EASCS Signed Four carriers have signed a memorandum of understanding (MOU) to build a submarine cable along the East African coast. www.subtelforum.com/NewsNow/23_november_2003.htm

7

MAINTENANCE NEWS NEC Completes Thailand-Indonesia-Singapore

Security First for Global Marine Systems Limited

NEC Corporation has successfully completed the construction of a new submarine cable network, named TIS (Thailand – Indonesia – Singapore) Cable Network for a consortium formed by CAT Telecom Public Company Ltd. of Thailand, PT Telekomunikasi Indonesia (Tbk) of Indonesia and Singapore Telecommunications Limited of Singapore.

Global Marine Systems Limited are proud to announce the C.S. Sovereign has become the first British flagged ship to have a security plan approved by the Maritime and Coastguard Agency. The International Ship and Port Facility Security Codes Policy (ISPS) is a key security arrangement all ships are required to have in place by 4th July 2004.

www.subtelforum.com/NewsNow/7_december_2003.htm

Orascom Telecom Awards David Ross Group Contract to Support New Mediterranean Cable Orascom Telecom, the largest GSM operator in the Middle East, Africa, and India, has contracted with the David Ross Group (DRG) of New Jersey to support their efforts to build a new undersea fiber optic telecoms network to connect Orascom’s North African wireless networks to Europe.

www.subtelforum.com/NewsNow/23_november_2003.htm

Submarine Power Project to Include Fiber Cables Pirelli and Nexans have been awarded a contract for a turnkey high voltage submarine link that will interconnect Spanish and Moroccan power grids across the Gibraltar Strait. www.subtelforum.com/NewsNow/14_december_2003.htm

www.subtelforum.com/NewsNow/7_december_2003.htm

Pakistan Company Plans New Cable

Tyco Wins India-Singapore Contract

Transworld Associates (Private) Limited is studying the viability of a private submarine cable system to connect Pakistan with the FLAG Network. The proposed cable will provide redundancy for the existing SEA-ME-WE-3 link, which is the only submarine cable to land in Pakistan.

Tyco Telecommunications and Videsh Sanchar Nigam Limited (VSNL), India’s leading international telecommunications carrier, have signed a supply contract for a new undersea fiber optic system connecting Chennai, India, with Singapore.

www.subtelforum.com/NewsNow/16_november_2003.htm

www.subtelforum.com/NewsNow/16_november_2003.htm

Emails to the Editor Congratulations on your publication. Very professional layout and graphics — much higher production values than many similar efforts. Oh, and the copy is interesting, too!

Lawrence Fedewa, KW Tunnell ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Thanks for the nice calendar!

What a nice surprise to find it in the mailroom. Great cover drawing.

Stephen P. Miller, Scripps Institution of Oceanography, UCSD ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

I received my copy of your calendar today. Looks good and glad to see it so well supported.

John Horne, SubOptic 2004

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EXECUTIVEFORUM MATTHEW B. MILSTEAD Mr. Milstead has served as President and Chief Executive Officer of New World Network since April 2002.

He had previously served as Chief Operating Officer since joining the company in September 2001.

Prior to joining New World Network, Mr. Milstead was President of the Latin America division of 360networks. In this position, he was responsible for all of 360networks’ sales, marketing, network development and operations in Latin America. Previously he was General Manager of Eastern Operations, which focused primarily on the initial business and network development of 360atlantic and 360americas’s undersea and terrestrial network connecting the United States to Europe and Latin America.

Before joining 360networks, Mr. Milstead was Senior Vice-President and Chief Operating Officer of Lightwave Spectrum International.

Mr. Milstead holds an engineering degree from Virginia Polytechnic Institute and State University and a master’s degree in management from George Washington University in Washington, D.C.

Q

Are business conditions improving or getting worse, and are you optimistic or pessimistic about the future?

A

Conditions in the telecommunications industry for our region seem to have started to stabilize a bit as we close out the most successful year in the company’s history. In spite of the deteriorating economic situation in some of Latin America’s most important markets, we remain pretty optimistic about the medium-term uptake of connectivity. An important factor to any sustained growth however, is the deployment of access technologies and their supporting infrastructure in order to enable broadband users the connectivity they are demanding.

Q

What do you see as the short term and long term health of the international telecoms industry?

A

Even though we are starting to see improvements, the short term is still going to be very challenging. Careful management of service portfolios and cost centers is key.

The majority of international connectivity thus far has been dedicated to voice services, we expect Internet traffic to exhibit the fastest growth rates through 2008, thereby

becoming the most important contributor to international capacity requirements. We do need to see that increase in investment by local carriers in their infrastructure and services which will result in greater demand in the regions and subsequent international connectivity.

Q

Who do you see as your customers, and how do their past requirements compare to those in the future?

A

Our primary customers are the Global carriers, Regional service providers, ISPs, and value added service providers focusing on operations in our region.

Although 2003 was a very strong year for us in terms of capacity sales, projections from independent market studies and our customers themselves are for continued sustained growth over the next 3 to 5 years.

Q

From your perspective, what is the state of the market, and how will your company cope with the change?

A

The Latin American telecommunications industry has gone through an unstable period with restructurings and consolidations of operators at all levels. Although I think there is still more to 9

has to be met with rationalism. The ratio of suppliers to users is still imbalanced. With the inventory of capacity what it is and the number of service providers competing for the same user base, irrational business is sometimes being conducted by some as a means of survival. Although understandable, this situation has to be corrected for the long term health of the industry. This will allow companies to truly focus on solutions development and customer care, which ultimately is what drives our business.

100 85 66 57

52

49

47

45

43

Figure 1

Q A

Source: Pyramid Research

In your opinion, what does the industry most need?

The obvious answer is global economic improvement. But local access infrastructure has to be in place to facilitate such growth.

Additionally for our industry, such economic recovery

TRA FFIC

D O M ESTIC BAC KBO N E TRAFFIC

New World Network is a wholesale services provider of advanced, high-speed bandwidth and IP services to telecommunications companies, ISPs, and value added services providers. The company’s Americas Region Caribbean Optical-Ring System (ARCOS) is the leading undersea broadband fiber-optic cable network connecting 15 countries including the U.S., Mexico, Central America, South America and the Caribbean.

LEA SED LIN ES AN D D A TA C O M S A C C ESS (ATM ,TD M , FR,VPN , X.25,etc)

Figure 2

M O BILE A C C ESS (G SM ,G PRS, w C D M A, U M TS,etc)

Voice Internet

Voice Internet

Data and Internet applications will be key in driving bandwidth demand throughout the Americas in the next five years, see Figure 2. A growing user base of Internet subscribers combined with the adoption of more sophisticated Internet-based applications will play a leading role in boosting traffic in the future. The migration to higher-speed leased line connections, expanded mobile communications

Private data Internet

What are your views of the future of the market?

ABOUT NWN Note: Pricing in 2000 = 100

BA C KBO N E

LO C AL AC C ESS TRAFFIC

Q Trends in International Connectivity Pricing A Evolution of Pricing for International Connectivity in Latin America

IN TERN A TIO N A L

Voice

come, at least some stabilization has been achieved.

Pricing declines that have been so steep should level out as the number of suppliers chasing users is reduced and capacity inventories are diminished, see Figure 1.

Early in 2003, we at New World Network successfully reorganized our operations and financial structure to ensure our long term health. We did so while maintaining competitively priced capacity services and introducing additional wholesale services in line with market demand. This includes IP transit services, collocation and other value orientated services.

FIX ED A C C ESS (AD SL,ISD N , PSTN ,FW A, cable,W LL,etc0

Source: Pyramid Research

infrastructure, the deployment of IP-based services, and the growing demand for broadband applications, such as streaming media, will all be contributing factors to the anticipated growth in capacity requirements.

Overall demand will continue to grow since mankind is somewhat greedy by nature in that we continually want faster processing and greater capacity. This leads to new applications, which leads to greater usage and greater demands for services. It is this continuing evolution of IT related products and growth that makes this industry so great.

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Addressing the Future of the Submarine Cable Industry Alan Robinson SubOptic 2004 President

SubOptic 2004 is in the final stages of planning and preparation. The conference will be staged in Monaco from 29th March – 1st April 2004 in the magnificent facilities of the Grimaldi Forum. It is a “must attend” event for all those who are involved in “subcables” whether it be from the carrier, ISP, or multi-media community, the supply side – manufacturers, ship owners and the wide range of subcontracting parties, large or small, and the environmentalists, specialist permitting agencies and finance and legal companies who are playing an increasing role in our industry, in the current tough economic climate. It is to these latter communities that SubOptic 2004 should have an added appeal.

The venture capitalist, equity funds and their associated commercial and legal partners should view the conference as a major opportunity to hear about new ideas, new technologies, commercial strategies and industry economics which could provide the seed for a new business venture.

Our industry hit a peak at Kyoto and we spent happy days congratulating ourselves on the growth opportunities that had been created by de-regulation and new technology and underpinned by a mountain of debt. Heady days! And now we stare at the abyss.

Cyclical industry patterns are nothing new but almost as soon as the lights went off in Kyoto, we entered a downturn that seems without end. And here we are, 3 years later in an almost unrecognisable state looking like a Grisham novel with Chapter 11’s, bankruptcies, enormous write-downs, huge job losses and little sign of an upturn – an unparalleled period of change. But out of change comes opportunity and it will be these opportunities that SubOptic 2004 will be focussing on.

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Opportunities abound. Companies coming out of Chapter 11 with or without new owners will be strapped for capital – as are the major telco’s. New owners of submarine systems that have been sold at a cent in the dollar will have the inevitable task of meeting their operating costs, let alone upgrading or enhancing their networks. There is still a massive oversupply in certain markets and in particular across the Atlantic.

There is also regional under supply but investors are looking continuously at the increased risk of long-term investment. There is irrational behaviour by incumbents trying to produce cash to survive another day. The IRU capacity product has been largely deserted in favour of the short term lease which sets the tone for “just in time” supply. We as an industry will have to learn to adapt from long term stable and predictable growth to a much more unpredictable, near term environment.

The investment risks are enormous, but this bleak scenario is set against a reasonably steady growth in capacity requirements. So the “buzz words” of rationalisation, consolidation and cost synergies come flowing onto the page. But these are not easy to achieve.

So probably more pain but also, and at long last, the shoots of recovery are starting to show.

SubOptic is once again organising a PTC roundtable discussion on Wednesday 14th January from 10h30 until 12h00. The subject will be “The Undersea Communications Industry – the rise of a new dawn – funding and managing international infrastructure”.

We have an expert panel, largely Pacific based – Robin Russell, CEO of the Australian Japan Cable, Brian Roussell, President and CEO, WCI Group Inc, Bill Marra, CTO & VP Network Planning and Engineering, Tyco Telecommunications, Ed McCormack, COO, Flag

Telecom and David Beck, Associate Director, Macquarie Infrastructure and Special Funds. As usual, Steve McClelland, Editorial Director of Telecommunications International will be the rapporteur. I am sure the subjects I have briefly touched on in this article will be hotly debated with the audience during the session.

And then onto SubOptic and Monaco in the Spring. The response to the call for papers was the best ever and we have a programme of 60 oral and 100 poster presentations. Hospitality suites are fully booked and space for exhibition booths is filling, but please remember we have to confirm the final number of booths by the end of January. “Just in time” booth reservations cannot be accepted! There are plenty of sponsorship opportunities still available so even if you are cash strapped, there are low and medium cost opportunities to get your company name into the event.

We are finalising our keynote speakers and the full programme will be issued in mid-January 2004.

Please remember that without your support, SubOptic would not exist. It is an event that is unequalled in the submarine conference calendar and it only comes around every 3 years. Make sure you are there and we will promise you an abundance of intellectual debate, a look at all that’s new in the technology pipeline and ways to own and operate strategic assets at the most competitive costs – and lots more! Just click on the website www.suboptic.biz where full details of all the conference opportunities and facilities can be found.

Not available on this website are airline bookings but I noticed the other day that the London – Nice route was in heavy demand just before SubOptic!

So don’t hang back – get booking and we look forward to seeing you. It will be worth it.

Alan Robinson served as Vice President of Global Operations Engineering Services (GOES) for Cable &Wireless, in which capacity he is responsible for strategic investments on behalf of C&W, including submarine cable systems and satellites.

He retired from C&W in December 2003. Mr Robinson possesses extensive experience across a broad range of the international submarine cable business.

Currently he is a Director of the Gemini cable system and is responsible for the development of Apollo, which is owned by C&W. He is a Master Mariner and commenced his career in BT in 1976. He held a number of appointments in the cableship fleet before taking an operational management role in 1981. He held positions in Sales and Project Management before being appointed BT Marine’s General Manager for the Asia Pacific region, based in Singapore between 1990 – 1994. On his return from the Pacific, Alan joined C&W where he has held a number of Senior Management positions.

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The trick went like this – use half a billion dollars to buy a truck full of gold, then convert it into a transparent form of sand, stretch it out for many thousands of kilometres and then throw it all in the ocean.

It would have been an even better trick if done the other way around.

The first part of this article - presented here will review the financial descent into the current weak market. The second part will appear in the next issue, and will identify some of the steps on the ladder to recovery.

In the last three years, we have witnessed the biggest change in our industry since long-haul voice cables were first conceived around 50 years ago. It may seem strange to make that claim, in the light of recent technological developments, however we hope to provide some insights by illustrating the symptoms and the underlying financial causes that lead inevitably to our current market conditions. It is really the story of the sudden transformation of international capacity, from a specialised premium product to a cheap open-market commodity, and the reactions of the market to that change.

Many outside observers have remarked that the bursting of the dot-com bubble caused a sudden readjustment of demand forecasts. It is of course tempting simply to lay the blame on the dot-com collapse – existing installed cables could meet new, dramatically lower demand for many years to come, particularly with ever-improving DWDM technology.

At a superficial level, this analysis has its merits.

However, to fully understand the cause of this market change and the impact it has had on our industry,

Alchemy Reversed

By Basil Demeroutis, Ian Fletcher and Steve Wells we must first briefly characterise the market that existed prior to the change.

In the early 20th century, trans-oceanic voice communication was achieved mainly by HF radio at huge cost per channel. The subsequent installation of early cables enabled operators to begin developing

an international business; however, use by the public at large was still restricted by high pricing. A key feature of this phase was that even allowing for technology development - for example, a shift from co-axial cables to optical fibres - demand exceeded supply. For each major route, a consortium of toptier telecom operators would jointly fund and project manage the next cable on the basis of mainly pent up demand in the market, based on their own inhouse forecasts. Each cable filled rapidly and was superseded by a larger capacity cable within 5 years.

The ‘virtuous cycle’ – reduced unit pricing interacting with price elasticity to stimulate further demand – led to a period of sustained and reliable market growth. This trend continued right through to the ‘co-axial technology crunch’ of circa 1980, and then accelerated further as single-wavelength optical systems offered undreamed-of capacity. The pace of acceleration picked up even further with low cost DWDM upgrades, increased globalisation, seemingly limitless technology and, latterly, the internet and dot-com era. Systems were initially equipped with 2% to 5% of their ultimate upgraded capacity, with even that initial capacity only partly sold, and carrying decades of future O&M commitments.

The theme that we develop here is that the major market change has been caused by the interruption of the ‘virtuous circle’, where transport is now such a small part of the total price paid by the end user that demand can no longer be stimulated by international transport price cuts alone – that is, elasticity has effectively gone and further price cuts lead simply to proportionately reduced revenues. This point was bound to arrive sooner or later due to the 14

success of the installed global networks in shifting the capacity pricing bottlenecks back towards the regional and last-mile areas of the national feeder networks.

The complex interplay of elasticity between pricing, supply and demand has thus far led to price declines of the order of 50% per year on many routes.

But the turning point has now occurred. For the near future, new capacity will continue to be obtained largely through the upgrade of existing cables at upgrade prices, and not through installation of new cables. Even for new cables, there is no longer any reason to assume that capacity pricing will be that much cheaper, due to the specific mix of fixed and capacity-dependent cost elements in new cables.

Technology has become just one of the necessary factors enabling price decline, some of the others being fill rate, market elasticity and the rate of cash return (revenues servicing debt capital) to the system owner. The final upgraded capacity is, in a sense, irrelevant - the crucial factors now are the capacity actually installed now and the incremental cost of upgrade capacity. This argument, if correct, implies that prices will stabilise at current levels unless crosssubsidy is deployed.

It is worth while pointing out that behind this phenomenon was an influx of ‘me-too’ investors, anxious to not miss the boat. The collapse of the market was exacerbated by a serious slip in the objective investment standards. It is important to lay out some of the changes of investment behaviour that led to the market as we see it now, with very limited telecom operator investments and the banks all but closed to new telecom build projects.

Until the start of the 1990s tech boom, network construction and in particular expensive international capacity projects had been undertaken primarily by the large carriers who raised capital based on the strength of existing cash flow generated by their decades-old business.

As a result of a confluence of factors – the perceived market opportunity but equally as important near-simultaneous deregulation of global telecoms markets, growth in the pool of global capital seeking higher returns – this changed dramatically.

Network construction became funded on a “project finance” basis, where the project itself formed the basis for an investment decision. Significantly, the implication is that the future, not the historic, cash flows were used to secure the financing. This projectspecific funding relies heavily on the structure and timing of the supply contracts, and the planned revenue profile. The need for proven revenues as a key criterion to obtain finance, shifted to signed contracts, to probable contracts, contracts in the “pipeline” and ultimately what was little more than blind faith in the ability to achieve a target market share. Pre-sales were used almost as equity to increase the ability of the company to raise debt or equity finance.

Thus, the early-stage successes of companies such as Global Crossing were instrumental in attracting less experienced players into the arena, and the market became flooded with competition. This, in turn, emphasized speed to market and cost as the decisive competitive factors.

Hence, a new, less virtuous ‘virtuous circle’ emerged – build faster, achieve first to market

Basil Demeroutis is a partner at Central Europe Trust Company specializing in Telecoms and head of Corporate Finance. Before joining CET, he was a Director at ING Barings, as banker to the telecom, media and technology sectors. Prior to joining ING Barings, Basil was a part of the Bear Stearns corporate finance team.

Before moving to London, he worked in Telecoms for Bear Stearns (US). He is a graduate of Cornell University.

Ian Fletcher obtained his BSc (hons) in Electrical and Electronic Engineering at Manchester University and his MSc in Telecoms Networks at Essex University. He worked on submarine cable technology for 20 years at BT Research Labs, latterly as head of R&D. He spent 3 years with PricewaterhouseCoopers, working on investment appraisal, due diligence, dispute arbitration, technical troubleshooting and network valuations. In 2003 he became a director of Datawave Limited.

Steve Wells has been involved in submarine systems since 1970, and has a postgraduate degree Masters in Business. He has worked in submarine systems for 30 years, and was a key engineer in burial technology, optical repeater terminations, jointing and fiber packaging. He was Head of Ops for marine engineering and maintenance at BT. He was also Director, Global Fiber Networks at PricewaterhouseCoopers. He is CEO of Datawave Ltd.

15

advantage, grab vendor finance, raise as much external capital as possible, enter a new market and build faster….. With few exceptions (e.g., Colt in Europe), operators pursued a land-grab strategy of trying to capture market share, because this was the metric on which their backers had invested.

Further fuelling the fire of unsustainable network expansion, of course, were the vendors.

Looking initially to achieve their own top-line growth targets and meet investment market expectations, and later on as a survival issue, they eagerly lent money to their customers on highly attractive terms.

At first, 50% to 60% loan to purchase price deals were made available, and later, leverage of up to 80% was possible.

Almost simultaneously, all of these sources of finance – equity, debt and vendor – dried up, leaving the whole industry in the cold. Why this happened is a complex discussion, it could be described as ‘waking up from mass-hypnosis’ or perhaps in more favourable rational terms.

However, it is important to say that without doubt, the current dearth of financing for network projects will end. When, is a difficult question to answer. How it will end, is a topic perhaps a bit easier to address.

We will conclude this article in the next issue with a review of how the objective investment standards can be recovered sufficiently to bring the large-scale investors back to the table, and how the new networks can be cost-optimised for a quantified quality-of-service and availability suited to the new traffic mix.

16

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www.ptc2004.org 17

You get further with a carrot and a big stick …

Criticism is often painful to receive, but when it is well informed and constructive, it can be a helpful if difficult pill to swallow. The case for ill-informed criticism is harder to make, and there has been a lot of it about lately with regard to the ACMA, so we thought we would take this opportunity to clear up any confusion there may be.

For those readers of SubTel Forum that are not already aware, the ACMA is the Atlantic Cable Maintenance and Repair Agreement. It is the preeminent provider of submarine maintenance services in the Atlantic Ocean. The ACMA is a non-profit making collaborative venture among almost 50 of the Atlantic’s cable owners, providing the same level of service to cables ranging from Cable & Wireless’ state of the art Apollo trans-Atlantic ring system, to cables such as APOCS in Canada and Unisur between Uruguay and Argentina. The pricing arrangement for all of these cables is exactly the same, meaning that the ACMA is open and fair to all. This has been recognised by the EU competition commission, who have approved the ACMA arrangements on more than one occasion, citing the special and direct benefits of the ACMA to European consumers.

In the November 2003 issue of SubTel Forum someone called John Pockett stated “This seems particularly relevant to your readers when large organisations such as ACMA seem to be moving towards just penalising suppliers for failure, instead of running a balanced scorecard, which can reward or penalise in direct relationship to the way in which they improve or worsen the fortunes of their customers”.

Let’s put to one side that Mr Pockett has not been to any ACMA meetings for at least eight years to our knowledge, so we’re not sure how he knows in which direction ACMA is moving, and examine the substance of what he is claiming.

Is ACMA “just penalising suppliers for failure”?

It may interest your readers to know that so far, only one supplier has been “penalised” by ACMA, meaning that our other suppliers haven’t been. That is because only one supplier has failed, which would in turn imply that suppliers do have the ability to succeed.

If you succeed, you get paid according to the contract you signed, which seems pretty balanced to us.

It may further interest your readers to know that the measures ACMA is using to benchmark its

by Rogan Hollis suppliers were all negotiated and agreed with those suppliers – not imposed by us. In fact, many of the cable owners – also known as “customers” in this context – were disappointed not to achieve more stretching targets in their supply contract. It is usually a sign of a fair and balanced contract that both sides feel they haven’t gotten everything they wanted.

Even more interestingly, when ACMA 2004 was being negotiated, the new service providers were given an opportunity to re-visit some of the measures that the ACMA is using.

Those service providers declined to change them, which would suggest that they consider them to be achievable - or at least that they consider the “penalties” for not achieving them to be fair and to reflect the impact that failure has on the cable owners.

Let’s not forget that restoration on another cable can cost millions of dollars, so the penalties that we are

18

talking about here cannot possibly reflect the real impact on the cable owners of a failed, or delayed, repair.

So let’s look at the economic realities of being a cable owner today. Every single cable is being challenged on its O&M by every single customer of that cable. Many cables are in the process of retiring – well ahead of their design life – because their O&M is no longer sustainable. Every cable owner – and ACMA is no exception – is therefore actively looking to reduce its costs.

At the same time, we are looking to preserve the quality of services that we use to maintain our subsea network. In this context, does it seem reasonable to pay a bonus to a service provider for successfully doing its job, and not having a jointing failure? The balance for the penalty – or the risk of failure - surely lies in the margin that the ship operator is taking from providing its service – the reward for success.

Everyone that reads SubTel Forum will know that the reliability of the submarine network is key to international trade and communication. Recent events such as the earthquake off Algeria have shown how fragile that submarine network can be. Other

recent events such as the double failure of a modern trans-Atlantic ring system show that, even when resilience is designed in, the best laid cables of mice and men can go astray. All of this means that the quality of service provision is at the front of our minds when we are considering the contracts for ACMA. It also means that we need to be able to rely on the quality of our service providers.

The ACMA contracts now include a number of performance measures, all of which have been drawn up around the most important and time critical facets of a repair operation. These include time to mobilise, time to load, passage speed, and jointing time and quality.

As cable owners it is most important to us that any repair is carried out as quickly as possible, taking into account the whole repair and not just the individual elements.

For instance we would much rather have one perfect joint done within a reasonable time than suffer a jointing failure because a jointer is rushing to complete it in an unreasonable time. At the same time we cannot accept unreasonably long jointing times because time is of the essence on any repair.

Accordingly, as we mentioned earlier, the ACMA sat

Rogan Hollis has been involved in the submarine cable industry since 1991, when he joined BT (Marine) Limited. Rogan moved with the company when it was purchased by Cable & Wireless, working in the Installations Sales area and latterly as a Project Director.

Amongst his key achievements at Cable & Wireless (Marine) was negotiating the creation of the Joint Venture company with NTT, NTT WE Marine Limited.

In 1999 Rogan moved to Cable & Wireless plc where he was Head of Maintenance for the Cable & Wireless network. This gave him experience as a network operator and purchaser of maintenance services, which he continues to use in his role today guiding the Cable & Wireless wet maintenance strategy and network development. Rogan is also the C&W deputy for Alan Robinson, President of SubOptic 2004.

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19

down with the service providers to develop measures that both sides felt were fair, reasonable and achievable – and that had a direct relationship to how we, as cable owners, measure our network performance.

One thing that we should make your readers aware of is that any service provider has the right to approach the cable owner, on any repair operation, and ask for a waiver of the performance measures.

We know that there are some cables in our Agreement that are particularly difficult to joint.

We are also reasonable people. We therefore provided for this waiver ability in order to ensure that the Agreement was enforced amicably and reasonably.

So the ACMA is responding to the changing needs of its members by introducing performance measures, in an attempt to drive service improvement, without being one-sided. Getting away for a moment from the details of the ACMA contracts, it can be seen that the ACMA as an organisation has been increasingly responsive to the needs of the ACMA’s customers i.e. the cable owners. As the shape of the submarine network in the Atlantic has changed, ACMA has moved its vessels into different areas, in order to maximise the benefits of ACMA membership.

For example, in 2001 ACMA positioned a repair ship in Brazil, to address the needs of a growing South American submarine market. As it turns out, that ship has not been needed, and so in 2004 ACMA will now have a ship in Curacao, in order to better serve the Caribbean.

The ACMA Management Committee continually reviews the location and number of ships that ACMA provides in order to match the service

against the need. We have had, and will continue to have, 2 ships in northern Europe because most of the faults in the Atlantic take place off the coast of the UK and France. Therefore it makes most sense to have our ships strategically located close to the area where they are needed. This ethos – of being responsive to the needs of cable owners – informs all of the decisions of the ACMA, whatever you may hear from people outside of the organisation.

That’s why we have so many cable ships stationed around the Atlantic. We are aware that it is highly unlikely – statistically – that all of our ships will be working at the same time. But the key thing is the response time. And in fact, in December 2003, all four of the northern based cableships were out on repairs. Which cable would have wanted to wait for a repair because the ACMA had cut its costs? We decided that the trade-off of cost reduction was not worth the impact on the service level – and yet we still see that ACMA 2001 saved 40% from its predecessor and ACMA 2004 will save another 30% !

ACMA now is about changing the behaviour of its service providers and indeed itself. We are becoming more externally focused and more responsive than ever before. We want to make sure our service providers understand that and work with us to enhance our overall proposition. During the course of ACMA 2001 we have noticed year-on-year improvements to many of the parameters that we have been measuring, as a direct result of our performance measurement and liquidated damages regime. Finally in closing, and to paraphrase a well known saying: “you get further with a carrot and a big stick than you do with just a carrot”.

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MARINE ASSET MANAGEMENT

by Graham Cooper

This year there has been considerable evidence that operators of marine assets have become more aware of the data and assets that they hold responsibility for in their organisations. This has enabled them to become much more financially aware of the value that they can derive from their assets, whether datasets held in their archives or marine installations at sea or on and below the seabed.

GeoSoft Solutions, a group within Fugro Survey Ltd. in the United Kingdom, are actively promoting solutions to new and existing clients so that they may develop increased awareness of their assets. Operators in different marine fields need to have information readily to hand so that they can react to changing business, financial and production scenarios.

Many organisations will already have industry standard Geographic Information Systems (GIS) within their offices and GeoSoft Solutions will develop solutions for particular scenarios for such organisations. These systems will have been populated with asset information with either a backdrop of an electronic chart or a regional map covering their area of interest.

One such organisation to require this has been Guernsey Electricity in the Channel Islands. Guernsey Electricity has a well established GIS for their land

assets and monitoring of such. However early in 2003 they identified that there is need for a system by which they could monitor a developing marine incident that might impinge upon their electricity cables between France, Jersey and Guernsey.

GeoSoft Solutions were awarded a contract by Guernsey Electricity in June 2003 to supply two Marine Digital Atlases, which were to have their cable

Graham Cooper is manager of GeoSoft Solutions, a group within Fugro Survey Ltd., in Great Yarmouth in the UK. Graham has 28 years experience in the land and hydrographic survey industries and has concentrated on creating a GIS centre of excellence. He was a member of the committee which produced the ‘Guidelines on the Use of Multibeam Echosounders for Offshore Survey” for IMCA. He was also on committee that produced the draft recommendations for the “Minimum Technical Requirements for the Acquisition and Reporting of Submarine Cable Route Surveys” for the ICPC. He can be contacted at g.cooper@fugro.com

information superimposed over a chart of the Channel Islands and French coast. Functionality embedded within the system included the display of a part of an Electronic Navigation Chart (ENC) in vector format, spatial attributes, as laid cable positions and zoom, pan and vessel position display.

An operator in Guernsey Electricity’s office is able to enter the position and heading of a vessel through the keyboard and set a circle of influence.

This indicates to the operator, in both graphical and analytical modes, whether the vessel and any towed equipment might be impinging upon their assets.

Guernsey Electricity can then advise the vessel and monitor the incident as it develops.

An important aspect of the Marine Digital Atlas is that Guernsey Electricity can specify their required functionality at the outset of and build upon it in the future. It need not be too complex in the beginning and enables the client to demonstrate to the authorities that it has a monitoring system in place should an incident develop.

In time to come similar systems will become common in many other industries both in the coastal environment and in the deep ocean. Graphical displays are a powerful tool through which information can be relatively easily published to the owner of marine assets and upon which key decisions can be made. ENC vector charts contain a considerable amount of attribute data and together with purpose built queries can be one of the parameters for financial, environmental and energy decisions.

The author would like to thank Guernsey Electricity for allowing permission for this article to be published in SubTel Forum.

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SB S S A WARD MARINE OFFICER SUPPLY CONTR ACT TO SUBSERV PRO

SubServ Pro has recently experienced a change of location, and so the fact their ability to attract and place high quality Marine Officers has been recognised has given them a welcome boost. Chris Reynolds said: “The SBSS contract reaffirms our position as being good at what we do. The fact they have signed a deal for two years is very encouraging, and I look forward to working with SBSS in the future to ensure that we meet their needs in a professional and adept manner.”

A number of officers have already been placed with SBSS under the terms of the new contract, a very

encouraging start to a new working relationship that promises to deliver significant benefits for both parties involved.

SBSS (S.B. Submarine Systems Co. Ltd) is a Global Marine Systems Limited (Global Marine) joint venture with China Telecom. Global Marine holds a 49% share of the business.

SubServ Pro is a wholly owned subsidiary of Global Marine. SubServ Pro is an International Recruitment Consultancy providing total solutions to “Blue Chip” Clients.

SBSS, the Global Marine Systems Limited joint venture based in Shanghai, has signed a deal with SubServ Pro to provide all the Marine Officers, comprising of Ships Masters, Chief Engineers and ETO’s required by the company for the next two years.

The manning agreement was signed by both Ian Douglas, General Manager of SBSS and Chris Reynolds, Technical Services Manager, in late November. The contract guarantees SubServ Pro’s position as the leading supplier of Marine Officers within the cable industry and is some welcome news as a sign of a life returning to the market place.

Ian Douglas commented on the deal: “I am very pleased that we have signed this agreement with SubServ Pro. It demonstrates SBSS’s commitment to ensuring we have the high quality staff that we need in order to deliver excellent service to our customers.

It also shows that we continue to support SubServ Pro, and recognise their ability to recruit and train the leading professionals in our business.”

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N E TS AND THE INTERNET

by Steven Shamburek

seas” including both “freedom of fishing” and “freedom to lay submarine cables and pipelines”1 or, as stated in a subsequent treaty, “freedom to lay submarine cables and pipelines” and “freedom of fishing.”2 Cable owners and commercial fishermen are equal tenants of the sea. Among the provisions in the applicable treaties is a requirement that when one tenant sacrifices to protect another tenant, the benefited tenant must recompense the sacrificing tenant. The treaties acknowledge what each would agree to do if they could negotiate before an interaction. In other respects, cable owners and commercial fishermen are left to accommodate their shared rights to use the sea.

Current international law governing the legal relationship between cable companies and commercial fishermen

Commercial Fishermen and Cable Companies Applicable International Law

The international law regarding the protection of undersea cables is generally established. There are three applicable treaties and one enabling statute of the United States in addition to customary international law3 and traditional maritime tort law.4

1

Some areas of law involve a “majority interpretation,” a “minority interpretation,” an exception, and an exception to the exception. And a suggestion that the entire analysis must be revisited because of recent developments in canons of statutory construction.

By contrast, international law involving submarine cable owners and commercial fishermen is profoundly simple. The law recognizes “freedom of the

2

Geneva Convention On The High Seas.

United Nations Convention On The Law Of The Sea.

See The Paquete Habana, 175 U.S. 677, 700 (1900); Article 38(1) of the Statute of the International Court of Justice; and 3

Section 102 addressing the “Sources of International Law” in the Restatement (Third) of the Foreign Relations Law of the United States and the Reporters’ Notes at 1.

4 See American Tel. & Tel. Co. v. M/V CAPE FEAR, 764 F.Supp.

97 (D.N.J. 1991), rev’d, 967 F.2d 864, 877 at n.15 (3rd Cir. 1992) (The two Cape Fear decisions address and discuss many of the critical legal issues).

Agreements/Conventions/Treaties 1. Submarine Cable Convention The International Convention for the Protection of Submarine Cables, 24 Stat. 989-1000, T.S. 380, 1 Bevans 89, concluded at Paris, France on March 14, 1884 and proclaimed by the President of the United States on May 22, 1885, is the primary international treaty that establishes international law involving the protection of undersea cables. The Cable Convention includes seventeen articles.

Article 1 states that the Convention shall be applicable “outside of the territorial waters” of the High Contracting Parties. Article 2 states that the “breaking or injury of a submarine cable, done wilfully or through culpable negligence, and resulting in the total or partial interruption or embarrassment of telegraphic communications, shall be a punishable offense, but the punishment inflicted shall be no bar to a civil action for damages.” There is an exemption if the vessel owner is involved in “saving their lives or their vessels.” Id. Article 7 states: “Owners of ships or vessels who can prove that they have sacrificed an anchor, a net, or any other implement used in fishing, in order to avoid injuring a submarine cable shall be indemnified by the owner of the cable.”

The Cable Convention has been adopted by over 40 nations.

2. Geneva Convention On The High Seas The Geneva Convention on the High Seas, 13 U.S.T. 2312, T.I.A.S. 5200, 450 U.N.T.S. 82, was adopted at Geneva, Switzerland on April 29, 1958, entered into force on September 30, 1962 and proclaimed

24

by the President of the United States on November 9, 1962. Article 2 of the Geneva Convention discusses freedom of the seas and specifically protects “(2) Freedom of fishing” and “(3) Freedom to lay submarine cables and pipelines . ” (Emphasis added). The Geneva Convention, particularly Articles 26-30, simply reaffirms the protection provided to submarine cables. Article 27 states: “Every State shall take the necessary legislative measures to provide that the breaking or injury by a ship flying its flag or by a person subject to its jurisdiction of a submarine cable beneath the high seas done wilfully or through culpable negligence, in such a manner as to be liable to interrupt or obstruct telegraphic or telephonic communications, and similarly the breaking or injury of a submarine pipeline or high-voltage power cable shall be a punishable offense.” Article 29 states: “Every State shall take the necessary legislative measures to ensure that the owners of ships who can prove that they have sacrificed an anchor, a net or any other fishing gear, in order to avoid injuring a submarine cable or pipeline, shall be indemnified by the owner of the cable or pipeline, provided that the owner of the ship has taken all reasonable precautionary measures beforehand.” Article 30 provides: “The provisions of this Convention shall not affect conventions or other international agreements already in force, as between States Parties to them.” Article 30 was included to ensure that the protections of submarine cables afforded by the Submarine Cable Convention of 1884 were still effective. The Geneva Convention has been adopted by over 62 nations.

The Geneva Convention is substantially superseded by the United Nations Convention on the Law of the Sea, although it is in force for those nations that are not parties to the United Nations Convention.

3. United Nations Convention On The Law Of The Sea The United Nations Convention on the Law of the Sea, 21 I.L.M. 1261 (1982), U.N. Pub. E.83.V.5 (1983), was adopted at Montego Bay, Jamaica on December 10, 1982 and entered into force on November 16, 1994 and endeavors to establish an architectonic regime for every aspect of ocean use.

The United Nations Convention addresses a wide range of issues. Article 79 states that a nation is entitled to lay submarine cables and pipelines on the continental shelf. Article 87 discusses freedom of the seas in particular “(c) freedom to lay submarine cables and pipelines” and “(e) freedom of fishing” each subject to other provisions and conditions in the Convention. (Emphasis added).

Article 112 states that a nation is entitled to lay submarine cables and pipelines on the bed of the high seas beyond the continental shelf. Article 113 states that any injury or obstruction of installations done willfully, through culpable negligence, or intentionally are to be treated as punishable offenses unless the act was done in a distress situation. Article 115 provides that owners of ships who can prove that they have sacrificed an anchor, a net, or any fishing gear, in order to avoid injuring a submarine cable or pipeline, shall be indemnified by the owner of the cable or pipeline. Article 116 protects the right of nationals to engage in fishing

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25

on the high seas subject to conditions. The UN Convention has been adopted by over 135 nations.

Enabling Statute 4. Submarine Cable Act The United States Congress enacted the Submarine Cable Act of February 29, 1888, 25 Stat. 41-42, codified at 47 U.S.C. §§ 21-33, to give effect to the Submarine Cable Convention of 1884 discussed above and to establish the law in the United States.

The Act was amended to add other provisions in the Act of May 27, 1921, 42 Stat. 8-9, codified at 47 U.S.C. §§ 34-39.

The Cable Act provides no express private right of action and is primarily criminal in nature.

Under the Act, it is a misdemeanor to “willfully and wrongfully break or injure, or attempt to break or injure, or who shall in any manner procure, counsel, aid, abet, or be accessory to such breaking or injury, or attempt to break or injure, a submarine cable in such manner as to interrupt or embarrass . . . telegraphic communication.” 47 U.S.C. § 21. It is also a misdemeanor to inflict the same injury “by culpable negligence.” Id. at § 22. There is an exemption if a person breaks or injures a cable in Steven J. Shamburek received a B.A. with a major in economics and a minor in political and social thought and a J.D. in law from the University of Virginia. He practices admiralty, commercial, construction and real estate law out of Anchorage, Alaska. He has represented cable companies and commercial fishermen in a variety of transactional and litigation work.

CALL FOR PAPERS The International Cable Protection Committee (ICPC) is holding its next Plenary meeting in Cannes, France from 6 - 8 April inclusive. NB: This is the week following the SubOptic 2004 International Convention in Monaco.

Papers that would primarily address the following topics are hereby invited for selection: 1. Environmental Programmes 2. Coastal Zone Management 3. Marine Technology 4. Fishing Liaison / Cable Awareness Abstracts must be submitted via email to secretary@iscpc.org no later than 14 February 2004. For more information about this Call for Papers please visit the ICPC’s website at www.iscpc.org an effort “to save the life or limb” or to save a vessel provided that the person took reasonable precautions. Id. at § 23. Other misdemeanors defined in the Cable Act include certain navigational errors, id. at §§ 24, 25; failure to present official papers on demand to officers of ships, id. at § 27; and installation or operation of a submarine cable without a license. Id. § at 34, 37.

The Cable Act also states that “penalties provided in this Act for the breaking or injury of a submarine cable shall not be a bar to a suit for damages on account of such breaking or injury.” Id. at § 28.

There are about two dozen reported judicial decisions involving damage to submarine cables.

Half of the decisions are more than fifty years old.

There appear to be only two published cases for civil damages that discuss the Cable Act in some detail; no published case involves claims pursuant to the criminal provisions of the Cable Act.

Conclusion Cable owners and commercial fishermen are on an equal footing under international law. Although the law establishes some of the rights and responsibilities, cable owners and commercial fishermen are in most respects left to address and resolve their shared rights to use the resource. © 2003 Steven J. Shamburek All Rights Reserved 26

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Gigantic Leap in International Network Capacity for Australian Researchers The Souther n Cross Trans-Pacific Optical Research Testbed ( SX TransPORT ) will fundamentally change the way that Australian scientists and researchers participate in global research initiatives and will vastly expand the horizons for delivering immersive educational programs and content.

SX TransPORT will provide dual 10 gigabit per second capacity circuits, sponsored by Southern Cross, connecting Australia’s Academic and Research Network (AARNet) to the advanced Research and Educations Networks in North America, as part of a bundle of services, for approved non-commercial scientific, research and educational use.

Schematic diagrams of the new infrastructure and interconnections to other global research and education networks are shown at: www.aarnet.edu.au/news/pacific10gbs.jpg and www.aarnet.edu.au/news/international.jpg. The initiative results from a partnership between Southern Cross and AARNet to catalyse new, effective ways for Australia’s research community

to participate in and contribute to global escience programs.

The Minister for Education, Science and Training, the Hon Dr Brendan Nelson MP approved funding of $16.4 million as a contribution by the

Australian Government towards the total cost of the project of $44.8 million, see: http://www.dest.gov.au/ ministers/nelson/N_media.asp?y=2003&m=12.

The initiative will reduce the cost of use of very high bandwidth for Australian researchers, effectively

28

removing the economic barriers to Australia’s participation in the global research economy.

AARNet’s Director of International Developments, George McLaughlin said the launch of SX TransPORT would enable Australia to participate in global e-science projects which required huge amounts of capacity and which had previously not been economically feasible. “The way that collaborative scientific research is conducted progressively changed with the evolution of the Internet. It has changed more fundamentally with the development of grid computing, specialised remote instruments, virtual collaborative environments, and vast globally distributed, constantly updated datastores. Many research projects are now entirely reliant on using this ‘global cyberinfrastructure’. High capacity research networks are what makes it all work,” Mr McLaughlin said.

State of the art research equipment is now so expensive to build, or is dependent on special environmental conditions that restrict the locations where they can be sited, that in many cases there will only be a few such instruments in the world. Gaining access to and operating such facilities, as well as accessing and analysing the huge amounts of data generated requires very high capacity global networks put in place for these purposes.

SX TransPORT will have a big impact on astronomy, an area where Australia is a global leader.

Australia is likely to host major internationally funded next generation radiotelescopes, SKA (Square Kilometre Array) and LOFAR (Low Frequency Array).

These telescopes will be able to peer back into the earliest days of the universe, and answer fundamental

questions about how the first stars and galaxies came into being.

But the scientific and technological benefits from hosting these telescopes, plus the millions of dollars of international investment in them, will only come to Australia if overseas researchers can access these telescopes at gigabit speeds. “This new capacity means that researchers anywhere in the world could access these telescopes in Australia just as if they were in their own backyard”, said Professor Ray Norris of CSIRO’s Australia Telescope. “It makes Australia a much more attractive place to locate a major international facility”.

There are many other examples of the benefits this infrastructure will bring, such as Australian applicants for a music degree at (say) Indiana University being able to audition remotely at extremely high fidelity from an Australian capital city; Australian participation in state of the art multi-centre global developments in weather and earthquake predication, and in sensing and anticipating consequences of changes in the world’s oceans.

Access to the SX TransPORT facility will be managed by AARNet, which is also providing many of the terrestrial networks and terminating equipment components. The involvement at the US end is being

An independent boutique survey company with a 30- year track recor d pr oviding innovative Survey ecord providing Solutions to the submarine telecoms community worldwide Over 100,000 kilometers of submarine cable route surveyed since 1997

Contact us EMEA Tel +44 (0) 1420 489 329 Fax +44 (0) 1420 489 434 E-mail info@egssurvey.co.uk Asia Pacific Tel: +852 2894 8622 Fax: +852 2576 3590 E-mail : egsasia@egssurvey.com .egssurvey .com Visit our website: www www.egssurvey .egssurvey.com

Services include: z z z z z

Feasibility studies Cable Route Studies Cable Route Surveys Burial Assessment Surveys Shore-end/installation Support

29

coordinated by the University of Hawaii, which has a special relationship with AARNet spanning several years including a direct connection via the Southern Cross Cable Network since 2001.

David Lassner, Chief Information Officer at the University of Hawaii, noted that “since none of the advanced US national networking initiatives actually reach Hawaii, our obstacles to participation in the emerging Cyberinfrastructure for modern research are actually more like those faced in Australia than the 48 US mainland States.” Among the key scientific resources in Hawaii to be made available to the global research community via SX TransPORT are the world’s premier astronomical observatories on Mauna Kea. One of the SX TransPORT 10Gbps circuits will connect through Hawaii and terminate in the US at Hillsboro in Oregon. Arrangements are being made to interconnect with the new Pacific Lambda Rail initiative to transit to the Pacific Wave advanced exchange point in Seattle where SX TransPORT will interconnect with Internet2’s Abilene, with National Lambda Rail and CANARIE’s CANet4 (both of which use switched optical lightpaths), as well as other international research and education networks.

The second 10Gbps circuit will terminate at San Luis Obispo in California and arrangements are being made to transit from there to the Los Angeles advanced exchange point where again interconnections will be made to Abilene, National Lambda Rail, TransPAC and other national and international research and education networks.

“SX TransPORT will create an immense opportunity for Australian researchers and its

impact could have far reaching implications for Australia’s future both socially and economically,” Southern Cross Director Asia Pacific Ross Pfeffer said. “This is a fundamental development in ensuring that Australia fully participates in global scientific and academic research and Southern Cross, in partnership with AARNet and with the support of the Australian Government, is pleased to be able to make its contribution available to the research community of Australia.”

“SX Transport offers unprecedented capacity that will be solely and exclusively available for not for profit use in accordance with an Acceptable Use policy that has been agreed by AARNet and Southern Cross,” Mr Pfeffer said.

AARNet’s rights to use the capacity Southern Cross sponsorship agreement will commence within six months of the start date on 31 December 2003 and will last for an initial period of five years.

Approved organisations will enter into agreements with AARNet to use SX TransPORT under the direction of an Advisory Board. The Board will have

representation from Southern Cross, AARNet, Internet2, the Australian Research Council and another authorised institution still to be agreed.

“The SX TransPORT project is an example of a truly exciting initiative in which all partners have worked together collaboratively to bring about a great achievement for Australia,” Mr Pfeffer said.

About Southern Cross Cable Network SCCN provides the fastest,most secure international bandwidth from Australia, New Zealand and Hawaii to the USA. Southern Cross has the huge capacity bandwidth increase required for widespread adoption of broadband Internet connections in its markets.

Originally designed to deliver 120 G/bits per second of fully protected capacity, Southern Cross has now been upgraded to 240 G/bits of lit capacity and the network has the potential to increase to 480 G/bits when capacity demand growth requires.

With offices in Bermuda, Sydney, Auckland and Wellington, Southern Cross has potential to

For further information, please contact: Sarah Berry Communications Manager Southern Cross Cable Network

George McLaughlin Director, International Developments AARNet

Phone: +64 4 496 3268

Phone: +61 2 6222 3531

Mobile: +64 21 412 133

Mobile: +61 411 256 370

Email: sarah.berry@sccn.co.nz

Email: george.mcLaughlin@aarnet.edu.au

30

provide for Australasia’s growing bandwidth requirements and is fuelling the broadband revolution!

SCCN is owned by Telecom New Zealand (50%), SingTel Optus (40%) and MCI (10%).

About AARNet (www.aarnet.edu.au) AARNet Pty Ltd (APL) operates Australia’s Academic and Research and Network (AARNet). APL is a notfor-profit company whose shareholders are 37 Australian universities and the CSIRO. APL provides high-capacity Internet services for the tertiary education and research sector communities and their research partners. AARNet serves over 800,000 end users who access the network through local area networks at member institutions.

AARNet is recognised as Australia’s National Research and Education Network and is represented on the International Committee of the Board of Internet2, the Coordinating Committee for Intercontinental Research Networking, the International Task Force on Advanced Networks, and the Asia Pacific Advanced Network Backbone Committee. It is engaged with the European Commission on research networking and support for e-science.

APL is working closely with the Australian Department of Education, Science and Training (DEST – www.dest.gov.au) to facilitate deployment of the Commonwealth Government’s Australian Research and Education Network (AREN) initiative www.dest.gov.au/highered/research/aren.htm.

From business case to operation

From satellite networks to submarine

From Alaska to Bahrain to New Zealand

Not everyone has our depth of experience or breadth of capability but now everyone can profit from it

Realise your business vision with Cable & Wireless www.cw.com/uk/nss

31

IN FOR THE LONG HAUL!

(We also do short and medium haul systems)

Online e-commerce

MARKET PLACE

The resource for industry reports, newsletters and cool stuff!

MARK ETPLA CE ADDIT IONS WANT ED

The name Caldwell has been synonymous with submarine cable installation and repair for over 40 years. The Caldwell Group is a marine construction group specializing in submarine cable operations worldwide. z Pre-Laid Shore Ends z Route Clearance z Pre-Lay Grapnel Runs z Repeaterless Systems z Cable Clearance

z Cable Burial to 10m Depth of Cover z Cable repairs z Diving/Vessel Services z HDD Operations

Industry data from:

1433 Hooper Avenue, Toms River, NJ 08753, USA 732-557-6100 (Tel) 732-341-3078 (Fax) bwall@caldwellmarine.com www.caldwellmarine.com

www.subtelforum.com/catalog/ 32

A global guide to the latest known locations of the world’s cableships, as at January 2004 Vessel Name

Built

Parent Company

GT

Speed

SAILING DETAILS (or last known location) Sailed Date Port Country

Arcos

2002

BOHLEN & DOYEN

3790

0

11/12/03

Singapore

Republic of Singapore

Asean Explorer

2002

SINGAPORE TELECOMMUNICATIONS

14988

14.5

27/10/03

Kochi(IND)

India

Asean Restorer

1994

SINGAPORE TELECOMMUNICATIONS

11156

16

12/12/03

Singapore

Republic of Singapore

Bourbon Reel

1976

BOURBON OFFSHORE

3186

11

10/11/03

Coatzacoalcos

Mexico

C.S.Sovereign

1991

BRITISH TELECOMMUNICATIONS

11242

13.5

25/11/03

Gibraltar

Gibraltar

C.S.Wave Mercury

1982

GLOBAL MARINE SYSTEMS

10105

16

13/12/03

Kobe

Japan

Cable Innovator

1995

GLOBAL MARINE SYSTEMS

14277

11

17/10/03

St. John’s(CAN)

Canada

Cable Retriever

1997

SINGAPORE TELECOMMUNICATIONS

11026

16

18/12/03

Keelung

Taiwan

Discovery

1990

FRIARY OCEAN

8248

12

09/12/03

Las Palmas

Canary Islands

Eclipse

1980

CAL DIVE INTERNATIONAL

7114

13

18/12/03

Jebel Ali

United Arab Emirates

Elektron

1969

STATNETT ENTREPENOR

1628

0

15/12/03

Kristiansand

Norway

Fjordkabel

1985

NOT APPLICABLE

331

0

20/11/03

Bergen

Norway

Giulio Verne

1983

V. SHIPS GROUP

10617

10

29/11/03

Vancouver(CAN)

Canada

Heimdal

1983

ALCATEL SUBMARINE NETWORKS

10471

16

21/12/03

Keelung

Taiwan

Ile de Batz

2001

NOT APPLICABLE

13973

15.4

20/12/03

Singapore

Republic of Singapore 33

Vessel Name

Built

Parent Company

GT

Speed

SAILING DETAILS (or last known location) Sailed Date Port Country

Ile de Brehat

2002

LOUIS DREYFUS ARMATEURS

13978

15.4

30/12/03

Brest

France

KDD Ocean Link

1992

KOKUSAI CABLE

9510

15

21/12/03

Yokohama

Japan

KDD Pacific Link

1993

TOKYO LEASE

7960

13

27/12/03

Kobe

Japan

Maersk Defender

1996

MOLLER A.P.

5746

16

18/12/03

Dover Strait

United Kingdom

Maersk Responder

2000

MOLLER A.P.

6292

14

06/12/03

Cristobal

Panama

Midnight Wrangler

1983

NOT APPLICABLE

5623

11

26/10/03

Lake Charles

United States of America

Miss Clementine

1996

BROOKLYN SHIPPING

3637

9

31/12/03

Singapore

Republic of Singapore

Newton

1976

UNITED KINGDOM (GOVT.)

2779

15

30/11/03

Bienville

United States of America

Nordkabel

1969

NOT APPLICABLE

395

10

14/11/03

Oslo

Norway

Normand Cutter

2001

SOLSTAD SHIPPING

12291

15

30/11/03

Dover Strait

United Kingdom

PLDT

1984

JAPAN (GOVT.)

1706

13.5

08/11/03

Batangas

Philippines

Provider I

1978

MARINE SURVEY

10493

14

16/12/03

Penang

Malaysia

Subaru

1999

NOT APPLICABLE

9557

13.2

23/11/03

Yokohama

Japan

Teliri

1996

ITALMARE

8345

14.5

10/11/03

Augusta

Italy

Teneo

1992

TRANSOCEANIC CABLE SHIP

3051

14.5

27/10/03

Kalamata

Greece

Tyco Durable

2002

NOT APPLICABLE

12130

13.9

01/11/03

Victoria(BC)

Canada

TUmm Al Anber

1972

EMIRATES TELECOMMUNICATIONS

7750

18

10/10/03

Dubai

United Arab Emirates

Wartena

1958

NOT APPLICABLE

407

9.5

27/11/03

Liepaja

Republic of Latvia

Wave Venture

1982

GLOBAL MARINE SYSTEMS

10076

16

24/12/03

Kaohsiung

Taiwan

34

35

Letter to a friend

from Jean Devos

Designed with full redundancy! No reason to be proud!!

I accuse!

Everyone who has been involved in the TAT14 story knows the reasons of such mess: Poor design of the project, poor management of the procurement process, an overcommitted supplier! I see the same pattern back again.

I accuse the purchasers when they request “the impossible” from the suppliers. I accuse the purchasers when they failed to do their own work, their own analysis of each supplier capability, strengths and weaknesses, then being unable to evaluate properly the offers. I accuse the purchasers who refused consortium offers that were designed to better satisfy their needs, suspecting them of all kinds of dark intention.

TAT 14 story – Never again please!

If not, our business will meet huge difficulties!

“J’accuse”

Our submarine cable activity does not forgive easily. It requires quality, professionalism, reliability; all this relies on people, on competent people, on dedicated and committed people.

You may remember this famous article published in Paris in 1898, in the middle of the Dreyfus story, written by Emile Zola, entitled, “J’accuse”. In certain occasions, somebody needs to stand up and shout, “Stop please”. So, I am saying so today: “Stop this story – TAT14 – never again, please.”

The TAT 14 loop suffered recently from an almost full shutdown, with failures occurring in the same time in both cables! And this is only the last event on an already long list of problems, including repeaters failure! This is the sad reality of a carrier’s cable, on the historical transatlantic highway!

I accuse the suppliers when they lie on their capabilities, when they offer what they cannot do, when they accept unfair terms and condition. I accuse suppliers when their priority is clearly at killing their competitor instead of serving properly their customers.

My dear friend, I urge our community to work at establishing clear “rules of the game”. If not, we will see the law of the jungle again from which everybody will suffer.

Cooperation is much needed at this moment!

Jean Devos Sport, not war… please!

36

Diary

FORTHCOMING CONFERENCES AND EXHIBITIONS

11-14 January 2004

Pacific Telecom Conference 2004, Honolulu, Hawaii USA. www.ptc.org/ptc2004

17-19 February 2004

Underwater Intervention 2004, NewOrleans, Louisana, USA. www.underwaterintervention.com

16-19 March 2004

Oceanology International 2004, London, UK, www.oceanologyinternational.com/

28 March - 1 April 2004 SubOptic 2004, Principality of Monaco, www.suboptic.biz 6-9 April 2004

International Cable Protection Committee Plenary, Southern France, www.iscpc.org

3-6 May 2004

Offshore Technology Conference 2004, Houston, Texas USA, www.otcnet.org/2004/

15-18 June 2004

CommunicAsia 2004, Singapore, www.communicasia.com

24-27 August 2004

Offshore Northern Seas 2004, Stavanger, Norway, www.ons.no/

14-16 September 2004

Offshore Communications 2004, Houston, Texas USA, www.offshorecoms.com

21-23 September 2004

Submarine Networks World 2004, Singapore, www.carriersworld.com

10-15 October 2004

SEG International Exposition & 74th Annual Meeting, Denver, Colorado USA, www.seg.org/meetings/calendar/

2-4 November 2004

Hydro4, Galway, Ireland, www.hydrographicsociety.org

9-12 November 2004

Oceans 2004 MTS/IEEE, Kobe, Japan, www.oceans-technoocean2004.com

37