FORUM
SubmarineTelecoms
An international forum for the expression of ideas and opinions pertaining to the submarine telecoms industry 1
Issue 13 March 2004
Contents Issue 13 March 2004
Advertisers
Editors Exordium
3
AZEA
41
NewsNow
4
BJ Marketing Communications
34
Emails to the Editor
7
CTC
35
Global Submarine Cable Map
8
Caldwell Marine International
43
Suboptic 2000 Alan Robinson
9
EGS
19
Executive Forum David R Coughlan
12
FLAG
25
Back to the Future — The rise of the regional systems market Tom Soja
Fugro
10
16 Global Marine
Unlocking the Broadband Opportunity — Middle East, India and Asia lead the way in industry recovery Andrew Evans
21
Convergence of Terrestrial and Undersea Networks Adam Hotchkiss and Richard Romagnino
26
4,5,6
Great Eastern Group
14
Lloyd’s Register
20
Nexans
36
Nortel Networks
31
Alchemy Restored Basil Demeroutis, Ian Fletcher and Steve Wells
32
OFS
48
Upgrades - The Viable Alternative? Mike Hynes
37
Parkburn PHS
24
A Passage to India Geoffrey Thornton
42
STF Global Map
8
Corporate Profile - Global Marine
44
STF Reprints
7
Letter to a Friend Jean Devos
49
SubOptic 2004
11
Tracking the Cableships
50
Tyco Telecommunications
15
Diary
52
WFN Strategies
47
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. 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. 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. 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
Exordium
A funny thing happened on the way to Monaco… What I believed was a noticeable improvement in the market was almost quashed recently. I thought that PTC in January would be an appetizer for things to come, where, like a wine tasting, I would have a chance to test a variety of viniferous treats, both good and not so good. I must admit, however, that from the sounds of the discussion at the submarine cable session, I was ready to slash my wrists right then and there, or worse yet, drink my way into oblivion at the Mai Tai Bar. Luckily, sanity prevailed, and I did neither, and a quiet polling of others showed that things might not be quite as bad as I had been led to believe. What I learned was that interesting projects exist today where none existed six months ago. But also to be fair, good, competent companies are still reeling from the turbulence. Obviously things are not as great as in the past, and plenty of pain exists for many. What is also interesting is that lots of folks are also rather busy doing some very fascinating things as well. So, I guess the proverbial wine glass is both half full and half empty. And I look especially forward to drinking some excellent French Red from the former this month in Monaco. See you at SubOptic.
General Advertising Tel: +[1] 703 444 2527 Email: Advertising@SubTelForum.com
Wayne Nielsen
Designed and produced by Ted Breeze BJ Marketing Communications, Colchester, UK..
3
A synopsis of current news items from NewsNow, the weekly news feed available on the Submarine Telecoms Forum website.
AJC Exec Talks about Submarine Cable Network Availability
C&W Expands in China through Deal with China Netcom
The availability of submarine cable networks is now emerging as a major issue for telecommunications carriers, according to Australia Japan Cable (AJC).
Cable & Wireless has announced a cooperative relationship with China Netcom International that will expand its global data network services throughout Mainland China.
www.subtelforum.com/NewsNow/ 1_february_2004.htm
www.subtelforum.com/NewsNow/ 18_january_2004.htm
Asia Netcom Sells China-Japan DS-3 to Sharp
C&W to Use SAT-3 to Serve Shell in Africa
Asia Netcom has recently announced an agreement with Sharp to provide network connectivity between Sharp’s main LCD factories in Japan, including the Kameyama Factory in Mie Prefecture, and its facilities in the People’s Republic of China.
Cable & Wireless (C&W) has announced that it is providing a fully managed fixed-line communications service for three Shell companies in West Africa: Shell Petroleum Development Company of Nigeria, Shell Pectin Cameroon and Shell Gabon, using the SAT-3 cable system.
www.subtelforum.com/NewsNow/ 7_march_2004.htm
www.subtelforum.com/NewsNow/ 29_february_2004.htm
4
C2C Restructures Credit Facility C2C Pte Ltd has announced that, together with its lenders and majority shareholder Singapore Telecommunications Limited (SingTel), it has reached agreement in-principle on the main commercial terms and conditions of a consensual restructuring of C2C’s US$650 million senior secured credit facility. www.subtelforum.com/NewsNow/ 18_january_2004.htm
Carriers Announce International VPLS First Hutchison Global Communications Limited (HGC) and KT Corporation (KT) have announced the joint establishment of the world’s first inter-Autonomous System (AS) International Ethernet network. www.subtelforum.com/NewsNow/ 7_march_2004.htm
FLAG, Reliance Complete Amalgamation FLAG Telecom has amalgamated with Reliance Gateway. At the shareholders meeting today, votes were unanimously in favor of the proposal. www.subtelforum.com/NewsNow/ 18_january_2004.htm
Diavaz-Oceanteam Announces Two New Joint Venture Operating Companies Diavaz-Oceanteam is pleased to announce formation of two new joint venture operating companies DSC-Oceanteam BV and GeoLab-Oceanteam BV. www.subtelforum.com/NewsNow/ 22_february_2004.htm
Equant Announces New Strategy Equant has unveiled its strategy to meet the new comms needs of multinational corporations (MNCs). www.subtelforum.com/NewsNow/ 11_january_2004.htm
Farice Owner Reaches Positive Cash Flow
Global Crossing Adds Earth Station
THUS Group, the UK-based carrier announced that the company turned free cash flow positive in the third quarter of the financial year.
Global Crossing has completed the roll out of a worldwide network for the UK Foreign and Commonwealth Office (FCO). www.subtelforum.com/NewsNow/ 7_march_2004.htm
www.subtelforum.com/NewsNow/ 1_february_2004.htm
FARICE Cable Officially Taken into Service Iceland mark a turning point in Icelandic telecoms with theopening of the FARICE submarine cable, linking Iceland and Scotland via the Faroes. www.subtelforum.com/NewsNow/ 22_february_2004.htm
Global Crossing Sells DS-3s to Canadian Carrier Global Crossing is providing Navigata Communications, a Canadian telecoms provider, with four high-speed voice service connections (DS-3s). www.subtelforum.com/NewsNow/ 11_january_2004.htm
FLAG Announces FALCON Cable
Global Crossing Studies Sale of Global Marine
Global Marine has been awarded a maintenance contract for the newly installed FARICE-1 system.
FLAG Telecom has announced FALCON, a new system providing multiple landings throughout the Gulf region, with links to Egypt and to Hong Kong.
www.subtelforum.com/NewsNow/ 22_february_2004.htm
www.subtelforum.com/NewsNow/ 22_february_2004.htm
Global Crossing recently hired Citigroup to advise on alternatives for its undersea cable installation business, which may include a sale. www.subtelforum.com/NewsNow/ 29_february_2004.htm
FARICE Contract Awarded to Global Marine
5
Pirelli Buys Back Cisco Shares Pirelli has paid $75 million to buy back a 10% stake in a submarine cables firm from Cisco Systems. www.subtelforum.com/NewsNow/ 18_january_2004.htm
Intelsat Restores Internet in Turkey Following Fault
KT Chooses Tyco to Provide Connectivity Between Korea and U.S. West Coast
Intelsat has recently provided details of an event that demonstrates the company’s ability to provide disaster recovery services. Following a recent fault in a submarine cable, Intelsat was able to restore Internet services to all of Turkey within 38 hours.
Tyco Telecommunications announced a multi-million dollar contract for diverse 10Gb/s Wavelengths with KT Corporation, Korea’s largest telecom operator. Under the terms of the Indefeasible Right of Use contract, Tyco will provide connectivity to carry large volumes of voice, data and Internet traffic between Korea and the U.S. West Coast.
www.subtelforum.com/NewsNow/ 25_january_2004.htm
www.subtelforum.com/NewsNow/ 11_january_2004.htm
International Telecom Signs Cable Installation Contract with Allstream
Pacific Crossing sues Pivotal
International Telecom Inc. has signed an agreement to install a high capacity marine fiber cable connecting Halifax to Dartmouth in Nova Scotia, Canada for Allstream.
Pacific Crossing Ltd. has sued Pivotal Private Equity, the company that had agreed to buy Pacific Crossing’s transpacific cable network. Pacific Crossing is filing suit to terminate the deal.
www.subtelforum.com/NewsNow/ 8_february_2004.htm
www.subtelforum.com/NewsNow/ 25_january_2004.htm
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PTCL, Etisalat Plan Cable Pakistan Telecommunications Company Ltd. and Etisalat have issued a memorandum of understanding for a system linking Pakistan and the UAE. www.subtelforum.com/NewsNow/ 29_february_2004.htm
SingTel Extends IP Backbone to Bangladesh Singapore Telecommunications Limited has introduced its broadband IP backbone to ISPs, broadcasters and companies in Bangladesh. www.subtelforum.com/NewsNow/ 29_february_2004.htm
SMITCOMS Contracts The David Ross Group St. Maarten International Telecommunications Services Inc. announced a contract with The David Ross Group to provide services for construction of the St. Maarten-Puerto Rico One system. www.subtelforum.com/NewsNow/ 29_february_2004.htm
South Africa Telkom Touts Submarine Cables in Bid for $1B Telescope
REPRINTS
Telkom has the infrastructure and expertise in radio technology to elevate Southern Africa as the most advanced region for multi-wavelength astronomy in the world, according to their Chief Technical Officer. www.subtelforum.com/NewsNow/ 25_january_2004.htm
Telecommunications to Niue Restored
The following prices are for digital reprints of editorial pages from Submarine Telecoms Forum magazine, without alteration. Page size is 8-1/4" x 11-3/4" on 28lb paper stock. Shipping cost is in addition to reprint price.
The main telecommunications link with the Pacific island of Niue has been restored after the satellite station there was destroyed by a cyclone. www.subtelforum.com/NewsNow/ 25_january_2004.htm
Telenor Announces Completion of Svalbard Cable On Saturday, January 31, Norway’s Minister for Trade and Industry, Mr. Ansgar Gabrielsen, conducted the official opening of the fiber optic cable that connects Svalbard to the rest of the digital world. www.subtelforum.com/NewsNow/ 8_february_2004.htm
I enjoy the publication. Keep up the good work. Martin J. Grasso, Jr. GROW Associates ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
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Emails to the Editor
There isn’t an issue that goes by that I don’t find several very interesting articles, and I always learn something new. Thank you so much for this valuable industry newsletter. Elaine Stafford The David Ross Group, Inc.
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8
I am writing this article just a few weeks before the start of Suboptic 2004. As you can imagine, the Executive Committee took many hours of debate to conclude that we should go ahead with the Convention as planned, and not lose our nerve in the face of the industry critics who forecast an empty convention centre with lacklustre papers and presentations. Once the decision was taken last year to “go for it”, we have all been holding our nerve, watching the customer reaction with a heightened awareness of the take-up of registrations, sponsorship and, of course, paper submissions. All the signs are now leading towards a vibrant and successful convention in Monaco. As I write, registrations have followed the early positive signs of substantial paper submissions and have surprised us all. Currently, with three weeks to go, registrations are totalling well over 400 from well over 100 organisations and are coming in at an increasing rate. Our recent appeal that this event is a “must attend” for the submarine community seems to have found the spot and now we, in the Executive Committee, must support Alcatel, the hosts, in every possible way to ensure that you, the participants, are able to take as much intellectual, social and business benefit from the Convention. So, for those who have already registered, thank you for your support. For those who are still weighing
SUBOPTIC
2004 By Alan Robinson
up the merits of attending, I will do my best in this article to persuade you. But please remember that this is not an ordinary Convention - it is “by” the industry and “for” the industry, and relies upon you and your participation for its ongoing strength. It only happens every three 9
years. Who knows what erudite paper or presentation will spark the gem of an idea to create a better future in our depressed state? Change breeds opportunities, and we all need more of those! Unsung heroes of every Suboptic are the Programme Committee. Chaired and quietly led by Jose Chesnoy, they have condensed an enormous demand for oral slots into 140 papers, 60 of them for 12 oral sessions, and 80 to be presented as part of the centrepiece of the convention, the Poster Session. For those doubters and critics of this session, please let me explain that Suboptic 2004 is breaking new ground with a revised format for the Posters. The Grimaldi Forum has an abundance of space, and this allows us to run a single dedicated session covering all topic areas with you, the audience, moving between the topic areas according to your needs. It enables the programme to be broadened and the audience to be mobile. This centrepiece will run from 1530 on Wednesday in the Diaghilev Area, and drinks will be served during the session. The aim is to create a less formal atmosphere than the oral sessions, allowing both the presenters and the audience to mingle and interact. This activity breaks new ground in terms of breadth of content and range of subjects, and I encourage everybody to help it become a permanent part of future Suboptic programmes.
No more poster sessions tucked away in corners and dead end alleys! Of course, the remainder of the programme follows the traditional style of Suboptic, including a comprehensive range of tutorials given by invited speakers, two different round table sessions addressing topical issues within the industry, and a range of oral papers dealing with all manner of commercial, technical, environmental and operational issues. All this content, preceded and followed by the opening and closing Plenary sessions with key note speakers from the investment, operating, manufacturing and marine contracting communities. And, of course, Jean Devos has been invited to take a critical and challenging view of the industry from the comfort of his pensioner’s chair in Provence! All in all, I hope, a well balanced three and a half days with enough varied content to suit all tastes.......... And, if not, there are always the social events in the evening, with a chance to share a drink and compare notes on the latest industry gossip. So, for you doubters, get on line to http:// www.suboptic.biz and register. If you have any problems, please call Didier Provost on 33 (0)1 64 49 14 08 or e-mail didier.provost@alcatel.fr. Alternatively, just book your flight to Monaco and register on site. The final programme is on the website together with conference facilities, exhibitors, hotel availability, transport information etc. Suboptic has grown and grown into a formidable organisation for the sole benefit of the submarine cable industry. This year we will not see
growth in the numbers attending the convention, but we will see growth in subject matter and quality of presentations. This has occurred because of two distinct reasons. Firstly, you, the authors and presenters of papers, have done a fantastic job in giving us, the organisers, the best ever content we have ever had. And, secondly, the Programme Committee under Jose has blended this into a well-balanced commercial and technical agenda. Well done and thank you everybody!
10
So, we look forward to seeing you all in Monaco on 29th March. My thanks go to Wayne Nielsen for giving Suboptic the space and support in his magazine, SubtelForum, to Jose and his team for a great programme, to the EC for “hanging on in there” when others would have cancelled, and to John Horne, our Secretary, for keeping us all sane! And, finally, to Didier and Alcatel who have remained totally positive and dedicated as our hosts. So, bonne chance, Suboptic 2004!
11
Q EXECUTIVE A
David R. Coughlan President - Tyco Telecommunications David Coughlan is the President of Tyco Telecommunications, the world’s leading fully-integrated supplier of undersea fiber optic cable networks and a global provider of network services on the Tyco Global Network (TGN). Mr. Coughlan was appointed to this position in July 2002, where he facilitated the integration of Tyco Telecommunications with Tyco Electronics. Prior to his current role, Mr. Coughlan held the position of Senior Vice President of Business Development at Tyco Electronics, a division within Tyco International Ltd. Prior to joining Tyco Electronics, Mr. Coughlan served as Director of Business Development for Tyco International Ltd. He was responsible for coordinating Merger and Acquisition activity between the Corporate group and various divisions. Mr. Coughlan has been awarded a Master of Business Administration from the Whittemore School of Business and Economics, as well as a Bachelor of Science from Lehigh University.
How would you rate the current health of the industry?
The last two years have been very tough for all of us in the telecommunications industry. I personally am thankful that Tyco Telecommunications, with our three lines of businesses, has been able to weather the recent market conditions. Recent indications are that the telecommunications market, including undersea telecom, is recovering at a prudent pace. The system supply market, in fact, saw $250 million of new repeatered business booked in 2003. The marine maintenance sector has been extremely competitive, but there is a definite shift back towards a collective regional maintenance approach by most cable owners, and that should help stabilize the situation. And, finally, increased demand for capacity services and price stability have returned to the carrier market. The Tyco Global Network has grown its client base from 10 customers to over 100 customers over the past 18 months! So there are good reasons to be optimistic for everyone in the industry.
Q A
Where do you see new market opportunities in the future?
Filling in the regional gaps that still remain after the construction boom that ended in 2001. The Middle East presents some obvious near-term opportunities. The coasts of Africa are expressing needs. Many island nations are still lacking sufficient connectivity to promote domestic economic growth. On the major transoceanic routes there is sufficient capacity, but it is dispersed inefficiently and could 12
benefit from consolidation. We see opportunities to help re-engineer those networks into linked structures, which will bring cost benefits to the entire carrier industry.
Q
What is the longer-term outlook for marine maintenance providers such as Tyco Telecommunications?
A
We recognized several years ago that the trend was moving back toward consortium maintenance structures, and Tyco Telecommunications is now actively participating in several zone agreements. Of the four ships recently contracted in the ACMA 2004 Agreement, Tyco Telecommunications was successful in securing two of those assignments. In addition to maintenance activities, our fleet also provides turnkey marine installation services and a la carte services to meet our customers’ needs (see Figure 1). We have continued our costcutting efforts and now have one of the most cost efficient, flexible fleets in the industry. By controlling our costs and working cooperatively to maintain the global infrastructure, I think the market can sustain a few global maintenance providers and several regionally-focused maintenance providers.
Q A
How are new installation projects being managed differently than in years past?
In the past, customers focused on maximizing network capacity – the more traffic the network carried, the more valuable the network. Today, because of the financial constraints on network operators, there has been a shift in focus from
where we’ve made revolutionary steps in integrating our equipment with an OSS and are continuing to refine and simplify network operation.
Q
Industry consolidation is a big topic of conversation these days. What is your view on consolidation in the network operator and supplier markets? Every analysis that I’ve seen suggests that consolidation is definitely needed in the supply market. It’s still too early to tell what form that consolidation will take, but I think the market will always want at least 3 system suppliers to choose from. Being a fully vertically-integrated supplier, I think Tyco Telecommunications is well positioned to outlast and outperform our competitors, so I’m very optimistic about our future. On the operator side, I think carriers need to be creative in their approach to consolidation. Each operator has its strengths and weaknesses, and it may not make good business sense for certain operators to continue owning cable assets. Many of the incumbent operators, who traditionally purchased systems by consortia, are under enormous competitive pressure from new market entrants, and the costs of cable ownership continue to drag down their bottom lines. This is why I think there is a role for private undersea network owners going forward, particularly those who are prepared to add terrestrial coverage and higher-level services to their portfolios. I expect that in the next few years we will see the retirement of several older systems in the Atlantic, and capacity will gradually be consolidated onto fewer systems. The situation would be further improved if systems were effectively linked to increase bandwidth efficiencies, but that’s probably further down the road.
A
maximizing capacity to creating solutions which are more focused on time-to-market or cost. We have noticed that the needs of our customers vary in terms of cost, schedule and capacity performance. We listen to our customers to make sure that we truly understand their needs and develop solutions which meet their balance of cost, performance and schedule. In some instances, as with the Svalbard system, we developed a solution based on the customer’s primary need – schedule. The fact that we had inventoried equipment and were able to utilize an aggressive marine program meant that we could take the system from concept to reality in less than twelve months. Customers have been more concerned with cost, and we’re using creative solutions to meet their needs. It’s essential in today’s market to deliver custom-tailored solutions, and at Tyco Telecommunications, we’re equipped to do just that.
Q A
In view of the general slow-down of new system deployment, what directions should R&D be taking today? The emphasis is on cost effectiveness. Five years ago the research community was continually pushing the capacity limits. In retrospect, we gained a lot of valuable knowledge from those efforts, but perhaps the greatest benefit was in our understanding of system interdependencies and leveraging these to lower system costs. For example, thanks to the millions of operating hours we now have with 980nm amp pairs, we can make cost-effective decisions regarding component redundancy while maintaining reliability expectations. Our design teams are also more conscious of the things that affect an operator’s bottom line, such as equipment footprint and heat generation. Another example is software design, 13
Q A
What is the biggest challenge facing the systems supply industry? After the dramatic events of the last few years, I think it’s time for the submarine industry to seriously assess our role in the telecom supply chain. For many years, cable system development was driven solely by national operators’ demands for voice traffic, which grew steadily and predictably, although system deployment was generally cyclical since it tended to follow technological advances. When the first private carriers began rolling out projects in the late 1990’s, there was suddenly an increase in available funding plus a monumental shift in suppliers’ technical capabilities, but there was not an accompanying increase in market analysis or due diligence to justify each project’s development. The result was an exponential increase in system construction, much like a runaway train. These days, cable system suppliers as well as developers routinely ask themselves: What is fundamentally driving this project development? Where is the bandwidth demand coming from? How might political and economic forces influence project financing and execution? In short, the deregulation of telecom markets, coupled with unprecedented technological advances, are forcing us to pay more attention to the bigger picture. Our biggest challenge, therefore, is understanding our new role as a provider of global IT infrastructure in the Internet economy while still satisfying our customers’ underlying requirements and business models. That’s a very different way of looking at things compared with the approach of 10 years ago, or even 5 years ago, and the industry will need time to adjust to the new environment. 14
Comprehensive array of planning, engineering, construction, installation and maintenance services The most advanced, flexible and cost-effective fleet in the industry Strategic global presence of ships and depots
etwork dwide. Whatever your global network needs may be - from Undersea Systems, Marine Services, Maintenance, to Network Services Tyco Telecommunications puts the power of integrated solutions to work for you.
Customized turnkey solutions anywhere in the world Unparalleled transmission and network design expertise, with cutting-edge R&D History of excellence in designing, manufacturing and installing submarine systems Commercial solutions tailored to each customer’s unique business needs
r focus. Bandwidth, Systems and Marine Services. End-to-end or integrated solutions. You choose. Learn how Tyco Telecommunications can solve any one or all of your global network needs by visiting us at www.tycotelecom.com, or meet us at Suboptic 2004 in Monaco.
Superior fiber optic technology with true global reach on the Tyco Global Network (TGN) Customized bandwidth solutions offering a variety of protection and interface options World-class 24/7/365 Customer Care Strategic Partnerships for off-net connectivity
for more info please go to www.suboptic.biz
www.tycotelecom.com sales-hq@tycotelecom.com 1.866.892.6611
15
BACK TO THE FUTURE The Rise of the Regional Systems Market The rise in prominence of the pure wholesale-level network operator / constructor came about in the late-20th century due to the confluence of a set of specific and unique circumstances in the telecom industry. The spectacular early financial success of the private carriers’ carrier network development model was simultaneously unexpected, insufficiently understood, over sold, and misapplied during the heady days of the boom in fiberoptic submarine cable construction. The opportunity for private systems was due to confluence of rising demand of unknown proportions, the lethargy of the traditional consortium systems development model, buoyancy in the capital markets and resultant fever-pitch of investment in technology sector, and the early successes in telecom infrastructure builds in capitalizing on the opportunity to finance, build and liquidate.
By Tom Soja
Clearly the lessons learned were mis-applied and over sold, leading to an overabundance of “me too” (read: non-differentiated) strategies guiding vast new infrastructure builds fueled by easy access to credit and capital markets. Although the first mover advantage was often cited as the sine qua non of future market success, second and third mover advantage is now creating arguably larger opportunities for both new-entrant consolidators and more long-time traditional style operators to pick up the pieces and evolve the telecom business into the 21st century. Consolidation and shifting strategies have left relatively few pure-play wholesalers in the marketplace. Barring the unforeseen rapid emergence of a new “killer app” or a profound shift in telecoms usage patterns, there is sufficient capacity on the densest traffic routes to satisfy any type of realistic or believable market demand forecast for the next five16
to-ten years at a minimum. The exceptions are the Europe-Asia route, which is in the process of being addressed by SEA-ME-WE-4. However, even that initiative might fade into irrelevance as sub-regional network builds usurp the opportunity to address the same market needs. The transpacific market could see at least one new system, despite a mathematical adequacy of capacity or potential capacity (including yet-to-be implemented upgrades) on an aggregate basis.
The Mathematical Imperative The early phases of the telecom boom period were driven by a need to fill rising demand which could not met by existing facilities. While this will continue to drive new cable deployments in select markets, there will also be an opportunity for strategic and economically justified over-builds in other markets.
The mathematical imperative – more submarine cables are needed because there is insufficient capacity available on existing networks to handle all foreseeable demand – will not drive that transpacific build or any other large-scale transoceanic builds. However, the mathematical imperative will still come into play in some smaller regional market builds where there really is a true scarcity of capacity and growing demand. But in markets where new cables are not strictly justified on a pure aggregate demand basis, equally important a driver will be what amount of capacity is available, on what terms, supplied by what parties, and to whom it is available.
Although the exclusionary practices work to preserve market share and dampen competition in the short run, they also possibly sew the seeds of their
Us versus Them
Difficulty of Being Pure
There yet exists in several markets an “Us versus Them” market environment where incumbent carriers seek to retain control of their markets as a group in response to the competitive threat to market share from new entrant carriers. Two prime examples of the “Us versus Them” phenomenon are SAT-3/WASC/SAFE and SEA-ME-WE4. Both networks are tightly controlled by the founding members to the exclusion of outsiders, who are actively discouraged and/or prohibited from joining the management committee or acquiring capacity on an equal basis. Highlighting the circumstances surrounding these cable systems is not intended to be a moral value judgement (i.e. not necessarily good or bad) it is merely the outcome of the golden rule – those that paid for the network make the rules of the network. Both are a throwback to consortia formed and controlled by monopolies unaccustomed to competition.
An opportunity still exists to provide independent capacity on an equal basis to all parties which is well knows as the carriers’ carrier model. But being a pure carriers’ carrier means having no built-in or natural customer base. Rather, the pure carriers’ carrier is totally dependent upon other carriers needing its services on terms that are more attractive than anywhere else available, including customers building themselves. Today, offering the “best deal” on capacity often means shorter-term deals and more pay-as-you-go arrangements – both of which increase the degree of uncertainty for the network operator in terms of future revenue streams and cash flows to service highleverage debt and ongoing overhead – i.e. increasing commercial risk to the network operator. A carriers’ carrier needs now, more than ever, to minimize operational expenses with latest technology and limit GS&A by focusing exclusively
own demise in the long run or at least limit their own success by discouraging use of telecom services through high prices and limiting participation in management of the network. New competitors, or even older competitors that have been excluded from some of these consortia and looked upon as potential customers from which to extract high tariffs and margins, will begin, and indeed have begun, to seriously consider other alternatives, including building their own facilities.
17
Mr. Soja has ten years experience as a Senior Analyst in the fiberoptics industry and as a Director of Submarine Cable Research. He has conducted feasibility and market demand studies for projects such as Atlantic Crossing. In the Pacific region, Mr. Soja completed a market study for the Hawaii-Americas and Western Hemisphere submarine cable systems. Mr. Soja holds an MBA from Babson College and a bachelor’s degree in mechanical engineering from the University of Rochester.
on definable and penetrable markets and avoid overreaching, especially into grey areas where the risk of competition with customers would cause conflict as potentially repel customers. Despite the commercial consequences of hewing to the carrier’s carrier model, Tyco Global Network and FLAG Telecom have successfully avoided such conflicts with their customers and seem to be gaining traction now with sales in the wholesale market as it begins to recover. Global Crossing (GCL), on the other hand, lost its purity as soon as it acquired Frontier Communications and plunged itself into the retail markets served by its customers. But to its credit,
GCL has continued to evolve into a world-class full services provider despite the very difficult market environment and all the while restructuring its entire business and financial footing – a task not unlike trying to re-build a 747 jetliner that is on fire while trying to land in stormy weather.
Consortia Not Dead All this is not to say that consortiums are no longer relevant – groups of carriers building shared facilities is a common practice in many industries – whether it be electric utilities sharing a power grid, oil & gas companies sharing the risks and expense of exploration and development of new reserves, or the global auto industry sharing common suppliers and even electronic data exchange systems, to name but a few. It still makes good economic sense to share facilities, especially in relatively thin-route markets where multiple builds and their associated capital expenditure (CapEx) cannot be economically justified for multiple builds. The next evolution of the consortium model will likely include more operators that are not former incumbent monopolists. These might also include a greater mix of financial players or telecom industry outsiders who bring fresh perspective to the market.
Strategy Drives the Market (at last!) Toward Regional Build Opportunities In the forward market, build decisions will not only be based strictly on supply and demand, but also on a keen awareness of potential competitive situations and consideration of strategic relationships with
Historical versus Prospective New Systems Builds Prospective Systems Based on Currently Active Projects plus TSA Estimates
Potential Annual Route km
customers and other operators, rather than strictly buying commodity capacity on a generic basis, regardless of provider. Retail network development will be more dependent upon combinations of builds in regional markets and purchases along the dense traffic routes where there is an abundance of sellers in the secondary market. The new builds will address many of the market regions either ignored or inadequately addressed in the mad rush to cash in on a share of the dense traffic routes which proved to be illusory as prices upon which the financial models were based, collapsed under the weight of supply-and-demand based erosion.
Still Room for Smart Money Despite the many lessons from the boom-and-bust cycle, several new initiatives have emerged, some of 18
which are yet blind to these lessons. The traditional approaches to venture capital sources and Wall Street or City-type investment banking are going to be blind alleys for some time to come. It is not clear whether some of these same sources ever truly understood the dynamics of the telecom infrastructure market during the boom, other than to know that the rising equities market meant a quick flip for profits through an IPO. But having now been caught out on some of these investments which could not sustain value over the long term, these traditional sources are now least likely to fuel to any significant degree the turnaround or recovery, and be least likely to recognize the early opportunities in the beginning of the recovery cycle. But for smart money, as always, there remain many opportunities both to capitalize on specific market needs with new builds and to be able to
structure deals favorably or at least to provide for informed flexibility that can adapt to market conditions in a way that matches the risk and reward. Some of these funding sources will be found in pockets outside the mainstream or from principals with fresh non-telecom industry perspective – such as Columbia Capital (acquirers of the 360atlentic / Hibernia transatlantic network as well as others, and Pivotal Telecom, courting acquisition of the PC-1 transpacific cable network as of this writing.) For thin-route markets, there remains interest from a variety of developmentally-oriented funding sources. These include sources such as the World Bank (International Finance Corporation), and in the United States, the Export Import Bank, The U.S. Trade and Development Agency, and various regional development funding sources based in Washington and similar regionally-based developments funds around the world. In several recent projects, there has been enthusiastic and substantial backing from in-region funding sources – i.e. funds coming from and eventually to be paid back into the same economies that will benefit overall from improved connectivity over high-quality fiber networks.
Late Mover Advantage It has never been less expensive nor will it ever be as inexpensive as it has been for some customers to acquire significant network assets who were able to take advantage of excess inventory situations both for capacity and for new systems builds. But the longer term will not necessarily mean a re-inflation of prices to boom-period levels.
There are at least two distinct late mover advantages for any carrier wanting to or needing to assemble or add to their network on a regional or global basis. The first is the ability to assemble assets from existing networks at distressed prices, or at least at prices that are far below those of just a few years ago. There have even a number of opportunistic transactions along these lines as carriers acquire excess capacity on the secondary market from others who either have encountered financial difficulties, or find that their capacity holdings no longer match their customers’ footprint in the market.
The second opportunity lies in markets where needs exist but excess capacity does not. Price levels for new systems builds have fallen by roughly half and are unlikely to return to previous levels as suppliers struggle for any share at all of a greatly contracted market. Granted, there have been several unprecedented price points testing extreme lows in the market at well below normal systems values. But these were more influenced by excess subsystems inventory – written-down repeaters, cable, terminal equipment and the like from cancelled contracts and speculative production during the boom.
An independent boutique survey company with a 30- year track recor d pr oviding innovative ecord providing Survey Solutions to the submarine telecoms community worldwide Over 100,000 kilometers of submarine cable route surveyed since 1997 Services include: z z z z z
Feasibility studies Cable Route Studies Cable Route Surveys Burial Assessment Surveys Shore-end/installation Support
19
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The Good News? The regional systems opportunity is substantial and represents a bright light at the end of the long tunnel of depression in the submarine systems market. TSA has identified more than thirty (> 30) projects currently being considered in the market that fall into the broad definition of regional systems – system spans of approximately 4,000 route-km, or less. These projects total about 150,000 route-km, and represent perhaps as much as $5 billion of systems business. The majority of these systems lie in the Indian Ocean, South Pacific, and South Atlantic (south of the high-density NY/NJ-Europe routes) regions and Americas ocean regions. These systems would serve primarily markets in South Asia, Africa, and island nations in the Pacific and the Caribbean. The majority of these markets have been either slower in liberalizing their telecom environments or are not otherwise adequately served by international fiber connectivity (or both.) This regional systems market is not a new phenomenon. From an historical perspective, even during the recent telecom boom period in which the large-scale transoceanic systems attracted the most attention and investment dollars, regional systems totaled nearly as much as transoceanic builds from 1998 through 2003. In some years regional systems have even outweighed transoceanic systems by as much as two-to-one. Going forward, the vast majority of these projects will most likely be financed privately either by entrepreneurial start-ups or on the balance sheets of a limited number of carriers or even by a single carrier in some cases. The traditional consortium
model would not seem to apply, except in fairly obvious cases such as SEA-MEW-WE-4. Some of these projects, before coming to market, may develop into the next evolution of the consortium model involving non-incumbent new operators and possibly in combination with outside funding sources as well. These regional systems will tie-in directly to the “big pipe” high capacity builds already in existence, creating aggregation and distribution tributaries in lesser-connected regions. Following the 60% fall-off in new systems installations in 2002 and the nearly non-existent market conditions of 2003 in which fewer than 10,000 km of new systems entered service, the prospects for the future will depend upon filling needs where they still exist. The challenge for suppliers will be to adapt their business models to a gradual recovery. A return to a robust 100,000-to-200,000-km annual cable deployment is unlikely within the next decade. Even the most optimistic evaluation of the 150,000-km or so of new projects identified will likely play out over at least several years – most falling into the time frame of at least 2005 and beyond. The dual challenge of aggressive price points to the customer to win contracts while maintaining low cost in terms of production on the supply side will determine the future structure of the supply industry. The beginnings of this new era is already evident and defined by the opportunities and the strategies that are now being implemented on significant share of the next generation of submarine cable systems. 20
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UNLOCKING THE BROADBAND OPPORTUNITY Middle East, India and Asia Lead the Way in Submarine Cable Industry Recovery
The submarine telecom cable industry is passing through one of the most difficult periods in its history since it came into existence in 1851 with the laying of the first undersea cable between Dover and Calais. It began when the industry was driven to massive investment in the 1990s to meet the expected global demand being created by the combined forces of the Internet, industry deregulation and strong capital markets. It reached crisis level during 2002 when the bursting bubble left over-leveraged companies with unwanted infrastructure, rapidly falling return and market capitalisation heading towards zero. Since then the industry has been in the process of restructuring, and while some markets remain in the doldrums, others are powering ahead. Problems of overcapacity remain on the overbuilt routes across the Atlantic and Pacific, but in regions underserved by international cable systems, demand is already outstripping supply. Leading this surge are countries in the Middle East, together with India and China, where demand for telecommunications services is forecast to explode in the coming years. It’s a demand being fuelled by increasing use of the Internet, by new broadband services and by global outsourcing of call centres and
By Andrew Evans
www.ptc2004.org Chief Technology Officer, FLAG Telecom 21
back office operations by European and US companies In India, for example, NASSCOM forecasts that bandwidth demand will grow from 7.31Gbits/s in 2003 to 92,56Gbits/s in 2009. While much of this demand will come from increased Internet usage, forecast growth in mobile and fixed services will be substantial, with the number of mobile subscribers growing from the current figure of 30 million to 70 million by 2007, and fixed subscribers growing from 50 million to nearly 70 million in the same period. The accelerating pace of market liberalisation in these regions is also serving to fuel growth in telecommunications. Market liberalisation in some countries has been slow and in a number of cases ineffective regulation of incumbent monopolies has inhibited market growth. However, as was the case in the US and Europe, where there is a strong customer demand for services coupled with the technology available to deliver them, governments are quickly sweeping such growth inhibitors aside. Such explosive growth in demand should not come as a great surprise. When the bubble burst it was not lack of demand for telecommunications services, nor the Internet that caused it. It was caused
Fixed Line Subscribers in India (millions) 80 70 60 50 40 30 20 10 0
Source: Hot Telecom Research
'99 '00 '01 '02 '03 '04 '05 '06 '07
by over-supply of infrastructure and over-investment driven by all the hype, illusion and over-optimism surrounding the industry. Traffic volumes have never stopped increasing. For example, according to ‘Telegeography’, private data networks grew by 56 per cent between 2001 and 2002, while Internet bandwidth grew 73 per cent during the same period. The entire global economy is heavily reliant on the world’s telecommunications infrastructure and international commerce would effectively cease without it. The pace of GNP growth of emerging economic nations is directly related telecommunications network and service penetration. For the submarine cable industry the problem has been one of demand-supply imbalance, but that imbalance has always been less evident in much of the Middle East and Asia. Not surprising then that it is in these regions that the first major new cable investment since the downturn was recently announced. In February this year, FLAG Telecom unveiled plans for a new cable system known as Falcon. Its terabit/s design is expected to meet regional demand in the Gulf region
today and for the foreseeable future. With links to Egypt, India and China, FALCON will be fully integrated into FLAG’s global network. Plans for the system are well advanced with a forecast initial service date of within 12 months. This is not another joust at an illusionary market. The investment is being made in a very different climate to that of the perceived boom times of the 1990s. Strong sustainable demand is already present in the market and FLAG, now clear of all debt and part of the powerful Reliance Group of India, is making this investment of several hundred million dollars without recourse to vendors or other public financing. Funding will come from cash from FLAG’s own reserves, support from FLAG’s parent company Reliance, and sales of capacity prior to FALCON entering service. Importantly, in planning this investment, detailed discussions have taken place with customers and leading global operators. Egypt and the Gulf states of Oman, Bahrain, Kuwait, Iran, Qatar and Iraq have all expressed interest in joining FALCON and
Mobile Subscribers in India (millions) 80 70 60 50 40 30 20 10 0
Source: Hot Telecom Research
'99 '00 '01 '02 '03 '04 '05 '06 '07 22
Indian IT Software and Services Exports (US$ billion)
10 9 8 7 6 5 4 3 2 1 0
Source: NASSCOM
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003E
most are in advanced discussion with FLAG about their participation. As the liberalisation of the telecommunications markets in those countries move forward and the political/economic ties with the rest of the world grow stronger, demand for international bandwidth within the Gulf region alone is forecast to grow from the current 3Gbits/s to 30 Gbits/s by 2010. At a time when parts of the industry remain in a depressed state, FALCON is expected to dramatically change the global communications infrastructure balance. FLAG has recognised for some time that the exploding market demand from major growth economies could not be served by the current level of bandwidth connectivity serving the Middle East and India. This is true, not only in terms of capacity, but also in levels of service reliability. FALCON will address both issues, bringing world-standard levels of quality and reliability to each of its landing points with service level agreements for customers of 99.997 per cent across its entire FLAG global network. Service quality is also greatly enhanced by the provision east and west routing across the network, meaning traffic can be switched at any time to avoid a cable cut or natural disaster.
The western link of the FALCON system will land at Telecom Egypt’s landing station at Suez, where the cable will integrate with FLAG’s global network. The cable will then follow a route through the Red Sea along the East African coast and across the top of the Arabian Sea before landing in Oman. FALCON will include the Gulf region’s first self-healing submarine network ring, providing all connected countries with the reliability and high-quality that comes from alternative two-way routing. Travelling from Oman along its easterly link, the cable will cross the Arabian Sea to a new Relianceowned landing station at Mumbai in India. At this
point FALCON will interconnect seamlessly to Reliance’s pan-India 80,000 km high-speed backbone network linking approx 1,100 cities and towns across the length and breadth of the country. This offers customers direct connectivity into and across one of the world’s largest growth economies from any metropolitan centre connected to FLAG’s global network. At Chennai, on the East coast of India where a second Reliance landing station is being built, FALCON will again become a submarine system, linking India to Hong Kong, where the cable will once again integrate with FLAG’s global network. FALCON
Andrew Evans joined FLAG Telecom in January 2002 as Chief Technology Officer (CTO). He will focus on the use of technology to reduce cost of service delivery. In addition, he will forge strategic alliances and partnerships. Andrew started his career at British Telecom in 1982 iprogressing to Executive Engineer. In 1990, he joined McKinsey & Company advising clients in the telecommunications, software and media industries. More recently, he has served as Head of Strategy for Netscalibur. Andrew re-joins FLAG Telecom having previously formed part of the executive team as Executive Vice President of Strategy. He holds an MA in Engineering and Electrical Sciences with First Class Honours from Cambridge, and an MBA with High Distinction (Baker Scholar) from the Harvard Business School, USA. will create the first direct, high-capacity links between many of the countries across the route of the cable, including a direct connection between the world’s two largest growth economies of India and China. FLAG is not, of course, abandoning the more challenging routes such as the Atlantic. While transAtlantic capacity, per see, remains heavily overprovisioned, the route is crucial element in providing
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F o re ca st D e m a n d fo r In te rn a tio n a l C a p a city fro m 'F A L C O N ' G u l f C o u n tri e s (O m a n , Qa t a r , Ba h r a in , Ku w ait, Ir an )
(Gb p s ) 3 5 30 25 20 15 10 5 0 2003
2 00 4
2005
2006
20 0 7 2008 2 0 09 2010 So u r ce : Ov u m Re s e ar c h
customers with global connectivity in and out of the US, particularly to and from the growing economies of the Middle East and Asia. FALCON is a welcome sign of recovery for the industry. But can recovery be sustained into the future? It is clear that further consolidation is needed and that cost/pricing structures need to be realigned. Many industries have suffered catastrophic collapses as a result of over-investment, over-commitment and over-expansion. In every case, a smaller number of highly enduring companies emerged from the chaos to lead the industry into a new phase of profitability. There is no reason to believe that the submarine cable industry will be any different. The winners from this realignment will be those able to deliver near-term financial stability with a clear and sustainable long-term strategic focus. At the heart of any long-term strategy must be efficient operational cost management. This will depend on being able to deliver what customers want at the right price points, understanding and anticipating the price curve, and establishing market leadership either through scale of a position in a defensible niche.
Becoming a winner in the global wholesale services space will require the successful integration of a number of key elements. Financial discipline will be absolutely critical - driving optimisation of operational support costs and network efficiency, as well as a focus on customer profitability. Survivors will have to be able to retain a stable and loyal customer base by delivering services that they value, which are differentiated from competitive offerings. A focussed business strategy must address the needs of a targeted customer base, rather than attempting to be ‘all things to all men’. Finally, leading players
will have the ability to deliver high quality service globally whilst maintaining strong relationships with local operators and influencers. Together, FLAG and Reliance believe they are well positioned to be one of the winners in this new world of telecommunications. Reliance has a clear vision of establishing the Reliance group of companies as a world-class global telecommunications player, FLAG, now has a strong base for future growth and opportunities to drive forward its strategy while contributing to the Reliance Group vision.
your complete cable handling systems provider
Parkburn - Precision Handling Systems Wobaston Road, Wolverhampton, WV9 5EW Telephone Enquiries Call Rob Cash on: +44 (0) 1902 575600
24
Visit us at:
www.parkburn-phs.com
providing middle east global india broadband china connectivity
Opening The Bottleneck FALCON is a new optical system providing high-speed connectivity between the Middle East and India, directly linking these under-served and rapidly growing communications markets to China, the rest of Asia, Europe and the USA.
1
3
1 Kufic calligraphy from ancient Persia (Middle East) 2 A depiction of the sun, the source of light, warmth, life and knowledge (India) 3 A character representing longevity and wealth (China)
FALCON will seamlessly extend FLAG's existing global network, connecting Gulf States via a fibre-optic loop and providing access to over 1000 cities and towns throughout India. FLAG's services already provide the foundations underpinning the networks of the world's best-known telecoms and Internet operators. FALCON will provide further connectivity solutions for the ever-increasing volumes of global voice, video, Internet and data traffic, opening the 'broadband bottleneck' to and from the world's major growth economies. For further information, please email info@flagtelecom.com (quote ref. FAL-STF).
www.flagtelecom.com
2
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Convergence of Terrestrial and Undersea Networks
By Adam Hotchkiss and Richard Romagnino
26
Traditionally, submarine optical system design and development have been largely separated from its terrestrial counterpart. Undersea networks typically rely on optical technologies promoting lengthy unregenerated reach in ideal conditions without frequent physical layer reconfiguration. On the other hand, terrestrial networks largely promote optical technologies allowing for a wide variety of distances with less than ideal fiber conditions. Additionally, in the past, the consortium model that dominated the deployment of submarine systems dictated that the submarine network would be operated as separate entity, independent of the terrestrial network. Since the negotiation of the technical content of the submarine network was carried out by a group of diverse companies with often conflicting commercial interests, innovations that would lead to optimization of the network for any given carrier’s model were difficult to implement. The effect was a “lowest common denominator” from the service perspective and a “known risk-free approach” for bandwidth management and restoration. Innovations were generally centered on addressing technical issues such as propagation delay and transmission distances, rather than innovation in services. As a result, the network architectures that emerged from the consortium developments were optimized for partitioned reliable services, but were dissociated from the end-to-end services they were intended to carry. The end result was an equipment configuration at cable-stations intended to facilitate opaque demarcation, with often wasteful equipment planning practices.
Current De-integrated Submarine Cable Station Solution Back Haul
MS-SPring Aggregator / Interface ADM
SNC-P
Back Haul Aggregator / Interface ADM
1+1 MSP
Back Haul Aggregator / Interface ADM
Submarine Switch
Submarine Line Terminal
NPE
SLTE
1+1 MSP
Optimized SDH Networks With the advent of high capacity services brought on by the unprecedented growth in data, the need to provide end-to-end data services has become an overriding priority. However, the traditional model that breaks down capacity to some defined subrate 1:N, Ring (such as E1 or STM-1) is not ideally suited to address these applications. In addition, end-to-end
1+1, 1:N
Backhaul Network
provisioning of services is a key factor in an operator’s ability to leverage critical time-to-market advantages. In terrestrial networks, customers are using advanced features on multi-service switch and bandwidth management products that can provide Optimized Cable Station solutions in a converged network. A typical multi-service NPE switch interface capability is shown below.
Multi-service switch NPE
High Speed Line Interface
Figure 1- Separate backhaul, NPE and SLTE entities The configuration above shows a typical architecture in which the submarine and terrestrial networks are treated as completely separate management entities with a back-to-back interconnection taking place at the backhaul, Network Protection Equipment (NPE) and Submarine Line Terminating Equipment (SLTE) layers. This adds complexity to the cable station and restricts the management and delivery of services in what should be a converged application. Additionally, the interconnection and management of the backhaul, NPE and SLTE adds both capital and operation expenditure through duplication of hardware, reduction in reliability and multiple management systems. With the surge of distance insensitive internet data services and the maturation of high capacity, flexible service rate cross connects in the terrestrial network environment, the ability to apply terrestrial technologies for transmission and switching over undersea networks is not only possible- it is desirable.
STM-16c/64c
STM-16 1+1, MS-SPRING, MESH
STM-4 1+1, SNCP, 0:1
STM-1o/e 1+1, SNCP
Figure 2 -Multi-service switch and NPE capabilities 27
G.709, 1+1, SNCP, MESH, MSSPRing, HERS
Cable Station Optimization As shown above, the multi-service NPE is deployed as an integral part of both the submarine and terrestrial networks with a focus on providing independent restoration of faults on the submarine and terrestrial networks, while being able to provide high-bandwidth end-to-end global services. The full range of concatenated services from VC-4/4c to VC4/64c can be provided in protected, unprotected and preemptable restoration modes in order to provide flexibility in both the grade and the granularity of service. In addition to the service-level differentiators, the multi-service NPE also provides equipment savings in the cable station by avoiding costly back-to-back connections with the backhaul network. In order to converge the backhaul and submarine NPE functions into a single network element, it is necessary to support interconnected and seamless protection options suited for both terrestrial backhaul and lengthy submarine networks. As such, the converged multi-service NPE solution pulls in common terrestrial protection schemes to the
submarine network protection staple. Such backhaul protection options include 1+1, MS-SPRing, SNC-P and MESH protection, all of which are commonly
collapsed NPE network element.Evolution of Terrestrial Networks. As optimized cable stations evolve from
deployed in terrestrial networks. The ability to manage multiple terrestrial protected rings and circuits in addition to interconnecting them to common submarine protection mechanisms such as SNC-P, 1:N and HERS is essential. Moreover, the advances of MESH networks on the terrestrial backhaul systems can easily be applied to submarine links through auto network discovery and proper shared link resources with submarine and terrestrial links alike. Thus, true end to end path service protection and connection management is afforded with a converged terrestrial and submarine network entity. The figure below compares the traditional backto-back submarine/terrestrial configuration (on the left) with the converged managed multi-service NPE solution. Through the utilization of a common multiservice switch matrix, costly interconnection and multi-vendor management is eliminated in a single
interconnected terrestrial and submarine groups to unified networks, opaque demarcation points are eliminated; providing greater bandwidth management and protection capabilities to the network operator. Submarine and terrestrial links will come to be considered as part of a single network. Figure 4 overleaf shows the implications at the network level and the ability to provide end-to-end service management while taking advantage of the savings at the cable station. The submarine and terrestrial networks can be managed from a single network management platform with full visibility of alarms, connections, service rates and restoration levels supported. The following advantages are realized through this convergence of terrestrial and submarine networks at the cable station: z Capital expenditure savings through the elimination of opaque interconnects between terrestrial backhaul networks and the NPE with replacement of directly interconnected rings, MESH and 1+1 interfaces z Reduction of power and footprint for backhaul equipment with integrated backhaul interfaces on the NPE z Increased reliability through common sparing and reduced optical interconnects z Network topology and resource auto-discovery on both the submarine and backhaul network
De-integrated Submarine Cable Station Solution
MS-SPring
SNC-P
1+1 MSP
Back Haul Aggregator / Interface ADM
Converged Switching and Backhaul Cable Station Evolution
MS-SPring Submarine Switch
Back Haul Aggregator / Interface ADM
NPE
Submarine Line Terminal
1:N, Ring
SLTE
Back Haul Aggregator / Interface ADM
MESH
Combined
Submarine Line Terminal
Back Haul Aggregator and Submarine Switch
SLTE
ADM/ NPE
1+1 MSP 1+1 MSP
Figure 3- Backhaul and NPE cable station integration
Multi-vendor backhaul NEs and optical interconnects integrated with multiservice NPE
1:N, Ring, HERS, MESH
to simplify configuration and speed equipment deployment 28
z Increased service velocity provided by fast-
connection setup capabilities and multi-vendor, inter-service provider connection interoperability z More efficient use of resources through the
planning and use of shared restoration bandwidth, such as shared MESH, and allocation of resources based on grade-of-service These network requirements are well within the reach of today’s switching and transmission systems.
Traffic Backhaul and Aggregation
SLTE and Submarine Switching
Backhaul Network
Commonality of DWDM high performance interfaces In past network deployments, the terminal DWDM interfaces for submarine and terrestrial networks differed because of varying market applications. For submarine networks, the use of high gain out of band forward error correction, non-NRZ impairment tolerant modulation codes and high performance electro-optical components were common place. These specialized characteristics provide for a longer unregenerated reach and higher bandwidth often required for undersea segments. In terrestrial network deployments, out of band forward error correction and non-NRZ modulation codes were normally not deployed to lower the terminal cost while addressing a lower reach and capacity network demand. However, the hugely increased demand for distance insensitive internet data traffic leads terrestrial DWDM equipment vendors to employ terminal technologies similar in nature to submarine networks to achieve increased performance and agility without significant fiber plant and physical infrastructure expense or change.
Integrated Backhaul Submarine Line and NPE Interface
MS-SPring Combined
Converged Backhaul and Submarine cable station
MESH
Back Haul Aggregator and Submarine Switch
HERS
1:N, MESH
ADM/ NPE
1+1 MSP
Figure 4- Integrated backhaul and multi-service switch network implementation As a result, terrestrial LTE DWDM interface specifications are now similar in performance to SLTE applications. Such advances now common in terrestrial LTE interfaces include: z >9dB out of band Forward Error Correction (FEC) gain z G.709 overhead compliance and full transparency z Advanced modulation techniques increasing OSNR performance or spectral efficiency z Electronic signal distortion correction 29
The following benefits are easily realized by implementing these features on both terrestrial LTE (TLTE) and SLTE interfaces from a single vendor: z Reduced SLTE and TTLE cost through sharing of common components and higher volume z Decreased development time frame through the utilization of a single R&D group for both market segments z Increased network feature set availability through the use of terrestrial switch and LTE equipment on undersea networks
Disjoint Backhaul, NPE function from SLTE
MESH
MS-SPring Combined Back Haul Aggregator and Submarine Switch
Submarine Line Terminal SLTE
1:N, Ring, HERS, MESH
MESH
Combined Back Haul Aggregator and Submarine Switch ADM/ NPE
ADM/ NPE
1+1 MSP
1+1 MSP 1+1, 1:N
Figure 5- Integrated NPE and SLTE evolution Moreover, as terrestrial and undersea technologies merge, NPE and SLTE network elements, once kept separate, can now be deployed in one network element. The illustration below shows the converged SLTE and NPE solution as compared to the opaque interconnected model of the past. The result of such a marriage of NPE and SLTE equipment provides large capital expense reduction through: z Elimination of costly optical interconnects between NPE and SLTE equipment z Reduction of spare hardware at cable stations through the removal of SLTE and NPE interconnection hardware z Decrease of common equipment and hardware required to install and support separate bays of multi-vendor equipment Additionally, the following operational benefits are achieved through the NPE and SLTE integration: z Reduction of power and space through elimination of optical interconnects and separate network element common equipment
Integrated SLTE Interface
MS-SPring
Converged Backhaul, NPE and SLTE Evolution
1:N, Ring, HERS, MESH
Adam Hotchkiss
NPE- SLTE interface eliminated improving cable station cost and reliability
z Increase of reliability afforded by loss of
interconnection optical hardware z NPE and SLTE protection with a common switch matrix, reducing the need for SLTE optical layer external protection devices z Integrated Network Management System (NMS) for a single vendor network element providing monitoring, provisioning and maintenance from a single GUI platform In order to satisfy demarcation point requirements between layers, internal switch diagnostics and performance monitoring tools provide bit level performance parameters to continue and allow network providers to guarantee service level conditions.
Conclusion As terrestrial networks evolve to meet the ever growing internet data traffic demand, the previously set lines of terrestrial and undersea network performance have blurred into a common solution set. Additionally, submarine networks are evolving from the consortium model and have begun to take advantage 30
Richard Romagnino
Adam Hotchkiss and Richard Romagnino lead the global undersea business development group at Nortel Networks. In this role they are responsible for specification, marketing and business development of switching, transmission and backhaul networks for repeatered and unrepeatered networks. They hold decades of telecoms experience at Nortel Networks and other companies, including similar roles in access, backhaul, terrestrial long haul networks and numerous submarine network build outs. Adam Hotchkiss can be reached at: ahot1@nortelnetworks.com Richard Romagnino can be reached at: romagnin@nortelnetworks.com of network efficiencies available in terrestrial network deployments. As the available network elements evolve to include higher capacity bandwidth management and sophisticated service management capabilities such as shared MESH protection, the converged networks will become the dominant network architecture.
Eliminate boundaries and you create opportunity. At Nortel Networks, we transform networks. Removing barriers to efficiency, productivity and growth. Making your business a more profitable place. nortelnetworks.com
how do you ask for
when you’re going someplace no one’s ever been before?
For information on Nortel Networks Submarine Solutions, visit www.nortelnetworks.com/submarine 31
The collapse of capacity prices and the scarcity of investment capital have together led to unprecedented pressure on the cost optimisation and robustness of business plans for new networks. This article will approach the problem from both sides - how to minimise the cost of a new network, and how to raise the funds to build it. We first review the key cost elements and their minimisation in the light of clearly defined availability and performance objectives. Then we address the process of raising capital, how investors analyse proposals, the key elements of a good business plan and some examples of what is currently going on in the market. Much of the following content on cost minimisation will be familiar to those who have been in the industry for a while, but the evidence is mixed on whether more recent market entrants have all adhered to the principles described. We suggest that it would do no harm to review these ideas which seem obvious when written down, but which also seem to be at the root of some of the recent difficulties affecting our industry. The process by which systems are initially conceived is largely a mystery to those of us who have not done it. It may be a single brilliant flash of inspiration or a natural succession from a previous series of cables – or mysterious mutterings in dark smoke-filled rooms. Whatever the method, the outcome is a rough idea of landings, routes and the identity of parties requiring capacity. This initial vision will need to be filled out with details. The order in which the details are tied down
Alchemy Restored
By Basil Demeroutis, Ian Fletcher and Steve Wells 32
will vary from case to case; however there will need to be recent, well founded and specific demand studies which will generate a matrix of traffic between the connected nodes as a function of time. Taking the geographical locations of the traffic origins and destinations into account will allow the generation of a first cut at the physical routes. Seabed specialists will give good general advice on areas to avoid due to factors such as anchorages, hydrocarbon activity or geological instability. The predicted growth of traffic will allow a forecast of the required upgrade potential, and for many cases this will be substantially below the maximum offered by the industry. Although 10G per wavelength is currently the standard, reduced fibre count will reduce the unit cost of cable and repeaters, and reduced wavelength upgrade count will allow repeater spans to increase for further cost savings. New build is not the only option – careful investigation may uncover supplier inventory stock that is heavily discounted, and there may even be entire systems that can be recovered, re-configured and re-laid in a new location at even heavier discounts. The relatively slow movement of transmission technology in increasing cable capacities means that such options can now be realistically considered for stock or segments up to three years old. In addition to the wet plant, the terminal equipment initial and upgrade capacity pricing has improved in recent years as competition and equipment integration have developed. Of course there will be many options for interconnecting the required landings, and this is the
first point where the options of point-to-point, ring or mesh architectures will arise. Choices made here will have first-order impact on the capital outlay and O&M recurring charges, as well as whether the system will meet its availability targets. Although laser failures and other intrinsic failures should be considered, the dominant failure mode will likely be external aggression resulting in loss of all fibres in the affected cable, so backbone systems or collapsed rings will suffer loss of service unless an instant grade of off-network service restoration has been arranged. Such topologies will require a high grade of cable engineering (e.g. cable armouring and burial) and even then would struggle to achieve the contractual QoS level for voice usage. Capacity in a backbone or collapsed ring cable could be sold cheaply at low QoS as part of a larger meshed all-IP network; however revenues would be correspondingly lower. Turning to protected ring topologies, these need not be as costly as might be expected. Indeed, considerable cost savings can be made by designing ring systems that will actually use the ring protection, saving on armour, burial and off-network restoration facilities. Further savings could be made by specifying a slower grade of repair service in the C&MA. There are several examples around the world of ring systems that have had frequent faults without affecting customers although they were not deliberately costoptimised to that end. For both the topologies discussed above, the key point is to design the robustness of the system to meet the contractual QoS demands – including
external aggression. The repair strategy should also take into account the relative urgency of the repair operations in each case. Having done the outline design this way, and having found a hungry supplier with an irresistible price, it is time to be seriously building a business plan and presenting it to potential investors. There are numerous avenues that can be pursued to secure financing for telecoms infrastructure projects such as undersea cable systems. From bank loans to government subsidies, equity to subordinated debt, each of these types of capital come with their own individual merits and of course costs. For the prospective operator, the financial aspect of a project can be as vexing as “repeater spans” or “mesh architecture” are to the financiers. How do we navigate through this and get a project financed? Essentially, each type of funding source can be defined by the willingness on the part of the financier to trade off risk for return. The bank market, for example, has a very low tolerance for risk but will charge a correspondingly low cost to the operator for the use of its capital. This can be as low as 6% to 7% in some cases. In return, however, a bank may only be willing to advance a small percentage of the total cost of the project, and in most cases will want to take a first lien on the assets of the company. An equity provider, on the other hand, will be willing to take significantly more risk but will expect a commensurately higher return on its capital, say 35% to 40%. In between, there are sources of capital that look more like equity and others that look more like debt. 33
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. 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. 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.
It can be difficult to know which of these markets to approach for a given project. There is a theoretical optimal capital structure for any project, a mix of equity and debt that generates the highest return for the shareholders. This will depend on the exact nature of the project and the financial forecasts, but we can generally say that ideally you should have a solid foundation of funded equity with a mixture of several types of capital. Of course, to make matters more complicated, the nature of the company’s capital structure must change over the life of the project. For example, equity is generally the first capital in, with banks following later after the future of the project is more secure. Additionally, whether to approach banks or equity investors will depend on the resources of the project sponsors – an undersea project developed by a large multinational firm can be financed much differently that one developed by a new start-up venture. What are financial institutions looking for when evaluating a project? Generally this can be broken down into several major topics. Firstly, there
are the technical aspects – is the project technically feasible. The specific steps to develop a technically sound business plan have largely been covered above. Notably, for financiers, this is only a very small part of their evaluation. It is also, unfortunately, the area that too often gets the most attention from the prospective operator. This is to the detriment of the other critical components of a sound business plan. Before even looking at the technical feasibility, any financier will first ask the question, does this fit our strategy, and does this make sense as a general business proposition. Each banker, lender, equity investor or strategic partner will have its own opinion as to countries they will invest in, where they want to be in the value chain, whether they want to be asset rich or asset poor, plus a litany of other strategic criteria. The first barrier any project looking for financing must cross is this question of fit. Often it can take dozens of calls before a match is found. Once through this barrier, typically high on the list of investor concerns is the question of market. The investor will want a detailed market analysis to
determine if the demand / supply characteristics are currently attractive and whether they are likely to continue to be attractive in the future. Costs are also a critical component of the business plan and will be subject to intense scrutiny, not only initial capital costs but ongoing operating expenses. The sales and marketing plan will be evaluated carefully. Who are the target customers? How much will be charged for each service? How will these services be sold? And lastly, quality of management is of paramount concern. Investors need to be confident that the management team can execute the business plan and meet or exceed expectations. Throughout the due diligence process, the way questions are answered can be as important as the answers themselves – a wellprepared management team inspires confidence. Investors also look for management with a track record of success. All these elements – market analysis, costs, sales and marketing, management strength, and yes, the technical plan – are then distilled down to create a detailed financial model. This model is usually built from the bottom up, that is, by taking each type of
How’s your image? BJ Marketing Communications Providing support to companies in the submarine cable industry for over 10 years Brochure and literature design and production z exhibition design and management z website design and maintenance Contact Ted Breeze z Telephone +44 1206 230472 z Facsimile +44 1206 231640 z Email ted.b@virgin.net
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product and forecasting volumes and pricing to get revenues, by taking each cost line item and breaking it down into its component parts. This can be a time consuming and incredibly complex process, but in completing it both the financier and the company will learn a lot about the project and indeed about the quality of the team in place to execute it. With the financial model finally in hand, the investor will run numerous sensitivities to “stress test” the business plan and ultimately come up with upside and downside cases. The time scale to complete all this work and get financing in place can vary greatly, but rarely do we see a project funded in less than 3 months. There are certainly some trends that we have observed in the financing market that would be worth mentioning as general guidance to those seeking funding for new initiatives. Generally, investors are more focused on the service offering than ever. Service-based competition and network neutrality are concepts we hear more and more from investors. With the price of capacity on many routes now stabilising and many of the dot-com era competitors out of the market as a result of merger or bankruptcy, investors are eager to capitalise on the trend towards network oligopoly and service plurality. Capital for new network infrastructure continues to be difficult to find. Certainly, financing is unlikely to be forthcoming for new cables on existing major routes. However, there are niches which remain under exploited and specialist subsea services that can fill unsatisfied demand. These projects, on a selective basis and with a sound, carefully crafted business plan, will get financed. 35
500 m
At submarine depths, Nexans was the first to manufacture and install 384 fiber submarine cable.Nexans has qualified and installed their URC-1 cable family for fiber counts up to 384 fibers.
For furter information, contact: Telecom: Vegard Larsen Tel: + 47 22 63 76 47 E-mail: vegard-briggar. larsen@nexans.com Oil & Gas: Jon Seip Tel: +47 22 63 88 25 E-mail: jon.seip@nexans.com
goes deeper Nexans Nor way AS P.O Box 130 Økern, N-0509, Oslo Nor way Tel: + 47 22 63 88 20 Fax: + 47 22 63 74 55 US Contact: Les Valentine Tel. +1 281 578 6900 Fax: +1 281 578 6991 E-mail: les.valentine@nexans.com
exans
1500 m 36
Global expert in cables and cabling systems
Upgrades: The Viable Alternative? Mike Hynes – COO, Azea Networks
Substantial investment in new submarine systems during the telecoms boom of the 1990s seems to have ground nearly to a halt as we approach the middle of the next decade. Yet bandwidth demand continues to grow, leading carriers to look for the most attractive options for increasing capacity. Fortunately, there are now alternatives to new build that can unlock substantial capacity while affording the carriers significant economic rewards. This article will discuss the technical and economic implications of upgrading existing submarine networks to deliver substantial capacity increases. What carriers want: incremental bandwidth Competing market pressures are creating a dynamic shift in the way that carriers are approaching the growth of their submarine communications networks. On the one hand, traffic demand continues to grow annually at between 40% and 80%, depending on the route. Whilst this may be modest compared with the peak of the boom, it does however continue to fill capacity on the existing cables, and at this growth rate the currently lit capacity will be exhausted within 2 to 3 years on many routes. At the same time, increased competitive pressures are dramatically driving down revenue per bit carried, which is continuing to squeeze carrier
profits. In many instances, pricing on a route can approach the marine maintenance costs. But the carriers’ dilemma is that while they want to create extra capacity to generate profitable revenue, they are nervous about committing to the sizeable capital investments required to deploy new cable systems. Carriers are therefore starting to look for alternative business models for adding capacity, and are looking to extending the lifetime of existing systems to provide them with the answers. They want to be able to link capital spend directly to actual revenue growth opportunity (rather than uncertain
future predictions of growth). This necessarily requires dramatically reduced planning cycles and lead times. Rather than spend huge amounts of investment in one shot, as for new cable build, they would ideally add bandwidth incrementally in much smaller units (e.g. a single 10G wavelength at a time), unlocking capacity as its actually required.
Technology advances: turbo-charging existing undersea systems This incremental growth model is, of course, the mindset on large ‘Terabit’ cables initially only lit with
Upgrade Beyond Design Limits
37
capacity, allowing capacity to be incrementally unlocked to meet growing traffic demand in a way never originally envisaged. This offers an unparalleled approach to extending the economic life of existing cable systems through targeted capacity upgrades. The principle is straightforward; replacing the original low capacity channels with a larger number at higher capacity. Figure 1 shows schematically how this might be done for an existing 2.5/5G system upgraded to multiple 10 G wavelengths. Prime candidates for capacity-upgrade are the earlier optically amplified systems, typically deployed between 1994 and 2000. Whilst it is the newer 3rd
Mike Hynes is responsible for all elements of Azea Networks’ day-to-day operations. He was previously General Manager of the international optical division at Nortel Networks and President and General Manager of Nortel’s global submarine business initiative. Mike brings to Azea Networks more than 20 years of experience in delivering best-in-class solutions to global telecoms operators. a few wavelengths, where additional wavelengths can be added as traffic grows. However, the majority of existing optically amplified cables on routes approaching their capacity limits are earlier ‘legacy’ cables not designed to have extra wavelengths added. The good news for carriers is that recent developments now enable these existing cables to be upgraded to many times their original designed
generation ‘Terabit’ 10G DWDM systems that have had most publicity, earlier 1st generation (2.5/5 G single-channel) and 2nd generation (2.5 G per channel WDM – possibly 2 to 8 channels) systems account for some two thirds of all existing optically amplified systems, representing a significant potential upgrade opportunity for carriers. It is the geographic distribution of the various systems that is most important. The newer ‘Terabit’ cables are principally deployed only on high-profile intercontinental routes (e.g. between Europe and North America). The reality is that earlier generation cables are the only options on many regional routes, and it is many of these that are approaching full capacity. It is a huge irony that whilst undersea cable systems are designed for a lifetime of 25 years, most actually reach their designed capacity limits within just a few years of being deployed, giving them a very limited economic lifetime. However, the limitation of their design is not generally the ‘wet-plant’ of fibre, 38
amplifiers or branching units, but rather the terminal equipment. Suitable replacement of this terminal equipment with dedicated upgrade terminals benefiting from the latest technology enables these existing systems to be upgraded to relatively huge capacities (capacity multipliers in excess of an order of magnitude are achievable). An existing system with a single 2.5 G channel upgraded to 8 x 10 G channels unlocks a capacity increase of x 32 on a cable that would otherwise deliver no new revenue growth (lighting more capacity on this 1st generation system than is currently lit on most ‘Terrabit’ cables). This can therefore potentially double the actual economic life of such existing cable systems. There have already been some limited upgrades of these earlier systems, demonstrating the commercial and technological viability of upgrading capacity beyond initial design limits. These have, hitherto, only scratched at the surface of the full capacity that can be unleashed in these systems. The vendors’ challenge going forward is to provide carriers with dedicated upgrade solutions that maximize the capacity multipliers that they can unlock on their existing infrastructure with minimal incremental investment. Giving carriers the potential to ‘turbo-charge’ their existing networks will enable them to substantially delay the need to build new networks, with all the economic advantages that this gives.
Capacity upgrades: the economic rewards There are a number of key factors which make the economic case for upgrade an extremely attractive
one. Not least of these is the substantial difference in the minimum level of capital investment required to unlock additional capacity once a system is becoming full. New build budgets typically run to hundreds of millions of dollars, and can even pass the billion dollar mark. The scale of this investment is in no small part due to the extreme challenges of laying a cuttingedge optical communication system in an undersea environment, with all the reliability and lifetimeperformance issues that this entails. By comparison, the costs of adding upgradecapacity can be some two orders of magnitude less than that of building a new system, because it allows reuse of the ‘wet-plant’, which dominates the cost of new systems. Furthermore, as if the sheer scale of new-build investment were not enough, there is a significant time-lag between capital being committed and the resulting revenue stream to fund this, possibly of several years before there is sufficient traffic on the new cable to return a profit. On many routes, new cables would not deliver an acceptable ROI, and are therefore not a viable option. In contrast, upgrades allow incremental capacity growth closely matched to revenue opportunity (see figure 2). The ability to perform an upgrade incrementally, one wavelength at a time, can also be applied geographically at pinch-points in a multi-link system. This allows the investment to be targeted more effectively still at unlocking actual revenue, as not all links might see the same traffic demand. Figure 3 illustrates this principle on a hypothetical network. Not only does an upgrade allow for smaller
incremental investments with shortened lead-times, but it defers a major capital expense of hundreds of millions of dollars by several years. Of course this deferral translates to immense cash savings – but the real advantage lies in how such new build network investments can be tied to actual traffic growth, and hence bandwidth demand. Committing to laying new cables is a long-term undertaking and heavily reliant upon accurate forecasting of bandwidth demand. In an era in which carriers have little margin for error, provisioning bandwidth based on incorrect predictions can have disastrous consequences if the forecasted revenue does not materialise. An incremental upgrade can therefore deliver not only substantial cash savings, but also a huge reduction in risk. Another benefit of upgrades is the OPEX savings as traffic, and hence the network grows. Whilst there 39
may be some increase in the total operational costs, associated with the additional network elements of the upgrade, the actual OPEX per unit bandwidth (and therefore per unit revenue) will be reduced. Many maintenance agreements for undersea cables reflect the cable length, which does not change with an upgrade. An upgrade therefore reduces the per-unitbandwidth operations and maintenance costs associated with the existing cables. This could also extend the lifetime of many of the existing systems that are generating less revenue than the cost of maintenance, and are no longer economic to run. As carriers struggle with how to meet ongoing network growth demands with minimum capital outlay and minimum risk, the potential to upgrade their existing cable systems offers their existing infrastructure a new lease of life.
Unlocking untapped potential: technical innovations But in order to understand how far economic lifetimes can really be extended requires an in-depth understanding of the inherent limitations of the legacy cable plant, including bandwidth, noise and non-linear characteristics. The technical challenges associated with delivering extra capacity differ between each generation of technology, but in all cases precise design and modelling is needed in order to optimise the solution to the existing infrastructure. There are obviously some fundamental limits to capacity of any transmission plant. For instance, bandwidth of concatenated amplifiers, not designed for WDM, narrows down as the number of elements increases. Even systems designed for one wavelength, with long spans such as 5,000 to 6,000 km, have been shown to deliver 5nm to 8nm of bandwidth, enough for more than 8 channels with a 100GHz spacing, or more than 16 with 50GHz spacing. Noise accumulation is another obvious factor, but with better regenerator design, the technologies to tackle this are now available. The last decade of advances in optical engineering has delivered better modulation techniques, improved regenerator design and new generations of FEC (Forward Error Correction) – now available with up to several dBs better performance than the solutions of the mid 1990s. First generation systems typically used NRZ (Non Return to Zero) modulation. More sophisticated schemes such as RZ (Return to Zero), chirped RZ or carrier suppressed codes, can give significant improvements now that the appropriate components are available. Also further trans-mission
improvements can be achieved by the use of digital control techniques, which can continuously fine tune regenerator parameters. Non-linearities too can be a challenging obstacle. Fibres with dispersion zeros close to the operating wavelength were often deployed in older systems, and give rise to fourwave mixing and other effects if used in a WDM configuration. However, with accurate modelling these effects can be quantified and mitigating strategies planned. Combined, these techniques can free-up headroom for higher bit rates or more channels. While actual achievable improvements are cablespecific, it is possible to create a simple rule of thumb guide and the numbers are impressive, often showing a capacity multiplication range of x 4 to x 100, or even beyond. To achieve the best multipliers requires dedicated solutions, which would inevitably differ from those used to deploy newbuild cables.
The future looks bright As the submarine upgrade market develops, carriers will be looking more and more to specialist providers with the skills and technologies to deliver their visions of profitable service revenues supported by incremental infrastructure provisioning. Over 40
time, further advances in this technology are set to push the boundaries of what can be achieved over existing systems still further. Of course, where there is a need for new routes not served by existing cables, new build will provide the only way forward. However, one might well imagine that new system build could be deferred on some existing routes for a very long time indeed!
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A Passage to India*
by Geoffrey Thornton
Henry Ford famously observed, “History is bunk”. The fact that history repeats itself so often may well reflect the fact that most people agree with him, and so never learn the lessons of history. Perhaps the real lesson of history is that in any given situation, human beings will nearly always react in the same way, despite the evidence that history presents of the likely consequences. One rule of human survival is to get lost in the crowd. If you are wrong, but in a crowd that is wrong you are much safer than if you are wrong by yourself and the crowd is right. Even if you are right and the crowd is wrong you may have to wait a long time before the rest of the world recognises that you were right. And it may be too late. To those wishing to minimise risk, the moral has to be to follow the crowd, right or wrong. The new technologies that have brought fundamental changes to economic activity – the railways, the motorcar, and electricity, the computer have all followed a similar pattern. The revolution in telecoms has followed the same pattern. But this is rarely seen at the time. Remember “the new paradigm”? Perhaps people can be forgiven for thinking that their new technology will be different from the ones that have gone before. But then the pattern starts to repeat itself within the new technology! The current situation in South Asia demonstrates this very clearly. The situation in the Atlantic is well known. So much bandwidth was installed that despite traffic growth rates of 100% per annum the market price fell to virtually zero. The typical situation in such a rapidly growing market is 42
not that the predictions of market growth are wrong. They are often right, at least I the short term. The problem is that 10 competitors all assume that they can achieve a 30% market share. Further out is the problem that exponential market growth cannot go on forever, but that is not the problem that has allowed the situation in the Atlantic to develop And against the backdrop of the Atlantic, and other overcrowded markets let us look at what is happening in the Bay of Bengal and the Andaman Sea. Two years ago the i2I system built by Bharti and Singtel came into service with a potential capacity of 8 Terabits. This augmented the existing capacity in the region provided by FLAG EA and SEA-ME-WE3. Very little capacity has been sold on that system so far: Logic would suggest that there would be no hurry to build any new systems in those waters for some time. So what is today’s situation? A completely new system is being built over the exact route with a potential capacity of a further 8 Terabits for VSNL. (And at a contract price of about 30% of the price of i2i. A contract is being let for SMW4 with a segment over exactly the same route. And now Reliance, having bought FLAG, is moving to contract with FALCON, which includes a Chennai – Satun segment. It is difficult to believe that in a couple of years time the situation in that area will resemble the situation in the Atlantic today. This is the jungle to which Jean Devos referred in the last issue of this magazine. One may accept that the people driving the industry today will not be aware of, for example, the multiplicity of competing railway routes that were * The article takes its title from E.M. Forster’s novel of a clash of cultures in India in the days of British rule
Geoffrey Thornton was formerly Director of Sales and Marketing for STC Submarine Systems and General Manager, Business Development for ASN. He was born in 1937, graduating from Cambridge in 1960. He joined STC in 1962, occupying a number of marketing and management positions in various component businesses of STC. In 1981 he became manager of the Microwave Systems Division, and moved to STC Submarine Systems in 1987. He retired from there in 1996 and has since worked as a consultant as part of the Don Quixote partnership with Jean Devos and Teijiro (Ted) Kitamura. built in Great Britain in the railway boom of the 1840’s (Most of them went bankrupt). But surely the Atlantic today is obvious to everybody. Yet if we turn to the opposite side of India to the Arabian Sea, we find that the situation has been the exact opposite. The need for a new cable from Europe to India has been very obvious for some years. FLAG and SEA ME WE3 have been equipped to their maximum potential over the critical segments. Industry estimates suggest that there is currently a capacity shortage of over 1Gbit/s of bandwidth. India is one of the BRIC economies that are expanding fast and showing very rapid economic growth. One reads almost daily of jobs moving from Europe and the US
to India. And these are jobs like call centres and financial analysis that require significant amounts of bandwidth to be effective. This is not a phenomenon that has suddenly sprung from nowhere. The evidence has been there for several years. Yet the financial markets were (and still are) unwilling to put money up for a system over this route. Again the problem is minimisation of risk. No one is going to get fired for turning down an opportunity for a new telecom investment opportunity today. But going out on a limb to advocate one is risky. Traditional carriers were well aware of the need for a new system, but too many were either in Chapter 11 or had major problems. As a result it has taken to this year to get a consortium cable to the supply contract stage, (and then only for a 2 fibre pair system). And it has taken an entrepreneurial company from India to develop a new system in a short time scale – one that will have 4 fibre pairs. The factor common to the two systems is that the financial markets are not putting money directly into either system. Thus we have the stark contrast of the passage to India from the west is desperately short of bandwidth and the passage from the east is already oversubscribed, and rapidly getting more so. The apparent paradox is that it is FLAG, under its new Indian ownership that is helping to resolve the capacity shortage to the west, and planning to increase the surplus to the east. But this is not really a paradox. To have the drive and ambition to seize a market opportunity calls for the willingness to take risks and the confidence that believes it can achieve its 30% market share whoever the opposition may be. 43
IN FOR THE LONG HAUL!
(We also do short and medium haul systems)
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
1433 Hooper Avenue, Toms River, NJ 08753, USA 732-557-6100 (Tel) 732-341-3078 (Fax) bwall@caldwellmarine.com www.caldwellmarine.com
A Corporate Profile Global Marine Systems Limited is based in Chelmsford, England. The head office is not particularly near to water, the environment in which the company is most at home, but that’s not the only place it has a presence. Global Marine was established in 1999 after being bought from Cable and Wireless. It is able to trace a history back to the laying of the very first telegraph cable back in 1850, and hasn’t looked back since. The positioning of any fleet around the world is important, particularly for industries such as
defence. But when you are in the communications business, the time it takes to lay your cables or repair a fault can be of paramount importance – not only in terms of lost revenue whilst your cable is out of action, but also in terms of customer relationships. If you make a commitment to your customers that your network will be up and running within a specific time frame, you rely on Global Marine to keep your promise and get your network moving again. Captain John Golding is head of Global Marine’s fleet operations. He came ashore after a number of years at sea and understands from a very practical point of view the importance of locating vessels in the right place: “We have a fleet of 14 ships and a large number of remotely operated vehicles (ROVs). The siting of these in a number of locations around the world is key to the way we do business. With over 95% of the world’s communications being handled through undersea cables, it’s critical that we are able to fulfil the customers expectations by having our fleet positioned so they can get to the problem in time to 44
Cable Innovator
minimise the impact on our customer and also on their customers as well.” The Global Marine fleet falls into three groups – installation, maintenance and shore based depots. Installation Maintenance Bold Endeavour Atlantic Guardian C.S. Innovator Bold Endurance Recorder C.S. Sovereign Maersk Reliance Maersk Responder Maersk Retriever Networker Pacific Guardian Sir Eric Sharp Wave Mercury Wave Sentinel Wave Venture
Maersk Recorder
The ships that are used for installation work have large cable tanks, allowing them to take on board the large amount of cable required to complete most installation jobs. Many of these ships were purpose built for their role, with A frames being a key feature to allow the ships to perform ploughing and burial operations in the most efficient manner. The ships in the maintenance side of the fleet make up the numbers, with some of the ships able to do small installation jobs as well. Although they will not be able to install many kilometres of cable, they can work on smaller projects and repairs in the most effective manner. The ships themselves are chosen with care – and where possible, they will all be purpose built for the role. The amalgamation of roles allows the Global Marine fleet to be very flexible, and able to respond to the demands that different customers make of the fleet and it’s capabilities. The ships in turn are strategically located close to where the fault history dictates, by using ‘Geocable’ we are able to utilise a vast amount of cable repair data to determine the optimum baseport location they need to be, for example, the Bold Endurance, based
in Victoria, Canada, looks after the North Pacific area, the ships located at Portland, UK, look after the shallow European waters and approaches to the
cases than one. This footprint means we have the global presence to deliver quality work to our customers very quickly.
Atlantic. The fleet operations team at Global Marine ensure the best ship for the job is available close to where the work will be taking place and calculates the steaming times to various locations as a guide to the best possible positioning to meet the needs of the customer. As a result, the Global Marine footprint is very impressive, with only the Antarctic not having a constant Global Marine presence. Capt. Golding commented: “This strategy of positioning our ships allow us to deliver maximum benefit to our customers – they can see clearly that we have the majority of the worlds locations covered, and are only 2 or 3 steaming days away from where we need to be in more
It’s not only the location of the ships that is key to Global Marine’s success. There is also a network of depots around the globe to support the operation of the ships. The cable depots store, as the name suggests, all different types of cable that could be needed for repair work. Each depot is located to supply a specific area: Portland, UK – Europe and Atlantic Bermuda – Caribbean and Atlantic oceans Victoria, Canada – North Pacific Manila – Asia and Indian Ocean Fiji – Australasia and South Pacific There is also a depot in Batam, Indonesia, which houses a great deal of Subsea construction equipment over the in the eastern side of the globe, and is also
Bold Endurance Bold Endurance CS Sovereign Maersk Responder
CS Atlantic Guardian Cable Innovator Maersk Recorder Wave Sentinel Sir Eric Sharp
Cable Retriever
Wave Venture Maersk Reliance
45
Wave Mercury
Pacific Guardian
Portland Depot
home to the Networker barge. Networker is capable of working in very shallow waters and completing cable burial projects which require burial down to 10 metres. Equipment is also housed at the Portland depot, with a huge area being given over to the storage and rotation of subsea equipment and strategic spares, ranging from Ploughs to Jointing equipment. This global presence stands Global Marine ingood stead. But, as Steve Searle, Manager Cable Operations, points out, it’s not just about where you are whilst preparing for a job, but also what tools you have to do that job. An example of specific cable working tools developed by Global Marine to assist and enhance cable work is the suite of operational software tools that can be used for analysing repair situations, planning cable installations, monitoring jointing progress and dynamically providing information on vessels positioning, cable parameters and logging data for eventual production of “as laid” or “as repaired” cable charts.
Many facets of cable repair operations can be modelled using a bespoke software application called CLARA (Cable Lay and Recovery Analysis). CLARA is
One of the features provided by the CLP is the capability of allowing a visualisation of the cable being laid over the route terrain using the information
an analysis tool for the various submarine cable lay and recovery operations. It is a Windows ®-based program providing simple ‘point and click’ menu selections and userfriendly data entry. The analysis tools are based on quasi-static models developed by Roden and Zajac. For example, a Bight Raising Analysis module is used to calculate the tensions expected during raising an uncut and unburied cable bight and will show whether a bight may be raised uncut and whether tension parameters are exceeded for a given cable type, depth and seabed slack. Output includes tension for rope and cable at various depths, bight width and cable seabed tension. Warnings are given if various cable tension parameters are exceeded and CLARA will display graphically a bight being raised and indicate when a cut in the cable is required. For installation planning another application, the Cable Lay Planner (CLP) is used to provide a quick, simple to use lay planner. This is a sophisticated piece of software designed to form the standard lay planning methodology that enables the user to plan a cable installation or a mini-block repair using Route Positions and Slacks in the supplied Route Position List for the defined manufactured cable system against the known seabed terrain CLARA along the route.
contained in the final lay plan. This feature gives the user a quick overview of an entire lay but also provides a useful teaching aid demonstrating to new users the importance of the Lay plan. In addition to the planning tools there is also the on line software utilised on board the vessels. This is known as CLARITY, which is an acronym that literally converts to (Cable Lay And Recovery Integrated TechnologY). The system basically comprises a number of bespoke software applications that perform specific functions related to cable working operations. Navigator, is the component that provides navigation data onto the CLARITY network. Navigator is a product that was developed specifically for the cable industry though it could equally be used in many other offshore operations. It is robust , easy to use and displays the vessel position relative to the cable route and its progress along that route. The vessel and any deployed subsea vehicle data can be continuously logged or “fixed” as the
46
installation or repair progresses. This data is post processed using another application recently introduced to the CLARITY environment called NavPPT The output from NavPPT is designed for direct import into Geocable and subsequent production of cable charts. Complimentary to Navigator is another program called NAVSLACK, which is Global Marine’s proprietary computer based Cable Instrumentation package used for monitoring and control of cable laying activities. NAVSLACK takes cable data from the vessels cable machinery sensors such as load cells and shaft encoders and positional data from the vessel’s Differential Global Positioning System (DGPS) via Navigator to compute slack and monitor cable parameters to ensure they remain within the manufacturers tolerances. Apart from the positional control and cable monitoring aspects of a cable operation one of the most significant events that occur once the cable is recovered on board is the jointing process A recent development has seen the addition of another quality control tool to the Global Marine arsenal of operational software known as JADE (Jointing Automated Documentation Environment) JADE provides a simple to use Operator interface that draws upon established UJCM (Universal Joint Construction Manual) documentation to create a build specific “story board” for each cable type selected for jointing. By processing documentation in this way it provides a step by step method for building a joint that is easy to follow, is continuously monitored and easily reported.
JADE is designed to make the construction of any qualified Joint quicker and easier whilst also recording all necessary information required by both the Operator and Customer. JADE will also be used to ensure that all joints are constructed to the latest UJCM specification issue by means of dynamic links to the central UJCM records database held within Global Marine Technical Services. This is achieved by an automated ship to shore e-mail link that ensures quality control is maintained and adhered to on every joint constructed by any Global Marine vessel. Having gone through all the stages of carefully planning a repair or installation and then executing that plan then all the gathered data is processed and smoothed to produce the output required for GeoCable™. GeoCable™ is a Geographical Information System (GIS) which, contains a worldwide database of current and historic submarine cable systems, assisting the management of: Route Planning; Cable Clearance; Installation and Maintenance operations. GeoCable™ is used by the Charting Department to produce Installation and Maintenance Charts. The following screen shows GeoCable™ displaying In Service Cables and Bathymetry for the North Atlantic. GeoCable allows the user to obtain information about the actual Depth for a selected bathymetry contour and the Name & Depth of a selected repeater are shown. Global Marine continues to develop new tools and software applications to ensure the quality of the service they deliver to their customers never stands still and always meets or exceeds their requirements both now and into the future. 47
wfnstrategies WFN Strategies assists clients involved in a variety of activities from business development, marketing & sales planning/implementation to installation support, submarine cable provision, system design, system or product procurement, system engineering and investment services. One of our key strengths is the ability to help you re-evaluate your products or services for alternate markets and future market positioning. Our corporate mission is simple: To assist customers by increasing their profitability, corporate and stockholder value WFN Strategies, LLC 19471 Youngs Cliff Rd Suite 100 Potomac Falls, Virginia 20165 USA Tel: +1 (703) 444-2527 Fax: +1 (703) 444-3047 Sales@wfnstrategies.com www.wfnstrategies.com
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48
Letter to a friend from Jean Devos
Not an accident, a pattern! I do hope that SubOptic will be able to evolve and to adapt itself to the modern times and the new era which is in front of us. It is important that SubOptic 2004 manage to be a bit more than a “business” convention. We need to establish some basic principles. We need to redefine our “values statement”, a set of simple principles that the members of the SubOptic community would endeavour to respect. It is my observation that the 1997/2000 “boom period” has made us lose our soul! The beautiful specificity of this business, made of Quality, Reliability, Cooperation, Understanding, Respect, has been significantly damaged. These “values” have not sufficiently resisted to the pressure of the “rush for gold”. Billions of dollars have been sunk in the oceans, together with our values, which is even more serious. SubOptic needs to focus on how to build
My Friend
to come back on some past events, achievements
from the global community.
OUR VALUES
and behaviour, so as to move forward on a better
motivation should not be “money”, but the desire
I am excited at the prospect of meeting the 2004
basis. Nothing wrong, even a duty, to recognize
to accomplish a task of general interest.
version of our community in the forthcoming
the past wrong doings! The one train that is
SubOptic convention. I am pleased to learn you
running late deserves our attention, not the 99 ones
are attending. The times are so difficult that I sense
that are on time! And we have reached a point
this gathering as timely and valuable.
where many trains have problems!
It is important that our community be able
49
the future global network. We have a mandate Our main
If this desire is dominant, the much needed stability will exist.
Jean Devos
A global guide to the latest known locations of the world’s cableships, as at March 2004 Vessel Name
Built
Parent Company
GT
Speed
SAILING DETAILS (or last known location) Sailed Date Port Country
Arcos
2002
BOHLEN & DOYEN
3790
8
02/13/2004
Singapore
Republic of Singapore
Asean Restorer
1994
SINGAPORE TELECOMMUNICATIONS
11156
16
Not available
Singapore
Republic of Singapore
Atlantic Guardian
2002
GLOBAL MARINE SYSTEMS
7172
14
01/19/2004
Portsmouth(USA)
United States of America
Bold Endeavour
1999
ROYAL BANK OF SCOTLAND
9388
12
01/19/2004
Busan
Republic of Korea
C.S.Sovereign
1991
BRITISH TELECOMMUNICATIONS
11242
13.5
02/16/2004
Falmouth
United Kingdom
C.S.Wave Mercury
1982
GLOBAL MARINE SYSTEMS
10105
16
02/08/2004
Wakamatsu
Japan
Cable Retriever
1997
SINGAPORE TELECOMMUNICATIONS
11026
16
01/29/2004
Batangas
Philippines
Chamarel
1974
FRANCE TELECOM
8575
16.5
Not available
Cape Town
South Africa
Elektron
1969
STATNETT ENTREPENOR
1628
0
02/26/2004
Esbjerg
Denmark
Fjordkabel
1985
UNKNOWN
331
0
Not available
Stavanger
Norway
Giulio Verne
1983
V. SHIPS GROUP
10617
10
02/28/2004
Cape Finisterre
Spain
Ile de Batz
2001
UNKNOWN
13973
15
01/31/2004
Port Said
Arab Republic of Egypt
Ile de Brehat
2002
LOUIS DREYFUS ARMATEURS
13978
15
Not available
Brest
France
KDD Pacific Link
1993
TOKYO LEASE
7960
13
02/24/2004
Wakamatsu
Japan
Leon Thevenin
1983
FRANCE TELECOM
4845
15
01/26/2004
Brest
France
50
Vessel Name
Built
Parent Company
GT
Speed
SAILING DETAILS (or last known location) Sailed Date Port Country
Lodbrog
1985
ALCATEL SUBMARINE NETWORKS
10243
14.5
02/20/2004
Valletta
Malta
Maersk Defender
1996
MOLLER A.P.
5746
16
Not available
Korsor
Denmark
Maersk Reliance
2001
MOLLER A.P.
6292
14
02/11/2004
Recife
Brazil
Maersk Responder
2000
MOLLER A.P.
6292
14
Not available
Curacao
Netherlands Antilles
Miss Clementine
1996
BROOKLYN SHIPPING
3637
9
Not available
Singapore
Republic of Singapore
Newton
1976
UNITED KINGDOM (GOVT.)
2779
15
02/22/2004
Southampton
United Kingdom
Pertinacia
2003
ITALMARE
12100
14
02/06/2004
Dardanelles
Turkey
Peter Faber
1982
UNKNOWN
2854
0
Not available
Calais
France
Pleijel
1972
TELEVERKET
1650
11
01/30/2004
Stockholm
Sweden
Raymond Croze
1983
FRANCE TELECOM
4845
15
01/18/2004
Gibraltar
Gibraltar
Rene Descartes
2002
FRANCE TELECOM
13864
15
02/06/2004
Valletta
Malta
Segero
1998
KOREA SUBMARINE TELECOM
8323
15
02/20/2004
Ulsan
Republic of Korea
Sir Eric Sharp
1989
GLOBAL MARINE SYSTEMS
6141
13.5
Not available
Bermuda
Bermuda
Teliri
1996
ITALMARE
8345
14.5
02/19/2004
Dardanelles
Turkey
Trinity Supporter
1988
UNKNOWN
7374
15
Not available
Singapore
Republic of Singapore
Tyco Decisive
2002
TRANSOCEANIC CABLE SHIP
12184
14
Not available
Baltimore
United States of America
Tyco Responder
2001
TRANSOCEANIC CABLE SHIP
12184
14
01/17/2004
Montevideo
Uruguay
Umm Al Anber
1972
EMIRATES TELECOMMUNICATIONS
7750
18
01/26/2004
Jebel Ali
United Arab Emirates
Wave Sentinel
1995
GLOBAL MARINE SYSTEMS
12330
18.25
02/27/2004
Dover Strait
United Kingdom
51
Diary
FORTHCOMING CONFERENCES AND EXHIBITIONS
16-19 March 2004
Oceanology International 2004, London, UK, www.oceanologyinternational.com/
17-18 March
Carriers World Asia 2004, Hong Kong, www.carriersworld.com/2004/ca_HK
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 52