global capacity pricing - subtel forum · 2019. 7. 11. · global capacity pricing 5 data gathering...

SUBMARINE TELECOMS

GLOBALCAPACITYPRICING

MARKET SECTOR REPORT

2 SUBMARINE TELECOMS MARKET SECTOR REPORT

3GLOBAL CAPACITY PRICING

TABLE OF CONTENTSExecutive Summary ............................................ 4Methodology ..................................................... 5

TRANSATLANTIC REGION .............................8 Route Overview ........................................... 10 Transatlantic Pricing .................................... 15 Transatlantic Regional Outlook ................... 16

TRANSPACIFIC REGION ...............................18 Route Overview ........................................... 20 TranspacificRegionalOutlook ..................... 28

AMERICAS REGION .....................................30 Route Overview ........................................... 32 Americas Pricing .......................................... 35 Americas Regional Outlook......................... 36

INTRA-ASIA REGION ....................................38 Route Overview ........................................... 40 Intra-Asia Pricing ......................................... 44 Intra-Asia Regional Outlook ........................ 45

EMEA TO ASIA REGION ..............................46 Route Overview ........................................... 48 EMEA & East Asia Pricing ........................... 50 EMEA & East Asia Regional Outlook .......... 51

Global Capacity Pricing Benchmarks ............... 52Capacity Pricing Outlook (Conclusion) ............ 58Works Cited ..................................................... 59Appendix – Capacity Pricing Tables ................ 60

SUBMARINE TELECOMS MARKET SECTOR REPORT4

It all starts in the Atlantic. Transatlantic routes have set trends throughout the history of the submarine fiber industry and will continue to do so in the future. The New York – London route is the most commercially competitive in the world and will continue to be so through the foreseeable future.

The Transatlantic will be greatly impacted by the market shift from connecting cities to connecting data centers. As Over-the-Top (OTT) providers like Amazon, Facebook, Google and Microsoft continue to expand their infrastructure and drive cable development, continue to expect new cables that do not follow the more traditional routes.

Like the Transatlantic routes, Transpacific routes will be shaped by the market shift towards interconnection of data centers instead of connecting population centers. Cloud service providers are developing infrastructure in a major way all throughout East Asia and the Pacific. Expect new cables to connect to critical trade and technology hubs that will not necessarily adhere to traditional cable routes.

As OTT providers drive several new Transatlantic and Transpacific cables, the possibility of these cable owners selling off their excess capacity and negatively impacting the market needs to be considered.

Capacity pricing for routes in the Americas region will depend heavily on economic health in South America. While these routes may never see the same level of demand as the Transatlantic and Transpacific, they are becoming increasingly important to OTT

provider infrastructure plans and global economic development.

Intra-Asia routes will continue to provide important paths between Tokyo, Singapore and Mumbai. While the Tokyo – Singapore route should remain relatively unchanged in the future, the Singapore – Mumbai has the most potential for growth. As new cables and telecoms development turn towards India’s growing technology sector, this region is prime for growth.

EMEA to Asia routes have been well established for decades and carry important traffic between Europe and Asia. However, they are high latency and expensive to operate. Threats to the health of this route will be planned systems that bypass the Suez Canal to avoid sustained economic and political instability in the Middle East and Arctic routes that connect Europe to Asia via much shorter pathways. Should these alternatives become truly competitive, these routes will be negatively affected.

STF Analytics has developed a new Pricing Benchmark model to help identify healthy cable routes. This model considers several cost and pricing factors to provide a quick reference score to help the industry better understand the economic health of submarine cable systems from a route and regional perspective.

Overall, there seems to be a healthy global market, but a lot depends on what OTT providers will do and how cost-effective system upgrades and new cables can be implemented.

EXECUTIVE SUMMARY


DATA GATHERING AND VALIDATION

This edition of the Submarine Telecoms Market Sector Report was authored by the analysts at STF Analytics, a Division of Submarine Telecoms Forum, Inc. It provides submarine cable system analysis for SubTel Forum’s Submarine Cable Almanac,

Cable Map, Industry Report and Industry Newsfeed. For the Capacity Pricing edition, STF Analytics utilizes both interviews with industry experts and its proprietary Submarine Cable Database. The database tracks some 400+ current and planned domestic and international cable systems, including project information suitable for querying by owner, year, project, region, system length, capacity, landing points, installers, etc.

The Submarine Cable Database is purpose-built

METHODOLOGY


by STF Analytics’ database administration team, which is powered by MySQL and retained on a Microsoft Azure platform. Data is collected from the public domain and validated through interviews with industry experts in order to provide the most accurate, comprehensive and centralized source of information in the industry. At present, STF Analytics’ Submarine Cable Database chronicles the work of some 18 financiers, 477 cable owners, 22 system suppliers, 12 upgraders, 15 system surveyors and 25 system installers. In addition, it manages data for some 400+ projects, across seven regions and 840+ landing points.

To accomplish this report, STF Analytics conducted continuous data gathering throughout the year. Data assimilation and consolidation in its Submarine Cable Database was accomplished in parallel with data gathering efforts. Trending is accomplished using known data with linear growth estimates for up to three following years.

STF Analytics collected and analyzed data derived from a variety of public, commercial and scientific sources to best analyze and project market conditions. While every care is taken in preparing this report, these are our best estimates based on information provided and discussed in this industry.

BENCHMARKINGSTF Analytics is introducing the Pricing Benchmark – a numerical grading system calculated from a variety of data points to help consumers better understand the health of submarine cable systems from a route and regional perspective. The benchmark grading system will also provide decision makers the tools to help support their business plans. The Pricing Benchmark is a numerical grade calculated on various factors including 100G circuit pricing, cable construction/installation cost, and the number of available wavelengths for sale on a cable system. This model does not consider depreciation and is intended as a rough estimate.

This Pricing Benchmark assumes the Annual Costs as the total system cost divided by the standard 25-year expected life span of a cable system, assumes Available Wavelengths as the total capacity of all systems on the route divided by 100G wavelengths, assumes Lit Wavelengths as the average lit capacity percentage for the region (STF Analytics, 2019) and assumes the wholesale pricing of 100G wavelengths is the median price for a given route to calculate Sales.

The Total Pricing Benchmark represents the total ratio between all annual costs vs all annual sales on the entire route while the Average Pricing Benchmark represents the average of each individual cable system’s ratio. Ratios above 1.0 indicate a healthy route, while ratios below 1.0 indicate a route that may be nearing the end of its economic feasibility.


TRANSATLANTICREGION


TRANSATLANTIC REGIONROUTE OVERVIEW


NEW YORK – LONDON ROUTE ROUTE SUMMARY

The New York – London Transatlantic route is the most saturated and mature market in the world with high demand on this route driven by financial traders, cloud services and enterprise customers. This route dates all the way back to the days of telegraph cables and connects two of the world’s biggest economic centers. Capacity pricing along this route is competitive and new capacity is added on a consistent basis whether through system upgrades or construction of entirely new submarine fiber cables. (STF Analytics, 2019)

The nine systems serving this route are the most of any single route in the world and allows for healthy competition. Details for these systems are as follows:


ROUTE ACTIVITY

While new cables have been few and far between along this route since 2001, recent years have seen consistent activity for new cable systems once again. As bandwidth demand between New York and London continues to grow – due to an increase in usage of enterprise and consumer level cloud services – system upgrades are not enough to keep up with capacity needs. (STF Analytics, 2019) Additional cables will be needed along this route to keep up with bandwidth demand.

Currently, there is only a single cable system planned that will serve this route. Details for this system are as follows.

TRANSATLANTIC REGION


ASHBURN – PARIS ROUTEROUTE SUMMARY

With the rise of Over-the-Top (OTT) providers and a continued convergence of the data center and submarine fiber markets, (STF Analytics, 2018) a new Transatlantic route was established in 2017. This route connects Ashburn with Paris in order to directly connect to data centers in mainland Europe. Not only does this route provide direct connections between two of the world’s biggest data center markets, it provides alternative routing away from the crowded New York – London route.

There is currently one cable that directly serves this route. Details for this system are as follows:

ROUTE ACTIVITY

As this route is still relatively new, and targeted mainly by OTT providers, there is not a lot of commercial telecoms activity – though that may change in the future. There is currently one cable system planned that will directly serve the Ashburn – Paris route. Details for this system are as follows:


TRANSATLANTIC REGIONBRAZIL – AFRICA ROUTEROUTE SUMMARY

Another new Transatlantic route was established in 2018 connecting Brazil and Africa directly. Previously, traffic between Brazil and Africa had to be routed through the United States and Europe before getting to Africa. This new route dramatically reduces latency and provides for new economic opportunities for developing markets in both South America and Africa.

There are two cables that currently serve this route and connect Brazil to Angola and Cameroon. Details for these systems are as follows:

as follows:

ROUTE ACTIVITY

Looking forward, there are two systems planned that will directly connect Brazil and Africa. Both cables will be connecting Brazil with South Africa. Details for these systems are as follows:


MONTHLY LEASE

Monthly lease pricing for New York – London is the lowest in the world due to the high amount of network competition and large amount of demand driven by financial traders, cloud services and enterprise customers between two of the biggest global economic hubs. Network owners and operators along this route can take advantage of economy of scale as they have access to a large customer base and can spread out their costs accordingly. The Ashburn – Paris and Brazil – Africa routes are brand new and do not currently have reliable capacity pricing information.

Pricing for a 10G circuit on the New York – London route ranges from as low as $1,000 to as high as $5,000 with an average price of $3,150 and a median price of $3,400. Prices vary based on demand at a given time of year, availability, cable operational costs, volume of the purchase and the length of the agreement.

Pricing for a 100G circuit on the New York – London route ranges from as low as $8,000 to as high as $42,000 with an average price of $21,600 and a median price of $15,000. Prices vary based on demand at a given time of year, availability, cable operational costs, volume of the purchase and the length of the agreement.

IRU

IRU pricing for New York – London is the lowest in the world due to the high amount of competition and large amount of demand driven by

financial traders, cloud services and enterprise between two of the biggest global economic hubs. Network owners and operators along this route can take advantage of economy of scale as they have access to a large customer base and can spread out their costs accordingly. Ashburn – Paris lease prices will be higher as there isonly a single cable serving this brand-newroute resulting in little current competition. TheBrazil – Africa route is brand new as of 2018 anddoes not currently have reliable capacity pricinginformation.

TRANSATLANTIC PRICING


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global capacity pricing - subtel forum · 2019. 7. 11. · global capacity pricing 5 data gathering...

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