04 January 2018
OTTs such as Facebook and Amazon have changed the dynamic of the subsea industry, a key topic for attendees at the first Subsea Connect Americas conference in Florida.
Mike Cunningham, CEO of Crosslake
Fibre, described "the supply side, the top-line/sales side and
the finance side" as the three silos for any new subsea cable
builds. Gabriel Holgado, VP of the global account division and
wholesale services in Latin America at Level 3 Communications
–now CenturyLink – discussed the capacity
price erosion happening in Brazil. But one topic that kept
coming up throughout the Subsea Connect Americas conference was
the emergence of over-the-top (OTT) providers and the influence
they are having on the industry.
The surge of OTT players entering the submarine cable market
has increased over the last few years – with one of
the most recent announcements being Amazon and Facebook joining
a consortium of investors that includes SoftBank, NTT, PLDT and
PCCW Global on the 60Tbps Jupiter submarine cable system
linking the US with Japan and Philippines. Speaking exclusively
to Capacity Larry Schwartz, chairman and CEO of Seaborn
Networks, says that OTTs have impacted the market "in a
"I think they’ve been great at leading the
growth of new-build systems," explains Schwartz.
"They’re obviously the biggest consumers of
global transit these days and I think they are opening the door
for new business models around these types of projects, which I
think is always welcome. They set the stage well for a player
like Seaborn Networks to play an ever increasing role on other
projects on other routes."
Lots of money
Interestingly, Artur Mendes, COO of Angola Cables has a
different perspective on the matter.
"There are different types of discussions from people who
think, yes it’s helping, because there is lots of
money being invested in the subsea industry," he
"But it’s not clear how that will impact the
operators. Most of us believe that it will affect us
negatively, because there is capacity you’d now
sell to OTTs. [In the future] they will use their own cables,
so you’ll lose that business."
He says that because of the way the OTTs have been
developing these projects "is creating some noise between the
operators". He explains: "Typically they use one operator, to
take care of the operation, maintenance and the local licences
etc. So that operator could be in a different position from the
other ones and may or not have a controlling monopoly in the
TE SubCom, one of the key builders and providers of global
undersea communications technology, says that the introduction
of OTTs has changed the way we think and therefore create
submarine cables as a whole. In a company statement to
Capacity, the company said: "The increased involvement of OTT
providers is significantly changing the market. It has
transformed the way we think about capacity from being a
'product’ to being the means of delivery for a
product (content applications)."
TE SubCom continued: "It has also changed the usage of
subsea cable from a resale model to one of internal
consumption. All this has had the effect of breaking down
significant regulatory barriers and breaking up some
monopolistic business paradigms."
Paul Scott, president of C&W Networks, thinks like
Schwartz it’s a good thing, but highlights that
due to the disruptive nature of OTTs it was unlikely for them
to stick with the status quo.
Certainly on a global stage are making an impact, he says,
"particularly with the intensification of their participation
in and investment in subsea cables. To date
they’re following more of the traditional
engineering profile of the subsea cable. I’d wait
for the day they’d bring that DNA of theirs, which
is of a disruptive nature, challenging why this way –
why not that way?" says Scott.
"I don’t believe we’ve seen the
impact of that yet. We certainly haven’t seen OTTs
invest in the Caribbean with subsea cable yet."
Xtera’s founder and chief sales officer, Robert
Richardson, observes that a change in the landscape through the
involvement of OTTs is the biggest impact of them all.
"It’s changed the whole model really.
We’ve moved from carriers being the purveyors of
long-haul bandwidth to the OTTs doing it themselves. With a
whole new focus, it’s really disrupted the market.
I understand that if the FCC’s net neutrality
thing comes [see page 22] carriers will then have control of
access," says Richardson.
Subsea Connect Americas,