Analysis: Partnership strengthens terrestrial routes between Asia and Europe

China Telecom and Rostelecom have signed an agreement to upgrade the Russian carrier’s Transit Europe-Asia (TEA) terrestrial cable system. The agreement was signed during Capacity China 2011.

The joint investment of over $70 million will see TEA’s existing SDH ring upgraded to 10G technology as both carriers seek to meet the increasing traffic demand between Europe and Asia. The project is scheduled for completion in the first quarter of 2012, when it is expected to become one of the shortest 10G routes between Europe and Asia.

“This project will further strengthen China Telecom’s resources and capability in the EMEA region and facilitate our business strategy in better serving transit in the Europe-Asia market,” said Sun Kangmin, VP of China Telecom. “In addition, our huge base of domestic customers will benefit from this investment which will provide fast and stable connectivity between China and Europe.”

Terrestrial connectivity between Europe and Asia has traditionally been limited and the move could offer an enhanced option for carriers currently reliant on subsea links. The two carriers plan to eventually launch new services on the TEA system between major cities in Europe and Asia. The partnership follows a co-operation memorandum between the two companies in 2006, which also saw Rostelecom launch a fibre-optic link between the Russian cities of Belogorsk and Blagoveshchensk, and the Chinese city of Heihe.

“Rostelecom’s carrier strategy is to focus attention on the development of our international services based on the unique geographical position of Russia,” said Pavel Zaytsev, VP and commercial director of Rostelecom. Over the last five years, China Telecom has continued to extend its terrestrial routes between China and Europe through its wholly-owned subsidiary China Telecom Europe. Under the ‘Information Silk Road’ project, China Telecom Europe has established three diversified cables through Russia, one of which also runs via Mongolia. The company is said to have already invested over €30 million on establishing its network, which offers single channel speeds of up to 10G and supports SDH and DWDM transmission technology.

This latest development brings TEA in-line with China Telecom Europe’s standard 10G offering, while also enabling the carrier with an option to begin providing longer-term IRUs on the route. According to China Telecom Europe’s MD Yan Ou, the upgrade is a result of a period of close collaboration between the company and the Russian carrier. “We have maintained close liaisons with our Russian counterpart not only on the network co-operation but with how it can provide internet services and solutions to its domestic market,” said Ou.

China Telecom Europe plans to introduce a fourth terrestrial route between China and Europe by the end of this year, which will run via Russia and Mongolia. According to Ou, this route will offer lower latency than on any of the existing terrestrial routes. “The benefit of terrestrial cable systems is in the latency,” he said. “They are also more stable than subsea links, which often require several weeks or more to repair if damaged.”

According to Ovum analyst Charice Wang, demand for terrestrial cables linking Asia and Europe has continued to increase as finance trading and international business between the two regions has grown. The shortest Eurasia routes, however, pass through countries with heavily regulated telecoms markets causing prices to be relatively high. Establishing crossborder fibre networks between countries such as China, Russia and Kazakhstan has proved a challenge for operators, which often experience delays with receiving approval as well as encountering high building costs. Wang identifies that the provision of more capacity on terrestrial cables between Asia and Europe could help to satisfy the high demand and allow prices to drop, making the route more affordable. Terrestrial cables can also offer better latency to carriers, as well as providing an alternative to subsea links.

“As a result of increasing global business integration and huge demands on various telecoms services between Asia and Europe, we expect more partnerships between Chinese and foreign carriers to build or upgrade more terrestrial cables,” said Wang.