GCX tackles Indian telecoms carnage with bold investment plan

A cable from China to Europe and new investments in Mumbai are among GCX’s plans to set it apart from the troubled Indian mobile business. Alan Burkitt-Gray interviews GCX CEO Bill Barney

The international unit of Reliance Communications is planning a new 100G subsea cable stretching from China to India to Europe. The new cable, to be built by Global Cloud Xchange (GCX), the international cloud and carrier unit that is owned by the Indian telco, will be called Eagle and will be part of the group’s Cloud and Fibre Initiative, announced in November. It will be ready for service in 2020, says Bill Barney, chairman and CEO of GCX, who is also CEO of Reliance Communications (RCom).

But at the same time RCom/GCX is recasting itself. It is getting out of the troubled Indian mobile business, where oversupply of operators has driven down prices to an unsustainable level, and is focusing on enterprise communications and data centres in the Indian market and subsea cables in the global market. 

GCX already has a global cable network, but the oldest part of that is Flag – originally Fibre-Optic Link Around the Globe – which went into commercial service in 1997. “We’ve had the largest capacity sales in our history this year, particularly from India to the Middle East,” says Barney. “And from Europe we see an absolutely huge demand, particularly from content players. It’s probably the best time in our history to build this and fund it.

He’s confident that GCX will get the business, comparing the sales performance on two of its previous cables: Falcon, which links the Middle East and Egypt with India; and Hawk, which connects Europe with the Middle East and Egypt. 

“For Falcon we were 130% oversub-scribed when we hit the water. Hawk was 80% oversubscribed.”

Hottest in decades

Over the next few years the subsea cable business is going to be “the hottest it will be for the next few decades”, he adds. And that’s especially the case for a company centred on India, which is seeing a booming demand for internet access – thanks, in large part, to the arrival of Reliance Jio. That’s not connected to RCom, except that each is owned by a different son of the late Dhirubhai Ambani. One, Anil Ambani, counts both RCom and GCX among his operations. His older sibling, Mukesh Ambani, runs Reliance Industries, which launched Jio in late 2016 with rates so low they have caused carnage throughout India’s mobile industry (see page 6).

“India is now the largest user of bandwidth in the world,” says Barney. “It was fifth before the arrival of Jio, but it’s now the largest. Nearly half the world’s population is reachable within a short distance from India’s borders, giving India a strategic edge in the new digital era.”

The new cable will be split into two parts: Eagle East, running from Mumbai to Hong Kong, with a number of branches, and Eagle West, running from Mumbai to Sicily via the Red Sea and Egypt.

“We will be fully operational on both legs by 2020, with our customers pushing for an early date. These systems can be built quickly these days.” Eagle will have fewer landing stations than Flag. That helps speed of delivery, he says: “Providing power to each location can be a problem.”

Who’s building it? “Vendors will be announced when we’ve picked them,” is all he’ll say. “We’re in the process right now.” 

Eagle “will help triple the size of the company by the next decade”, says Barney. “It will create synergy with our existing cables”, because it will be easier to do restoration and maintenance. “It means in three or four years we will have duplication across all our cables.” 

Who’s going to use Eagle? GCX has two letters of intent and three on the way, he says. He’s aiming to have three to announce by the time of the Pacific Telecommunications Council conference in Hawaii in late January.

New technology 

Technology has advanced significantly since those cables of the late 1990s and early 2000s. There were dot-com bankruptcies and not much new investment. “Now we have new technology players such as Ciena and Infinera, and a lot of the advances come from the over-the-top [OTT] players,” says Barney. “They’re pushing to increase the bandwidth. Most cables were sub-10G, but new cables are 10G and are 100G-enabled.”

There are hotspots around the world that have lots of capacity, and areas that don’t, he notes, comparing the capacity available in Hong Kong with “the entire Middle East”. He also points to Turkey and eastern Europe as areas with less capacity than they should have. 

Better fibre connections to poorly connected places with low-cost labour will help boost the service economy, he adds. “The service economy will chase lower-cost labour – and fibre and data centres will chase right behind.” That’s one reason fibre is going to India, the Philippines and Latin America, he adds. “It’s the human factors. Africa will open up as well, but Africa is probably the last stop.”

OTT providers have started to invest in subsea cable. “They’re in a land-grab now,” says Barney. But the opportunity for them could be “fleeting” as new cables are laid. “We’re seeing more and more video on our platforms and that requires massive infrastructure investment.” This investment was always picked up by carriers in the past, but will the content companies take it up? “It partly depends on the US net neutrality rules,” he says. 

Meanwhile GCX continues to expand its footprint in that other element of infrastructure that Barney knows is essential to the new service economy: data centres. 

The company, along with its investment partner, is planning to announce its new Mumbai data centre project in early January. It is, he says, “a world-class data centre” that aligns with its recently announced Cloud and Fiber Initiative. “This new facility will be a key India data centre hub with direct connectivity into our planned Eagle express subsea cable system,” Barney added.  

It’s not been officially announced so far because of the challenges that are affecting all of Indian mobile communications at the moment. GCX’s parent company, RCom, is in the process of unwinding from the mobile business to focus on the enterprise market. “We didn’t want to make a lot of announcements while we were going through the process with RCom,” he says. “Many people wouldn’t understand that we were two businesses.” But now “there is a lot more clarity in the market”, he adds. So what’s happening at RCom? “It’s a restructuring exercise we’re going through. It all started last year when Jio launched free data. Since then four operators have exited the market. Anyone with less than 15% market share is finding it difficult to continue.” 

Before Jio came into the market, RCom’s enterprise business, plus the data centre operation, plus GCX accounted “for 15-20% of the entire company”. 

Now RCom is trying to sell off its towers, spectrum and mobile activities, and Barney hopes that it will all be over by March 2018. “The new company that will emerge from this is GCX,” he says. 

Shift in the market

With its base in Mumbai on the west coast of India, GCX is trying to shift the market away from Chennai, on the south-east coast. “OTT companies were focused on Chennai,” says Barney. 

But Eagle and other investments mean Mumbai’s fibre footprint will get much better. The new network will be four/six fibre pair systems with initial design capacity of 12-24Tbps per fibre pair. Eagle East will be 7,750km long, with landing points in Singapore and other branching units from Mumbai. 

The Eagle West map shows a single link from Mumbai to Italy, 8,900km long, but GCX says there will be “diverse routing and landing points within the Mediterr-anean and low latency subsea routing from Europe to India and beyond”.

The company claims that the new system will be the fastest Mumbai-to-Hong Kong route, avoiding the outage-prone Malacca Strait. In addition, GCX says Eagle will also be the fastest submarine route between India and key technology centres across the Middle East and Europe.

Barney says: “We’ve got our eyes on the emerging markets, where there will be opportunities.” For data centres too, he hints. “If we were able to get into Riyadh or Cairo we would look at it.” 

The Eagle investment and the yet-to-be-officially announced Mumbai data centre investment are intended to mark a new start for GCX and for a slimmed down, enterprise-focused RCom. 

Meanwhile the carnage across the whole Indian mobile industry continues. There have long been too many operators competing for business, and Reliance Industries’ funding of Jio has focused minds on the need for consolidation. 

GCX and RCom’s enterprise business have a new focus. Whether that ends years of sibling rivalry in the Ambani family is a completely different question. 

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