Navigating geopolitical hurdles in the Middle East

The delay in the $500 million Regional Cable Network (RCN) project in the Middle East has brought to light the geopolitical hurdles that carriers face when building extensive international networks in some parts of the world.

Several terrestrial Middle Eastern cable projects are being deployed, which aim to offer alternatives to the subsea route via the Red Sea and through Egypt’s ‘fibre-optic corridor’. These include the RCN, the Jeddah-Amman-Damascus-Istanbul (JADI) network and the Europe Persia Express Gateway (EPEG) project.

As Capacity reported in October, ongoing revolts in Syria have pushed back the schedule for the RCN’s completion, which had originally been slated for the end of 2011. According to reports, the EPEG launch has also been delayed through the lack of availability of the cable line’s sea segment between Iran and Oman.

The Arab Spring, and in particular the temporary shut-down of the internet at the start of 2011 by former Egyptian President Hosni Mubarak, raised the importance of route diversity between Asia and Europe. But carriers were actually seeking alternatives to the Red Sea well before those events.

Alexander Shepherd, a partner at law firm Simmons & Simmons, describes the Red Sea as a significant choke point for world telecoms. “A number of operators are considering terrestrial alternatives to ensure route diversity,” he adds.

Many agree that the Red Sea route is a bottleneck for inter-regional subsea routes, citing a variety of political and regulatory factors that can potentially confront carriers when undertaking international cable projects. According to industry estimates, about 95% of international voice and data traffic between Europe and Asia passes through this fibre-optic corridor.

Michael Ruddy, director of international research at Terabit Consulting, says respective capacity and cost issues face alternative routes via South Africa or Russia and China. Ruddy says the concern with the Red Sea route is that the concentration of 10 or so cables in a very narrow corridor leaves them open to damage from anchors, fishing, trawling, sabotage and natural disasters.

“Carriers are also uncomfortable having so much of their capacity vulnerable to the political will of a single country,” he adds. “This brings up issues of regulation and regulatory fees, eavesdropping and other traffic management/interception issues.”

Ruddy also says that Telecom Egypt’s role as the primary carrier for the terrestrial transit corridor “presents another issue of putting too many eggs in the basket of a single carrier and related pricing concerns”. He contends that prices for transit capacity through Egypt are higher than international benchmarks.

Regulatory factors have also considerably delayed the roll-out of a number of new subsea cables connecting across Egypt until recently. Abu Saeed Khan, a senior policy fellow at LIRNEasia, a regional ICT policy and regulation think tank, says Egyptian authorities’ delays in granting permission to lay overland cable to cross the Suez Canal have impacted entire cable projects.

Mohamed Saro, director of international customers and networks at Telecom Egypt, believes there have been several major misconceptions about Egypt as a cable route.

He says, for example, that the existence of multiple subsea cables is a benefit rather than a disadvantage, allowing a higher level of diversity and resiliency and the ability to hop on and off different cable systems and cross-connect to a different system if an outage or cable cut occurs in a marine segment. He adds that he does not recall any major multi-cable cut involving subsea cables since 2008.

Furthermore, Saro says that Telecom Egypt is a tried, trusted and transparent transit carrier and Egypt is a historically reliable route: “From a latency perspective it’s a proven route and has been tested many times before. We understand that alternatives must be there, but these will be an operational challenge and at the moment we don’t see any stable alternative route.” He says the company’s transit facilities are charged at a fair, standard price and feels that the market “accepts this price”.

He also points out that many international carriers have choosen to establish core nodes in Egypt rather than other locations, as “they realise it is a pivotal area for their networks”. Saro believes that the concentration of cables through Egypt allows the country to act as an international hub, with Telecom Egypt seeking to create an ultra-high capacity mesh network across the country to link up different routes.

The company also hopes to increase its number of landing points, which presently stands at four, and is holding ongoing discussions with the government to establish one or two in the near-term.

Saro says many past govermental delays in issuing subsea cable permits were down to the previous regime, but the new regime has a fresh, transparent mindset that is open to change and has streamlined its processes. Indeed, most previously delayed cables are now in service. “We are creating a transit-friendly environment, an Egypt 2.0,” says Saro.

It’s not just routes through Syria that are encountering problems. Building a terrestrial cable from the south would alternatively necessitate construction through Iran or Iraq, but the former route can be complicated because of international sanctions and tensions.

Simmons & Simmons’ Shepherd says international sanctions generally do not cover international communications interconnection because “it’s vital to maintain communications with these countries”.

But he says there are associated issues, including the practicalities for telcos making or receiving international traffic payments to or from a country on which sanctions have been imposed, and for cable system operators in relation to options for contractors able to assist with construction or maintenance of facilities in these countries. In addition, he says sanctions prevent US companies from partaking in projects involving subsea cables or terrestrial routes via Iran and Syria, limiting US carriers’ options if seeking routes other than the Red Sea.

Iraq is emerging as a potential option. The market is showing signs of opening up and received its first subsea cable landing earlier this year in the form of Gulf Bridge International (GBI). TeleGeography figures show that Iraq’s mobile penetration surged from a meagre 0.3% of the population in 2003 to almost 77% by the end of 2011.

But despite these positive signs, some observers still have major concerns about Iraq. Sources have referred to a combination of political delays that have prevented the effective use of subsea cables, as well as government postponements of fibre roll-outs and infrastructure pricing that has seriously limited market growth. One unnamed source indicates that prices for fibre access are four to five times higher than those in surrounding countries.

Kassim Al-Hassani, a consultant with Diginets Consultancy Services, says the Iraqi population is “hungry” for technology, but mobile operators only offer 2G, internet penetration stands at less than 5% of households and private investment is being hindered.

TeleGeography estimates that less than 1% of Iraqi households had a broadband connection at the end of June 2012 and observers say a significant capacity increase is needed for 3G.

Terabit Consulting’s Ruddy concludes that markets like Iraq and Afghanistan are not yet viewed as serious international transit points.

Ruddy says that while Middle Eastern terrestrial cable projects face many significant challenges, there is an urgent need for “reliable, coherent, cost-effective pan-regional terrestrial connectivity”.

He says that carriers constructing point-to-point cables are often beholden to individual operators in countries, which could be exacerbated by political problems. “Significant progress has been made in the deployment of terrestrial fibre-optic infrastructure, but a more harmonised approach to accessible multinational connectivity is needed,” he says.

Ruddy adds that long-distance roll-outs can be delayed for years and that fibre-optic cables like the 27,000km Trans Asia Europe (TAE) system are old legacy systems. He believes the construction of denser mesh networks could ultimately help circumvent geopolitical challenges and cites one highly ambitious initiative that proposes to do just that: the Longest International Open-access Network (LION) (see box-out).

“From our perspective, a coherent pan-regional mesh infrastructure would offer significant advantages and perhaps be able to compensate for conflicts or instability in any given market,” says Ruddy. He adds that international terrestrial infrastructure has struggled to compete on an equal footing with international subsea infrastructure, but as more terrestrial networks are deployed and if multinational initiatives such as LION succeed, then it could become “a more level playing field”.

Sure but steady progress, however, is being made. “The reality is that there are many more cables and many more routes available than even a few years ago; this gives alternative options to deal with when cuts occur,” says Shepherd.

The Longest International Open-access Network (LION), the brainchild of LIRNEasia, hopes to link 32 countries in Asia and connect to Europe.

The key to the initiative is rolling out fibre-optic cables alongside 141,000km of pre-existing roads that form the Asian Highway project, which is assisted by the UN Economic and Social Commission for Asia and the Pacific (ESCAP).

LIRNEasia’s Khan says the idea is to offer open access to licensed carriers. He says ownership will belong to respective governments and costs will be kept down partly due to the lack of need for rights of way, which can sometimes constitute more than 50% of total cable project costs.

One aim is to provide diversity and redundancy for submarine cables linking Asia with Europe. The mesh nature of the network is also intended to make it highly resilient, with the ability to reroute traffic. “Route diversity is the network’s DNA,” says Khan.

He points to Asian bandwidth costs of six times those in Europe or North America, but expects LION to help make internet access a similar price or cheaper than in the EU. The network is expected to help reduce the impact of ownership and protectionism by single carriers and countries, as well as problems involving cut cables, sabotage and natural disasters.

It is also anticipated to have major benefits for landlocked countries like Mongolia and Afghanistan that are often beholden to their neighbours for access, as well as countries that Khan says are becoming isolated, like India and those in southern Asia.

Khan anticipates that LION will be funded via a public-private investment model and will provide a rapid payback. “The challenge is to bring the government and private sector together on the table,” he says.

He is confident the project will proceed, although there is no specific public timeline for roll-out yet. “Once there is a terrestrial open access network, every government will feel the economic benefit of opening up,” says Khan. “I believe that all governments have realised the imperative of getting broadband and without international connectivity they cannot have successful cloud services.”