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 positive way”.
“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 says.
“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 region.”
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.
