1. Risks are systemic rather than operational. Across the stages and the halls, delegates discussed the enormous opportunities in the APAC market.The demand is certainly there for connectivity! Where the icebergs could appear though is on the systemic or operational side. Regulatory issues related to sustainability and data sovereignty took up a lot of stage time, as did the recent squeeze on capital availability – something that came up at lot at Capacity Europe, too. Technological obsolescence was also identified as a potential threat, particularly in areas like smart cities. The demand is there but meeting it will be a complex process.
2. Submarine cable builds will not slow down. The APAC submarine cable market is buzzing with news of upcoming large projects, and a presentation by TeleGeography put some numbers to the story. According to the analyst firm, both spending on cables within Asia and projects linking the region to Europe and the Americas will rise by a factor of five between 2022 and 2025. As in other regions, this is driven by growing involvement from content providers, who between 2023 and 2025 will contribute 80% of the total investment in trans-Pacific cables. This figure stood at just over 20% between 2016 and 2022.
3. New hubs are coming. Singapore’s hub position is longstanding, but space is running out and data centre build has slowed. But the rest of the region is growing at a fast clip. The Capacity Asia team already assessed the potential of several alternative regional hubs, and this became clearer on stage at the event this year. Johor, Batam and Mumbai were all spotlighted for their access to cheaper land acquisition and cleaner and cheaper energy. These up-and-coming APAC tech hubs can address build squeezes in incumbent markets and bring connectivity closer to users across the region.
4. AI is changing the sustainability calculation for data centres. Even though they require enormous processing power (up to 170 MW per day was one prediction), many of the compute-heavy applications of AI – particularly large language models – are not latency sensitive. That means they can be in larger data centres away from where users are. And that means that data centres specialising in AI provision can, in theory, be built where renewable power is, instead of prioritising closeness to the applications. This shifts the perspective.
5. Right of way is a stumbling block. In markets across APAC, there is demand for fibre and operators want to build it, but getting permission to put the cables down is bringing work to a halt in places. Bangladesh for example has some of the lowest FTTH rates in the region, primarily due to licensing limitations.According to one speaker it took 18 years of asking before a Right of Way Officer was appointed in Pakistan. Various panellists agreed more government involvement is needed to streamline approvals and ensure collaboration between utility providers. As one speaker put it, “fibre shouldn’t be regulated as a utility, but it should be managed like one.”
6. Localisation is a big issue – and not just data. Localisation of data, content, and compute power is an important topic in connectivity across the world. There are several factors that are driving it in APAC too. As well as the need to localise processing power to improve performance, content localisation was a vibrant talking point in the Capacity Asia halls. Across Asian markets local content is generally more popular than international content, but it is currently stored in global hubs. Content providers are looking to host content and CDNs as locally as they can to take the shortest possible path to the end user. On the business side, while India and Singapore are well served with cloud regions, this is less the case for Malaysia and the Philippines, which needs to be addressed to ensure growth.
7. Price erosion in Asia-Pacific is slowing. According to a presentation delivered by a TeleGeography analyst, the weighted median global 100 Gbps wavelength price declined by over 20% per year on average between 2016 and 2019 along certain routes to and from APAC. But from 2019 to 2022, prices only fell by less than 10%. This can be explained by several factors. Delays in capacity upgrades have kept prices higher than expected, as well as supply chain issues being resolved.
8. Messaging is growing, but pricing is a puzzle. There is significant potential for growth in the A2P and messaging market in Asia. Consumers are well used to communicating with brands in this way, particularly with OTT providers like WhatsApp, LINE and WeChat. This means the trust is there, but are the revenue opportunities? Capacity Asia delegates heard from the stage that charging per converted message, rather than per sent message, will boost trust in the supply chain and ensure revenue can be gradually and sustainably increased. But monetisation strategies need careful thought, and this should include close collaboration with the brands actually marketing products to consumers to learn how preferences might be changing.
See more about what happened at Capacity Asia 2023 here.
