Clouds are not in the sky, they are mostly underwater, or at least their veins are. Connectivity submarine cables have been with us for 170 years, but the sector is now undergoing a major makeover in how it deals with legacy infrastructure as well as how it builds new one. But most importantly, the key shift is on who is now behind these new projects. João Marques Lima writes.
The shores of Cornwall in the UK are reminiscent of those of other usually seen as more summerly destinations like the Algarve in Portugal or the Côte d’Azur in France. Beautifully sanded beaches with crystal clear water and seaside towns and villages out of a child’s fairy tale adorn spots of the coastline in what is potentially one of the UK’s most-best kept holiday secrets.
However, there is much more to this idyllic southwestern peninsula of England than the eye can see; this is the landing spot to several subsea cables connecting the UK to Canada, the US, France, Spain Ireland and Portugal.
An active hub for landing infrastructure, Cornwall is just one of Europe’s subsea connectivity motors sitting at the center of other highly-active markets that connect the Old Continent to almost anywhere in the world and vice-versa.
This is not a new industry, with the first cable ever deployed dating back to 1850 when an undersea telegraph cable was laid between nowhere else than England and France. The first transatlantic cable would come eight years later to connect Ireland and the US by telegraph.
From legacy to a whole new digital world, the industry has evolved, and 170 years later it still heavily invests in existing and new systems to connect populations and businesses. Since 1990, the submarine telecoms cabling industry has spent nearly US$50 billion in deploying and building out systems comprising more than 1.3 million route kilometers, according to the Submarine Telecoms Forum (STF). As much as $9.3 billion were put to work in the period between 2016 and 2020 alone.
According to Google’s estimate, today, as much as 98% of the world’s data goes through the more than 400 underwater cables currently in service. And if that was not enough, FCC’s commissioner Jessica Rosenworcel estimates that submarine cables are responsible for $10 trillion worth of transactional value every day. “That is more than triple what the United States spends on healthcare annually. It is greater than the Gross Domestic Product of Japan, Germany and Australia— combined. It is a big deal,” she says.
It is undeniable the importance and role of subsea cabling systems in the digital economy, which the COVID-19 pandemic has perhaps come to put an even stronger emphasis on the sector’s relevance. And things continue to change, notably in Europe.
The STF says that transatlantic capacity – which includes systems north or south of the Equator – has tripled in just four years. Whereas in 2016, cables connecting Atlantic shores amounted to 308.3 Tbps, in 2020 this figure skyrocketed to 938.2 Tbps as digital consumption boomed.
With 19 new planned systems for deployment between 2021 and 2023, the EMEA region amounts to the highest number of projects when compared to other markets such as Australasia (13 systems), the Americas (13), Transpacific (9), Transatlantic (6), the Indian Ocean (5) and the Polar region (3) – although, more projects do not necessarily mean more capacity and/or system length.
Around the globe, many players continue to move waters to connect the unconnected, and a growing sensibility around protecting marine life and bringing sustainability to the forefront of deployments has also gained pace. Leading names in the game include Orange Marine, Crosslake Fibre, Alcatel-Lucent Submarine Networks SAS, MainOne, Bulk Infrastructure, Norddeutsche Seekabelwerke GmbH, NJFX CLS, Globenet, Confluence Networks, Aqua Comms, Eastern Light, Seaborn Networks and more.
One of Europe’s players in this space and who is contributing to the large number of projects being developed in Europe is as mentioned, Nordic data center, fiber network developer and operator, and logistics real estate developer, Bulk Infrastructure.
Launched in 2006, the company has today three main cabling systems including Havfrue (connecting the US and Denmark with Irish and Norwegian shores), Inter-City Ring (connected four major Norwegian cities), and the Skagerrak 4 cable (connecting Denmark and Norway.) 
More cables are set to come, including one linking into Canada, as founder and chairman Peder Nærbø tells us his business is witnessing a ramp-up in activity and demand towards the Nordic region.
“We have now started to look at Canada, to have a Northern route that travels directly from the Nordic region into Atlantic Canada, where there is a massive amount of surplus of renewable energy. This project is called Leif Erikson,” Nærbø says.
The project, named after the Norse explorer who set up the first Viking settlement in North America 500 years before Christopher Columbus, comes as global real estate investment management advisor BentallGreenOak committed NOK 1.5 billion (approximately €140 million) last December to support the future growth of Bulk’s core lines of business.
Changing Player Field
Bulk’s investment mirrors a growing trend in the sector whereby investors are now seeing infrastructure that “deals” with data as a class A investment bet with good returns.
Another example was the recent acquisition of Aqua Comms by Digital 9 Infrastructure PLC for $215 million. Aqua Comms is the owner and operator of America Europe Connect-1 (AEC-1), America Europe Connect-2 (AEC-2) and CeltixConnect-1 (CC-1).
Aqua Comms’ CEO, Nigel Bayliff, said of the deal: “The acquisition by Digital 9 will facilitate Aqua Comms in delivering on its vision of efficient infrastructure ownership and deployment to the widest possible market through its Carrier-Neutral approach. It will allow us to accelerate our expansion into new systems and new products in both the Atlantic and new geographies.”
For Bulk’s Nærbø, who believes there is enough market for existing and future players in this digital world, Aqua Comms is not an isolated case. More will happen, and this is all leading to yet another shift in the sector.
“We will see data center players in the market also taking stakes in the fiber optic networks, including subsea networks,” he says. “This will lead to a disconnect from cables being built with telco operators, as part of their original build; instead, they will be initiated by others, for example, like this new company [that acquired Aqua Comms].
“The telcos have pulled back quite a long time ago, but the telcos have an urge in their DNA to build a monopoly, new routes. And this does not sit well with the data center and its operators. They want carrier neutrality so that they can have as many carriers as possible going into their sites. And this way they can also manage the pricing. If you put too high of a price, then your data center locations will be less attractive for the market. It is just about giving access to the data center sites. And what we are trying to do at Bulk is to have a one-stop-shop where we can help with fiber networks and data centers and data center capacity depending on the customer’s needs.”
On top of these market movements, the SubTel Forum Analytics Division of STF explains that OTT providers such as Amazon, Facebook, Google and Microsoft are completely transforming the submarine cable market in their own fashion.
“They are no longer reliant on Tier 1 network operators to provide capacity and are simply build(ing) the necessary infrastructure themselves,” STF says. “This is likely to have a long-term impact as the largest consumers of bandwidth are essentially exiting the market. A side effect of this is that traditional carriers may have a harder time developing a business case for new cable systems.”
The Transatlantic market is shifting from connecting population centers for traditional telephone carriers to connecting data centers for Content Providers. As Content Providers like Amazon, Facebook, Google and Microsoft continue to expand their infrastructure and drive cable development, continue to expect new cables that do not follow the more traditional routes between New York and London such as those from Virginia Beach to France and Spain, Brazil to Europe and Brazil to Africa.
EU’s Digital Decade
And where technology advances, governments follow. As recent as March this year, the Portuguese Government, acting as the presidency of the Council of the European Union from January to June, launched the Commission’s Digital Decade targets which are expected to influence how data is stored in the Union, security is done, and connectivity is built, including submarine fiber systems.
The 25 Member States, as well as Iceland and Norway, have now committed to reinforcing internet connectivity between Europe and its partners in Africa, Asia, the European neighborhood, the Western Balkans, and Latin America, by signing the Declaration on “European Data Gateways as a key element of the EU’s Digital Decade”.
The commission says in a statement that followed the announcement: “Submarine cables are essential to sustain the exponential increase in internet traffic. For one, internet traffic across the Atlantic is doubling every two years.
“New, secure submarine cable infrastructures can serve growing data flows of Africa, Asia, and Latin America. Member States and the Commission will improve the managing of different communication networks and infrastructure while ensuring to strengthen cybersecurity.”
Lisbon is also aware that the existing EU submarine cable infrastructures are aging, and Europe “needs to strengthen knowledge in all domains of this technology” by retaining talent and reinforcing expertise. The average age of the submarine cable systems, that connect the EU Member States with each other or with the rest of the world, is seventeen years, according to the EU.
One of the first initiatives that will come to fruition from the joint ministerial declaration between member states and Iceland, is around the need and design of a mandatory reporting system for submarine cable operators to report cable outages that concern the EU.
The subscribing Member States also call on the European Commission to designate submarine cables as part of the EU’s critical infrastructure, explore the need for targeted support from the external cooperation instruments to investments in submarine cable systems, and conduct a study to map digital public and private connectivity infrastructures (terrestrial, submarine and space) outside of the EU; analyze the main stakeholders in digital connectivity; forecast infrastructure growth in the next ten years and make a gap analysis of digital connectivity infrastructure needs.
Nærbø comments: “The European community needs to or wants to have more control of its own digital infrastructure assets, at least to a point where they cannot be misused by other nations or other vendors.”
Nevertheless, for Norway’s Bulk, the mission seems quite clear: as long as data centers need connectivity, the operator will keep building networks until the data centers have what they need.
“It is always the case of what comes first. Is it the data centers or is it the infrastructure? That is why at Bulk we have focused on building fiber networks to support the data center industry, to come into the Nordic region and will continue to do that for as long as it needs.”
