Softbank Maruyama CLS

In March this year I decided to take a closer look at the submarine cable landscape in Africa and published an article followed by another article in August to take stock of cables that are operational, near-RFS, under construction and planned, with classification and ranking based on geographic mapping. To my satisfaction, it was well received and even cross referenced.

Submarine Cables in Africa

 

Submairne Cables in Africa

 

An afterthought lingered that while the number count of submarine cables looks really encouraging, when their addressable market footprint, network interconnect and overall relevance to meet the burgeoning data requirements set to unfold across Africa in 2019-21 is considered, it’s evidently inadequate, doesn’t coalesce into cohesive connectivity fabric or is heavily skewed to South Africa. I wondered if the industry observers and the wider audience interested in Connected Africa agree or disagree with it. This article aims to take closer look at submarine cables RFS in 2018 and those lined up for 2019-21 and assess their relevance and uncover hard realities that lies ahead. Further it examines the readiness of the existing cable systems and their limitations with respect to scale of connectivity required in the next 3 years. Finally it explores options available with OTT providers and how they could pursue mix and match of options judiciously to build connectivity portfolio across diverse routes.In 2018, 2 transatlantic cable systems were commissioned – SAIL and SACS, connecting Brazil to Cameroon and Angola respectively, opening a new intercontinental route. As 32 Tbps cable system with 100x100G per fiber pair, SAIL has limited relevance if aimed to address requirements in Cameroon only. Camtel, that owns the cable system, needs to widen the addressable market for remunerative utilization. From Cameroon, connectivity needs to be extended to Nigeria with NCSCS (also owned by Camtel) and with MainOne thereafter to reach Ghana, Ivory Coast, Senegal and landlocked countries adjoining Nigeria covered by MainOne’s cross-border terrestrial network. In Fortaleza, collaborate with a submarine cable operator to extend reach to Miami or NY, and cross-connect for access to 10G and 100G IP ports. Notably SAIL and NCSCS land in the same CLS in Kirbi, Cameroon, further NCSCS lands in MainOne CLS in Lagos and hence seamless interconnect is quite feasible, provided there is underlying spirit of collaboration and competitive pricing worked out. It also needs to be considered that with China Unicom as the landing party in Fortaleza and Huawei Marine as the turn-key solutions provider, it might face apprehension with some prospects or World Bank funded projects. 

Comparatively 40 Tbps SACS that lands in Angola, while facing the same limitation as SAIL in Cameroon, is better placed to address markets outside Angola. It indeed is the first submarine cable in Africa that terminates in datacenters at both ends, the gold standard for submarine cables commissioned 2017 onwards. Angola Cables, that owns and operates SACS, is also consortium member of MONET that extends connectivity from Fortaleza to Boca Raton, Florida. It has launched aggressive marketing campaigns and announced string of partnerships with TeracoBroadband InfracoIOX and Silica Networks. It is expected to leverage WACS and terrestrial connectivity to reach South Africa, with the USP of latency between Miami and Cape Town reduced from 338 ms to 163 ms. However two other cables – SABR and SAEx1, under construction, will connect South Africa to US, directly, touching or transiting Brazil. It’s time Angola Cables take up cross-border connectivity to DRC, Zambia, Zimbabwe, Botswana and Namibia with Broadband Infraco, Angola Telecom and Silica Networks to grow addressable market for SACS. It remains to be seen if SACS can leverage its early mover advantage in South Africa and adjoining countries and in Brazil, Argentina and Chile with competitive end-to-end commercials and SLA.

The following are notable observations that’s applicable for SAIL and SACS –

  • Both SAIL and SACS are linear or unprotected cable systems. Any cut in the subsea segment could take 6-10 weeks and even longer to be fixed.
  • Camtel and Angola Cables being WACS consortium members, could jointly activate capacity between Cameroon and Angola for protected connectivity and it will consume MIU Kms minimally for the 2,500 Kms subsea span or 1,250 Kms for each party. In this arrangement either party does not incur any out of pocket expense and debits their capacity inventory in WACS negligibly, but credits reliability and resiliency.
  • Some providers are evaluating commercial feasibility of South Africa-Angola/Cameroon-Brazil-US with WACS+SACS+MONET and WACS+SAIL+Seabras-1/BRUSA with WACS capacity from their inventory. The first option is likely to gain more traction as it consumes less MIU Kms on WACS and is comparatively more reliable as WACS and SAIL interconnect in Cameroon involves 200 Kms terrestrial connectivity.
  • Commercially, for the transcontinental connectivity options to fly, 100G needs to be of the order of $80,000 MRC in 2019.
  • With estimated O&M cost of $12 million annually, and 10G IP transit to US being $20,000 MRC, would mean 50x10G links to be delivered to recover the O&M charges. This could raise question on economic lifespan of these submarine cables in the next 2-3 years. 
  • SAIL and SACS have limited pan African relevance other than the country where it lands, unless the addressable market is network expanded to include adjoining countries and South Africa, and effective interconnect established with other submarine cables for resiliency and new routes.

In 2019, 2 submarine cable systems are scheduled to be RFS – IOX and DARE. Uncertainty still lingers about their funding status given jubilant declaration of – we are fully funded, is still to emerge. For IOX the attractiveness of the South Africa-Mauritius-India route is being questioned with respect to demand forecast and interest from the OTT behemoths, along with the business rational for landing point in East London, South Africa and Puducherry, India as that makes it challenging for them to interconnect with other cable systems and have limited backhaul options. This is relevant if they intend to participate in or interconnect with other cable systems to reach US and Singapore. Further the value proposition of alternate route to US touching Brazil, in collaboration with SACS, does not seem to gain much traction either. The effectiveness of interconnect between IOX and SACS through WACS (Angola-South Africa) and 1,100 Kms terrestrial backhaul in South Africa from Yzerfontein (WACS CLS) to East London (IOX CLS) remains a topic for further clarification, along with identity of the licensed landing party in South Africa and India.

DARE, renamed DARE1 subsequently, is primarily led by Djibouti Telecom. It has had limited success with readiness for deployment as contract so far is only signed by Djibouti Telecom and Somali provider Somtel with SubCom in October 2018. Further identity of the landing party in Kenya is yet to be revealed and if it will bring funding for the cable system to be deployed from Somalia to Kenya. Drawing board plans also envisaged extension to Dar es Salaam, Tanzania, that seems to be shelved. Connecting Djibouti and Kenya would have limited relevance by itself, other than selling fiber pairs to other providers and consortiums developing cable system to Djibouti and open to consider ready solution for east African branch. Down the road OTT providers and independent infrastructure developers could be interested to lease/buy fiber pairs for east Africa branching or once they decide to setup datacenters and content nodes in Nairobi. It will be interesting to see if PEACE and DARE decide to join hands.

The more relevant and awaited milestone for 2019 would be 5,000 Kms extension of ACE till South Africa, the only alternative to WACS in west Africa, that remained half-built till Sao Tome and Principle since the cable system was commissioned in 2012. However work has been revived for 5000 Kms extension to South Africa reportedly by Q4 2019 supporting 100G wavelengths, in partnership with MTN that joined ACE consortium as the South African landing party with investment of $50M that includes construction of new CLS. ACE being a $700M cable system with 4 fiber pair, 15 year IRU for one fiber pair is expected to be of the order of $100M. It remains to be seen if spectrum and fractional or virtual fiber pairs would be offered.

In 2020, 2 additional cable systems are scheduled for RFS – SABR and PEACE. SABR, a private point-to-point submarine cable from Brazil led by Seaborn Networks, lands in Cape Town, though identity of the landing party is yet to be revealed. Likelihood of either Liquid Telecom or MTN is high, though Seaborn Networks acquiring license in South Africa can’t be ruled out. Any of these options would call for new CLS to be built in Cape Town for it to be open access cable system.

PEACE, theoretically a private submarine cable, representing China Manufacturing Global Quality, is progressing steadily from Gwadar, Pakistan to Marseilles with branching to Africa connecting Djibouti, Somalia, Kenya and Seychelles, indicating military grade project management. Understandably funding is not a challenge. For Africa it primarily provides an alternate route from Mombasa, Kenya to Marseilles, France, in addition to SEACOM and combinations like EASSy+EIG/SMW4/SMW5. Hence relevance is rather limited. Further with outright Chinese dominance and involvement of Huawei Marine, it’s quite unlikely that any of the OTT’s would be interested in the cable system. European, US and Japanese telco carriers are expected to follow suit. However it would not deter Chinese Internet giants Alibaba, Biedu, Tencent and Huawei Cloud (for public cloud services in South Africa) to leverage it as the crore network transport to realize Africa strategy.

For 2021, 2 submarines are scheduled for RFS – SAEx1 and SAEx2, for South Africa-Brazil-US and South Africa-India & Singapore. Put together it’s massive 27,000 Kms and costing nearly $800 million, one of the most ambitious cable systems in recent times. For this reason, stretched deployment schedule could relate to challenge with funding, though their public announcements and clarity of details provided evokes optimism that they will be able to make it happen. SAEx1 will compete with SABR+Seabras-1 and WACS+SACS+MONET. SAEx2 will compete with IOX, but it has several advantages, as it lands in Mtunzini and Cape Town in South Africa and Chennai in India that are hub for submarine cable landing. Further SAEx1 and SAEx2 land in the same CLS in Cape Town. Thus SAEx1+SAEx2 will have advantage over Seabras-1+SABR+Terrestrial Backaul+IOX. There is another aspect of SEAx1 that merits mention, a few dedicated professionals committed to bring Internet access to under-connected countries and archipelagos have mobilized funds for SAEx1 to have stopover in St Helena. While all this is great, SAEx1 and SAEx2 does not benefit any country other than South Africa and Mauritius. Hence its pan African impact will be limited.

SAIL, SACS, SABR and SAEx1 along with SAEx2 and IOX will compete and collaborate with similar marketing storyline of “firsts” for Africa. Hopefully customers will be pampered with connectivity options and it will lead to South Africa-US 100G price in 2021 to be lower than $40,000 MRC. SABR and SAEx1 will have an edge over SAIL and SACS as they land in South Africa directly. However different combinations of multi-segment connectivity with end-to-end SLA and pricing made attractive will gain traction. It remains to be seen if likes of Google, Facebook, Amazon and Microsoft would come forward to buy capacity, spectrum or fiber-pair in one or more of these submarine cable systems. 

It could be argued if submarine cables that just touches Africa should be included in this discussion. It should be, if the independent infrastructure developers deploying the submarine cables systems have plans of pan African cable system along west Africa going forward. The 2 closely competing cable systems being alluded to are – EllaLink and the recent announcement from WASACE 1. Both are from Brazil to Portugal with bragging rights to provide Latam to Europe connectivity bypassing US. With forecasted RFS of 2020, EllaLink will land in the same cable landing station as WACS in archipelago of Cape Verde with the intent to interconnect. In its second innings, after enthusiastic start in 2012, Hemisphere Cable Company (HCC) developing WASACE-1 intends to develop WASACE 2 from Canary Islands to South Africa with announcement scheduled for mid-2019. WASACE 1 is truly a next gen submarine cable system as evident from its business objective – “As opposed to other projects, the 8 Fiber pairs property title will be sold, instead of its capacity, to international telecom and digital companies”, quite similar to TE North operated by Telecom Egypt.

Among the cloud and content giants Google and Facebook are most active with new submarine cables. Facebook, according some industry observers with privileged insight, is exploring a submarine cable system named Simba, though there has not been any public announcements yet. The leading pan African providers are reportedly in discussions with Google and Facebook for new submarine cables that will hopefully emerge from privacy of closed doors in the course of 2019 to rattle the market. Compelling ground for involvement of pan African telco’s is to be the licensed landing party in target countries. There is one other need for including at least one telco carrier in the consortium, to provide cable administration for the submarine cable system, though none of the pan African providers other than Orange and Angola Cables has experience in submarine cable administration. There is mixed reaction to the argument that pan African providers that own CLS in multiple countries would be preferred partners, when considered with the outlook that new submarine cables will very unlikely land in as many countries as SAT3, WACS or ACE, but likely to keep options open for providers in select countries to fund the branching. While MTN and Orange through their subsidiaries, own multiple CLS across north-west African countries, SEACOM and WIOCC (operating EASSy) have CLS in all the east African countries including South Africa.  

Looking at existing submarine cables that have ruled African market for the last 8-9 years and still going strong, majority of them have executed upgrades to be 100G ready, the new benchmark for submarine cables. Notable exception is WACS that is scheduled to execute 100G upgrade in Q3 2019. 100G links are expected to take off majorly in 2020 with OTT and pan African providers as major customers. Interestingly this will make 10G links more affordable in countries beyond South Africa to the extent that those evaluating 1G link(s) will find justification for the incremental spend to go for 10G.

SAT3 and SAFE, having played its role as patriarch of submarine cables in Africa, diligently for 16 years for its 33 consortium members, is not expected to go for 100G upgrade and deemed old cable system, though not headed for retirement yet. Not to mention the formidable challenge to build consensus among consortium members, given cost of technology upgrade increases with age of the cable and it could vary as much as $70,000 to $100,000 per 100G wavelength as one time investment. At the same time increasing competition between SLTE and DWDM vendors with silicon photonics innovations including Ciena, Nokia, Infinera, Xtera, Acacia has brought 100G DWDM technology upgrade to increasing number of submarine cables, and poised to go 200G, with transatlantic 400G demonstrated by Acacia over MAREA this month (December 2018). Digressing a little, the overall cost of constructing submarine cables have reduced considerably given the intense competition between SubCom (erstwhile TE SubCom), ASN, NEC and Huawei Marine. In fact the competition is so intense that submarine cable industry titan TE SubCom succumbed to wafer thin margins, and despite $700 million revenue projection for FY’18, was acquitted by PE firm Cerberus Capital Management for $325M. Murmurs of similar fate for another submarine cable systems giant is also reported by news media. Undeniably however it’s fierce competition that is driving innovation and affordability and submarine cables are not exception.

Given time to market is a critical success factor and more so in 2019-21, it’s likely and logical precursor to new submarine cable built that Google and Facebook, followed by Amazon and Microsoft, assess feasibility of fiber pair IRU in existing submarine cables. In west Africa WACS is the only option till Q4 2019. It’s 4 fiber pair system with design capacity of 14.5 Tbps, with no more than 20% of it utilized till date, an irony with most of the submarine cables in Africa, and even globally. The fiber pairs however are set for express route (no stopovers), semi-express route (select stopovers) and omnibus (stopover at all CLS). Hence availability of unused fiber pair is practically ruled out. Virtual fiber pair in the semi-express route with stopover in Nigeria could be a possibility, with the other semi-express route with stopover in DRC and Ivory Coast deemed risky, provided consortium members reach a shared understanding. Thus capacity lease/IRU on WACS is the only viable option at present. Capacity is restricted to 10G wavelengths, and the next round of upgrade scheduled for Q3 2019 will make 100G wavelengths available.

In east Africa, the dominant cable systems for the last 8 years are SEACOM and EASSy. These are 2 fiber pair system. Hence fiber pair IRU is practically ruled out. It remains to be seen if further upgrades are carried out to support spectrum and virtual fiber pair. Hence capacity lease is the only option at present. However both the cables support 100G wavelengths and that’s likely to entice cloud and content hyperscalers.

It’s well known that the cable and cloud behemoths are paranoid about resiliency. Hence they are known to lease capacity in 4, 5 and even 6 diverse submarine cable routes as they have reportedly done for transatlantic and transpacific routes to achieve network availability of 5 9’s and remain unscathed even with concurrent failure in two submarine cables. From South Africa, can go for capacity lease over more than 4 diverse routes even today. Hence even if they join or form consortiums to co-build submarine cables, it does not lower the possibility of capacity lease on existing submarine cables. The never before capacity purchase deals as they come to light in 2019 will create market transforming benchmarks on pricing and usage trends. 

To sum up, the existing submarine cables and scattered development of new cable systems, for reasons discussed in this article, are unlikely to be sufficient to meet the connectivity requirements set to unfold in 2019-21. Submarine cables commissioned in 2018, though national pride for countries where they land, will have limited impact on the wider connectivity landscape. Submarine cables scheduled to be operational in 2019 does not evoke confidence till date that they would eventually see the light of the day. Comparatively submarine cables scheduled for 2020 seem to be on definitive trajectory. 20201 is little too far to foresee at this time. However a lot could happen and impact of submarine cables amplified if harmonious collaborations are formulated to expand the addressable markets and interconnect with other cable systems. Even if some of these were to happen in 2019, Africa does need new submarine cables along east and west coast that are 8 fiber pair cable systems with 16-24 Tbps per fiber pair, and outrun skeptics that argue – with capacity prices on steady southward spiral does it really make sense to invest in submarine cable. New submarine cable systems to be announced in 2019, will be operational no earlier than end of 2021 and even spill over to 2022, unless the unprecedented project management feat for MAREA can be repeated. Hence it remains important to evaluate what best could be done with existing cable systems while focusing on new submarine cables.