20,000km under the sea
New telecoms applications, coupled with globalisation, free trade and deregulation in 1999-2000 led to dramatic growth in submarine bandwidth demand. However, the recent turbulence on the world's capital markets and telecoms pricing weakness have led to over capacity in long-haul links.
George Krebs, vice president of business strategy and sales for Alcatel Submarine Networks, says that there is now "a short-term trend to under-equip a DWDM link initially (for example, to half-capacity), then upgrade later with more wavelengths as needed.
Upgrades are an increasingly important part of the company's business, amounting to about 30% of its revenues, says Krebs, with termination equipment correspondingly gaining in importance compared to wet plant.
For example, in February Alcatel won a EUR45m contract from the SEA-ME-WE 3 consortium — a three-year-old EUR2bn 40,000km network linking 92 carriers in 33 countries in South East Asia, Middle East and Western Europe and beyond — for an upgrade of seven out of 10 segments plus the landing stations of over nine countries (from Portugal to Hong-Kong).
Alcatel is providing wet and dry technologies for more wavelengths at 2.5Gbit/s as well as upgrading some wavelengths to 10Gbit/s (for operation by February 2003), increasing capacity by 40%. It is also providing the terrestrial part, including 10Gbit/s SDH and long-haul DWDM systems, and most of the submarine infrastructure.
As termination equipment will continue to form a high proportion of sales for the foreseeable future, says Krebs, the wet-plant side of the business is halving its capacity. Alcatel decided in May 2001 to close its plant in Portland, Oregon then, in August 2002, its plant in Australia, leaving just its French plant. "The market for submerged plant won't return to 1999/2000 levels and will remain relatively small," he says.
However, there is still under-capacity in some regions and under-developed links, says Krebs, (for example. connecting the West via Europe to the Middle East and, it is anticipated, India) as well as demand for restoration, such as from Singapore to Europe and other major routes.
Late August saw the severing, yet again, of the 7500km-long 2.5Gbit/s CANTAT-3 cable, which connects Iceland to Canada and Europe, via the Faroe Islands, the UK, Denmark and Germany and is majority owned by Canadian telecoms supplier Teleglobe together with BT, Deutsche Bundespost, Telecom Denmark, and Iceland Post and Telegraph. In fact, the aging CANTAT-3 cable has proven unreliable. From 1994 to 2000 there were 12 faults, so it has only been active 90% of the time.
During the most recent break, communications with Iceland and the Faroes were maintained by satellite links. However, this method is expensive, capacity is reduced and quality is not as good.
In particular, the north sea is one of the most difficult environments in the world, says Krebs, especially with the trend over the last two years to deeper fishing (down to 1500m). As a consequence of such failures, improved protection technology has been required.
Submarine cables are therefore now being buried deeper below the sea bed (3m below). However, this is slow and expensive so, even though there is an over-supply of cable-laying ships, it has led to the building of new, more powerful vessels, enabling deeper and faster sea ploughs able to work in adverse regions and weather.
Alcatel has had four of its own ships built over 1999-2001 (see Fig.1)."The market is looking for a turn-key solution," says Krebs, "especially since sub-contractors have been weakened". Alcatel has worked with most cable-laying contractors, but "some may disappear. Having your own ships assures control of both quality and the delivery schedule."
Such technology may come in use to construct a new cable called FarIce, which will connect Iceland and the Faroes to Scotland. Currently out for tender, Iceland Telecom, TeleDenmark and a Scottish Power Company are therefore working with international telecoms suppliers. Explorations have been carried out and formal arrangements are due to be finalised in 2002 for the cable to be laid in 2003/2004. Once completed, it should make it theoretically impossible for communications to be cut off entirely.
Another project in a key location — the Mediterranean.— is the 7000km Med Nautilus link. Started in 2001, the Italy-Israel-Greece link was completed in early 2002. Alcatel is busy manufacturing the link to Istanbul, says Krebs, but the link to Turkey has been delayed by negotiations between the customer and regulatory authorities. The link to Egypt, in which Telecom Italia has a majority, has also been delayed.
Nevertheless, the market for repeaterless submarine links.— to the Canary Islands, Portugese Islands, and FarIce.— is more stable and is becoming more important.
Likewise for segments of long-haul links on new routes, for which Europe is a key node. In September Alcatel signed a Memorandum of Understanding to be a supplier after a consortium of 13 carriers (including France Telecom and Telecom Italia S.p.A) agreed to begin work on the new SEA-ME-WE 4 cable, which will form a 1.28Tbit/s DWDM link between 12 countries — Indonesia, Singapore, Malaysia, Thailand, Myanmar, Bangladesh, Sri Lanka, India, Pakistan, United Arab Emirates, Saudi Arabia, Egypt — with Italy, France and the UK.
Lim Shyong, SingTel's executive VP (Global Business), told LWE: "Though the current market situation might not seem conducive to embark on this project, this is the opportune time to plan and build a network to ease the expected bandwidth bottleneck between Asia and Europe."
Another such contract is the EUR640m, 28,000km SAT-3/WASC link around Africa's west coast, on which commercial service was recently launched. The link results from the combination, in 1998, of two projects: SAT-3/WASC (South Africa Telecommunications - West African Submarine Cable); and SAFE (South Africa-Far East). The first fibre system to link Europe, Africa and Asia, it will be operated by its consortium of 36 nations for the next 25 years.
The link has 16 landing points in 15 countries, from Portugal via 10 countries along the western coast of Africa to Cape Town, then India and Malaysia via Reunion Island and Mauritius. Construction began in December 1999 and was completed in December 2001.
The system comprises two fibre pairs with potential capacity of 130Gbit/s for SAFE and 120Gbit/s for SAT-3/WASC. France Telecom says that the bandwidth will spawn new broadband applications in these countries, facilitating foreign trade.
France Telecom is one of the largest sponsors, with a EUR96m investment giving it a 15% share. It extends its global network — which includes the European and North American backbones and SEA-ME-WE 3 — by providing high-bandwidth connections for its regional units, Reunion Island and group subsidiaries Côte d'Ivoire Telecom (Côte d'Ivoire), Sonatel (Senegal) and Mauritius Telecom (Republic of Mauritius). It also provides an alternative for the Europe–Asia route, enhancing security. "The cable also provides back-up for our satellite links serving these countries," said Jean-Philippe Vanot, Head of Long Distance at France Telecom.
System contractors were Alcatel Submarine Networks for SAT-3/WASC and TyCom for SAFE. Cableship operators included France Telecom Marine, for 3000km, whose subsidiary Chamarel Marine Services has been responsible for system maintenance since June 2001 for the 20,000km segment between the latitude of Dakar in the Atlantic and Diego Garcia in the Indian Ocean (70% of the total cable length).
"No sooner has the network been lit up than we need to upgrade it, showing its sustained development as soon as the capacity is available," said SAT-3/WASC consortium chairman Kobus Stoeder. "SAT-3/WASC occupies a key position, its route being ideally located: it can easily be used as a secure and fast back up solution for other networks."
In April, Alcatel was awarded a EUR33m contract to supply all submarine and terrestrial optical terminals for an upgrade of the SAT-3/WASC DWDM cable, expected to be operational by Q1/2003.
The system is designed to support four wavelengths at 2.5Gbit/s, providing countries along the Western coast of Africa for both voice and data regional telecom needs, and five wavelengths at 10Gbit/s providing a high-speed link between between Portugal and South Africa. Also, it can provide restoration for other submarine systems around Africa.
SAT-3/WASC can act as a restoration for the Sea-Me-We 3 link from Western Europe to Far East Asia due to connections with other India to Africa systems. The upgrade will add one wavelength at 10Gbit/s on a single fibre pair between Portugal and South Africa.
Alcatel will supply the terminal equipment as well as back-to-back equipment in Senegal, Ghana, the Ivory Coast and the Canaries to ensure the traffic signal regeneration, as well as SDH terrestrial equipment.
A knock-on effect of the SAT-3/WASC link is that it has spurred Kenya, Uganda and Tanzania, which currently rely on satellites for international connectivity, to call for a similar initiative along the east coast of Africa. So, while the market for the traditional long-haul routes may be saturated, there are still signs of future opportunities in new regions, both for capacity and for restoration.
At KMI Research's 8th Annual Fiberoptic Submarine Systems Symposium in July, Lynx Technologies' chairman Leonard Elfenbe said that the glut of capacity in the undersea cable industry is normal in the middle of a 1-3 year transition from one cycle of development to another, and that it will disappear when new bandwidth-hungry applications arrive. But before recovery in 2003 or 2004, there will be more bankruptcies and consolidation as prices continue to fall, e.g. from EUR120,000 to EUR15,000 by 2005 for an STM-1 (pop-to-pop) London to New York.
The excess capacity on many routes has put in question the future of IRU (Indefeasible Right of User) long-term leases for large amounts of capacity to allow for growth. Many carriers are now buying short-term leases (typically, less than a year) for small amounts of capacity.
Carriers will again start buying IRUs when the market stabilises but not at the same level as when monopolies owned the undersea systems.
Worldwide, more than 200,000 route-km of submarine cable are distressed due to the financial condition of their owners, says KMI. Although major telecom carriers are currently weak financially, they must participate in the rescue efforts of those that are failing. The first such steps are now occurring with Global Crossing, and major telcos could be behind a return to the consortium style of cable project. Demand is increasing but more slowly than envisaged. System upgrades and new builds will occur only where demand is visible.
But demand is visible for unrepeatered links, says senior KMI analyst George Miller and author of the August 2002 report 2002 Worldwide Summary of Fiberoptic Undersea Systems. Although most fibre installed in 2002 will for long-haul repeatered systems, as for terrestrial traffic moving between long-haul and metro networks, submarine network traffic often transits an ultra-long-haul or long-haul system to regional systems, many of which comprise unrepeatered links, installed since the mid-1990s.
Bandwidth demand has been growing on these systems. As these systems reach capacity, carriers will need to prepare for either DWDM or cable system upgrades. Unrepeatered upgrades will account for a growing proportion of the submarine market, requiring less capital and with a more readily quantifiable return on investment.