Submarine cables and their vital role in global connectivity

Caroline Gabriel

Hello, and welcome to the Analysys Mason podcast. My name is Caroline Gabriel, and I'm a research partner heading up all our research in the areas of telecom networks and cloud. 

Today, I'll be discussing our latest research on the extremely interesting topic of submarine cables with our experts in this subject: Simon Sherrington, who's a research director leading work on fibre infrastructure and sustainable networks, and Stephen Burton, an analyst who's led the development of our brand new submarine cable database. 

Simon and Stephen will tell us more, but we believe that this will be a highly valuable asset for subscribers to our Fibre Infrastructure research programme, providing details of over 600 cables worldwide and providing the foundation for an ongoing analysis of the key trends and developments in a market that is critical to global connectivity and digital transformation. Further details and a free article summarising the main trends of the first half of this year are available to access and download from the Analysys Mason website.

The Submarine cable database

Caroline Gabriel

So, Stephen, tell me about the database and the tracker. What sort of information is in it?

Stephen Burton

Yes, thanks, Caroline. The database is huge, really. It has over 600 cables that we cover across eight different regions. It has over 400 cables that are operational worldwide - we record 436. And a further 105 that are either planned or in deployment. 

For each of these cables, we include information on ownership of the cable, the countries that are linked, including landing points, the length of the cable, the number of fibre pairs, the cost of the cable, the capacity of the cable, and any upgrades that have been made to the capacity as well. So, we have a wide array of information on each of the cables, and we update the information biannually. So we stay on top of cable upgrades and different launches of new cables as well.

Caroline Gabriel

Fantastic, because I know just from reading news headlines how active this market is and incredibly strategic in some areas where there's a lot of cable development. 

So, turning to Simon, why did you decide to launch the Submarine cable database now, and how does it fit into the wider research agenda?

Simon Sherrington

Yes, thank you. Good questions. So, you touched on part of the reason for launching it now, that it's such a hot topic globally. There are a lot of people who need to understand what cables are out there, where they're running, and what sort of capacity they have for a variety of different reasons. 

But taking a step back and looking at the bigger view, Analysys Mason has a lot of expertise in this area. We've been working on projects for clients planning and looking at cable deployment and cable systems for many, many years. We're sitting on a huge amount of data that would be valuable to our subscribers, and we felt it would be valuable to package everything up and bring our knowledge to our multi-client research customers. 

This database sits within our wider Fibre Infrastructure programme that covers all things fibre infrastructure. It has traditionally provided a highly detailed analysis of what's happening in fibre access networks. We took the decision this year to expand it to cover long-distance fibre infrastructure, and clearly, submarine cables are an obvious and critical part of that extension. So there are a variety of reasons why we decided to bring it to market now. And it fits quite nicely into the broader package of research that we're able to offer to our subscribers.

Stakeholders interested in the database

Caroline Gabriel

Absolutely. I think it fits extremely well into some of our key research themes that, as you say, cross over many programmes, including infrastructure into infrastructure investment, around the world into different kinds of infrastructure to support digital change. 

As you say, we're building on a lot of expertise that we have. So, to me, this seems like a very interesting, valuable addition to our portfolio. But Stephen, who should be interested in this product?

Stephen Burton

Yes, so as you've said, it's like a huge database containing all this information on infrastructure, and we believe that it'll be interesting to a range of stakeholders across the industry. 

The first is financial investors due to the huge database that includes all this information on this critical infrastructure. 

Also, governments or industry regulators that are tasked with looking at international telecoms network resilience. That's something that we're seeing a lot more interesting talk about these days. 

Of course, for operators as well, both as potential investors and as providers of international services. I think it's crucial for them to understand which routes will be coming on stream for their future operations. 

Additionally, I would say content providers who need access to submarine cable capacity. And, also the vendors who build these cables that provide the optical equipment, install the cables and provide maintenance on them. Any and all companies really within the value chain will find this database useful.

Caroline Gabriel

And if I'm one of these companies that you've listed, how is this going to help me?

Stephen Burton

I think it's going to help because it provides this holistic picture of all of the cable infrastructure. It's right there in front of you, and it's all listed in exactly the same way. So you can compare different cables. You can sort it by different regions and different countries. For example, if you were a regulator based in a certain country, you could see all of the subsea cable infrastructure that connects to your country and surrounding countries within the region, and it could help you to assess your own submarine cable infrastructure and also plan new routes, whether that's for diversity or expanding data traffic that you see. It gives that holistic picture and provides you with the solid foundation of a complete understanding of the subsea cable infrastructure, both in your country, if you're a regulator or an operator, but also across the world.

Big themes in submarine cable investment

Caroline Gabriel

So we've got this amazing amount of data. Another very important part of the service to our clients is to be able to draw out the big themes and look ahead to what's shaping this market and where their money may be flowing. So perhaps both of you would like to comment on what are you seeing as the big themes now in submarine cable? What are you drawing from all this data that you've collected?

Simon Sherrington

Thank you, Caroline, quite a lot. Stephen, do you want to have a go at that first?

Stephen Burton

Yes. So I'd say investment by hyperscalers is something that we're seeing quite a lot of recently. The first hyperscaler foray into the market you can trace back to 2010 with Google's Unity cable that connected the US with Japan. Since then, we've seen a lot of investment by hyperscalers, including Amazon, Google, Meta, and Microsoft. In total, they're now involved in 47 cable systems, whether those are active cables, cables that are in deployment or cables that are operational. Hyperscalers are entering the market because they generate a huge amount of internet traffic, particularly in recent years. They're now moving to take greater control of the delivery of this service by investing in subsea cables. And that's something we think will continue to drive the subsea cable market into the future.

Geopolitical factors and market dynamics

Simon Sherrington

Yes, I would emphasise taking control as well. In the current era of quite substantial geopolitical uncertainty and instability, the requirement to keep international connectivity running is critical. It's strategically critical for nations. Large businesses, banks, military, pretty much every big piece of infrastructure or organisation that you can think of requires international connectivity on some level. And if the cables go down, whether they are broken or whether they are maliciously attacked, it costs millions or billions of dollars of damage. 

So there's a lot of interest from governments, regulators and investors in ensuring that the cable routes that are being used are diverse. A lot of cables, for instance, go through the Middle East, and you can understand why there may be concerns about the integrity of those, given the political uncertainty that's happening there. Also, apart from malicious action, an awful lot of cable gets damaged by fishing trawlers, anchors, and general shipping activity. So one of the really big trends in terms of investment is finding new routes, finding ways to diversify the directions the traffic will go to make sure that if something goes down, there are alternative options. That's driving a lot of expenditure within the submarine cable market at the moment.

Stephen Burton

Yes, and I'd say another factor would be the growth of international traffic leading to system upgrades. So, of course, you can build a new subsea cable and deploy it end-to-end, and that'll give your country or your business that increased capacity. You can also upgrade a cable as well, while it's still in operation. 

This rise in international data traffic is mostly driven by high volumes of fixed and mobile data traffic generated by consumers and even more so by enterprise and government users as they migrate to cloud-based solutions. Also, the movement of data between data centres. This huge rise in traffic leads to a kind of increased demand for capacity. You can upgrade subsea cables with system upgrades, this provides a cheaper option than deploying thousands of kilometres in a new cable and can provide this increased capacity that we're seeing demands for due to the continued rise of international data traffic.

Emerging markets and new routes

Stephen Burton

Another reason is there’s a need for new routes in and out of emerging markets as well. For example, in sub-Saharan Africa, where there are few routes in and few routes out. That's both from a capacity standpoint and resilience, as Simon touched upon before. We see a load of submarine cable infrastructure in more developed telecom sectors, in Western Europe, for example, that's the leader with the most submarine cable infrastructure. 

But as I touched on previously, with growing data rates and things like that, there is a need for more subsea cable infrastructure, especially as these sectors expand and consume more data this need will continue to rise. This will often take the form of maybe localised subsea cables between two countries with two emerging telecom sectors that are nearby. Or it can be longer subsea cables between more developed telecoms markets and less developed ones. Those longer cables are something that we see as well. So, in the case of sub-Saharan Africa, there are quite a few cables that are in deployment or planned. I believe there are 14 that we are currently tracking at the moment. And some of these cables are really large. We have the Africa-1 cable and also the 2Africa cable, which, once it becomes ready for service, this is expected to be in 2024, perhaps 2025 now, this will become the longest subsea cable in the world at 45,000 km. So this need for routes in and out of emerging markets is another driver that we're seeing.

Sustainability issues in submarine cables

Simon Sherrington

Yes, very interesting. And you mentioned the scale of those networks. These really are big investments, requiring a lot of time, effort, money and energy to deploy. 

You mentioned earlier that I wear two hats, Caroline, I'm responsible for the Fibre Infrastructure programme and our Sustainable Networks programme. There's an emerging sustainability issue here in relation to submarine cables as well. Fibre is generally seen as a quite environmentally optimal technology from the perspective of telecoms. However, when it comes to laying submarine cables, you have a lot of very large, very expensive ships powered by diesel. You know, they emit a lot of carbon, and there's going to be increasing pressure over time to upgrade that fleet, I suspect, and reduce the emissions that are being produced when cables are deployed. So that's something to watch for the future, I think.

Caroline Gabriel

Great. Some really interesting themes there. And, as you touched on earlier, Simon, this report doesn't exist in a vacuum. It relates very closely to a lot of the other areas of our research in terms of different types of infrastructure build-out. Sustainability, as you were just talking about, and the overall issues of getting digital access to different parts of the world to support the many different use cases covered by the services side of our research business. So it's a really important piece of our jigsaw that we've filled here. 

Simon, what other submarine cable analyses are you planning to publish related to the data that we'll be updating in the years ahead?

Future submarine cable analyses

Simon Sherrington

That's a good question. We're really excited about our publishing agenda in this area. As you mentioned, it's an initial splash in the water, if you'll excuse the phrase, quite a big splash, given the amount of research that's gone into it. But it's just the start. We're working on a series of cable investment forecasts. Investments are at a recent high, and we think it's going to remain strong for the reasons we've mentioned. So we're preparing a set of forecasts of investment, looking at investment by different investor types, different oceanic routes, and looking at the key categories of cost. That will be interesting to anybody who wants to understand the opportunities in the market going forward.

We'll be doing some detailed analysis of landing point diversity. As Stephen mentioned, we've got a lot of information about landing points in the database and understanding how much diversity there is is quite critical to understanding whether you can ensure route diversity and ensure that there's resilience when cables are cut or damaged. 

Looking a little further out, we're planning some international traffic forecasts. We already produce extensive forecasts for fixed data traffic generated at the access level. Only some of that flows through to international cables, so we'll be taking a look at that. 

We'll be looking into the question of how AI and data centre deployment could impact the demand for subsea cables, potentially meaning demand for new routes or potentially meaning the need for higher capacity. Or if everything becomes very localised, whether that might have a negative impact on demand for subsea cables. 

Finally, we've already collected a large amount of information about contracts and suppliers, but we'll be doing a more detailed analysis of the supply side of the submarine active equipment market, the optical system. So, quite a lot of stuff to look out for in the coming weeks and months.

Caroline Gabriel

That's great. That’s a pretty rich agenda going forward.

For all the people who are interested in this market, and as Stephen was outlining earlier on, that’s quite a diverse set of organisations, whichever type of organisation you're from, if you're interested to know more or you have questions you'd like to discuss with us in relation to submarine cables, do get in touch with anyone who's on this podcast. 

In the meantime, thank you for listening. There's more content on this topic, of course, on the Analysys Mason website. That includes some more details about the database, and there's a free article that Stephen's written, which will provide some more hints about what we'll be publishing and some of the themes that Stephen and Simon have talked about today. 

So it just remains to thank you both for explaining all that to us. I'm sure we'll be returning to this topic frequently. 

And to all our listeners, to automatically receive future episodes, please subscribe to the Analysys Mason podcast. Once again, thank you for listening.