By Carlos Ruiz Gomez, Practice Lead Business Development, Colt Technology Services.
According to the Submarine Cable Systems Global Market Report 2024, the market size for submarine cable systems has exhibited rapid growth in recent years. The market is forecast to grow from $18.28 billion in 2023 to $20.54 billion in 2024, representing a compound annual growth rate (CAGR) of 12.3%. At present, the global network comprises 574 subsea cable systems, either operational or at various stages of construction. [1] In total, they account for roughly 1.4 million kilometres of operational cable around the world. Undersea communications cables carry around 99% of transatlantic digital traffic. This includes international calls, data transfers (like internet browsing), and financial transactions – a staggering $10 trillion worth every day. The historical period’s growth can be ascribed to several factors: the demand for global connectivity, the expansion of international trade, development of telecommunications infrastructure, increased energy transmission needs, and the growth of data centres. But Cloud computing and artificial intelligence have been the primary drivers behind the surge in data traffic, necessitating an increase in subsea cable capacity at a compound annual growth rate of at least 70% between 2015 and 2019.[2]
Subsea cables form the backbone of the global information and communications ecosystem, carrying vast quantities of data across continents and oceans. Their security and resilience are fundamental to the well-being of societies and the functioning of businesses, from global financial dealings to manufacturing, homeworking, education, healthcare, and all the way up to military communications and defence systems. Ensuring seamless collaboration across continents relies on a resilient network of undersea cables and the unrestricted movement of data along these pathways.
The telecommunications industry is in the midst of a significant transformation, driven by a confluence of key trends. It is worth highlighting the growing appreciation for the value of public-private partnerships. There is a growing recognition amongst both governments and private undertakings of the mutually beneficial nature of collaboration in developing and upholding telecommunications infrastructure, with a particular focus on subsea cables.
Spanning the Atlantic Ocean, the corridor between the United States and Europe constitutes a critical artery within the global telecommunications infrastructure. This vital link shoulders a significant proportion of the world’s data traffic, ensuring the seamless flow of information across continents. This vital communications nexus undergoes continuous evolution, mirroring the ever-present influence of trends such as enhanced collaboration and shifting ownership paradigms.
Shaping the future of subsea networks: A public-private win-win model
Traditionally, subsea communications systems have fallen within the exclusive purview of the private sector. This encompasses ownership, planning, production, deployment, maintenance, and governance. Despite its prior autonomy, national and inter-governmental agencies are now exerting a growing influence on its development. This engagement carries significant implications for the burgeoning complexity of the regulatory landscape.
Indeed, a confluence of factors is prompting public organisations and agencies to cautiously define their roles in the governance and regulation of this high-profile industry. These factors include, but are not limited to, infrastructure ownership, security anxieties, [3] navigating the territorial waters and exclusive economic zones (EEZ) of third countries,[4] managing situations with landings in multiple countries, and growing environmental concerns.
Consequently, numerous countries classify subsea cables as critical infrastructure, necessitating mandatory reviews prior to approval. In response to national security concerns, the European Commission recently issued a whitepaper with recommendations towards ensuring the “security and resilience of submarine cable infrastructures”, and European governments are actively implementing more robust foreign direct investment (FDI) regimes. Some European nations have already enacted stricter investment policies specifically for communications infrastructure. [5]
Within the United States, the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (hereafter ‘the Committee’) plays a critical role in safeguarding the nation’s telecommunications infrastructure. Established through Executive Order, this inter-departmental committee comprises representatives from the Ministry of Defence, the Home Office, and the Department of Justice.[6] Working collaboratively with the Federal Communications Commission (FCC), the Committee meticulously assesses applications for telecommunications licences, ensuring they do not pose a threat to national security.
It is unsurprising, therefore, that the U.S.-EU Trade and Technology Council (TTC) has witnessed a growing emphasis on co-governance of subsea infrastructure. This encompasses a broad range of issues, including cybersecurity, critical infrastructure protection, foreign policy, innovation, trade, information-sharing, investment, competitiveness, and development. [7] In addition to nation-states, regional organisations such as the Asia-Pacific Economic Cooperation (APEC) forum and the Association of Southeast Asian Nations (ASEAN) are playing an increasingly active role in shaping and upholding sound governance frameworks.
Partnering for efficient subsea infrastructure deployment and ownership
Given the escalating prominence of subsea communication systems, compounded by economic and political instability, price volatility in commodities, and rising labour expenditures, a redistribution of the deployment, ownership, and operation of these systems is demonstrably necessary. Collaboration at various levels has become an indispensable element in ensuring the resilience of subsea communications infrastructure.
While subsea cables are undeniably critical, it is vital to recognise that they constitute but one element within the wider subsea infrastructure ecosystem. Landing stations and terrestrial backhaul networks play an equally pivotal role in ensuring the operational integrity of this vital communications network.
Furthermore, submarine cable landing stations themselves are undergoing a paradigm shift, transitioning towards a disaggregated landing station architecture. This innovative approach separates the power conditioning equipment, telecommunications equipment, and network management systems and associated monitoring infrastructure into distinct physical locations. The dispersion of physical assets across multiple locations enhances resilience against natural disasters and deliberate attacks. This strategy facilitates the implementation of robust data encryption and zero-trust security frameworks across critical components, ensuring data confidentiality, integrity, and availability. Furthermore, it enables the continuous improvement of security posture through streamlined upgrades and maintenance.
Within this intricately interconnected ecosystem, we must consider the multifaceted interactions between diverse industry stakeholders. For instance, environmental and sustainability concerns have become paramount for both industry participants and investors. This includes, for example, the impact of subsea systems on the marine environment through heat, turbidity (during cable burial), the risk of entanglement, and the introduction of artificial substrates. These concerns are not merely reshaping regulations, operational practices, and technological advancements; they are also facilitating the entry of new stakeholders into the industry.
Another type of new stakeholder is the technology behemoths such as Google and Amazon, which collectively control or lease over fifty percent of the world’s undersea bandwidth according to a 2024 study.[8] These players introduced a new purchasing power, and changed the way cable systems are funded. This dominance has spurred a trend of telecommunications carriers forging partnerships and mergers with traditional media companies. The motivations behind these collaborations extend beyond mere cost-sharing for subsea cables and landing stations; they encompass a strategic response to the evolving regulatory landscape.
Finally, a significant change is taking place with regards to the ownership model. While industry consortiums continue to define ownership, there is a growing emphasis on maximising asset utilisation, reducing idle capacity, and precisely tracking market pricing over time. This is prompting the industry to explore a hybrid model that combines fixed, long-term “anchor” agreements with shorter-term capacity contracts, potentially structured on a pay-as-you-go basis. This shift favours the emergence of new exit opportunities for private equity, a sector that has traditionally, albeit inconsistently, played a prominent role in supporting private subsea investments. [9]
The transatlantic corridor retains its status as the primary communication nexus
The European Commission has emphatically underscored the necessity for a cohesive and coordinated strategy to bolster the resilience and guarantee the security of critical infrastructure within submarine communications, specifically Cable Projects of European Interest (CPEI), at both the Union and national levels. However, the paramount importance of safeguarding cable availability extends beyond the European continent, encompassing the transatlantic hub as well.
Undoubtedly, for reasons rooted in history, economics, and politics, the transatlantic submarine cable route connecting the United States and Europe has established itself as the world’s most critical communications backbone. This pre-eminence is further underscored by the profound economic integration between the two continents. In 2022, the combined US-European economy boasted a value of $7.1 trillion, representing the strongest economic partnership on the global stage. This deep interdependence fosters a remarkable number of jobs, with an estimated 16 million individuals employed in mutually “onshored” positions across the Atlantic. Collectively, the US and Europe constitute the largest and wealthiest market in the world, accounting for half of global personal consumption and nearly one-third of global GDP measured in terms of purchasing power parity.
Over half of digital services exchanged between the United States and the European Union (EU) underpin the production of export goods on both sides of the Atlantic. This statistic highlights the significant contribution that digital technologies make to international trade. For instance, in 2020, the United States was the destination for a substantial portion (22%) of the EU27’s digitally-enabled service exports to non-EU27 countries. This demonstrates the strong demand for these services within the US market and their crucial role in supporting EU exports.
Furthermore, data from 2021 indicates that the value of US exports to Europe more than doubled the value of exports to the entire Asia-Pacific region. This underlines the pre-eminent position of the European market for US digital services.
The significance of the transatlantic hub can also be understood through the prism of data flows. These flows constitute the lifeblood of the digital economy, and transatlantic exchanges account for a substantial proportion of global data traffic. More than half of Europe’s total data flows and roughly half of the United States’ traverse the Atlantic. This intense exchange reflects the deep economic and technological interdependence between the two regions. Furthermore, over 90% of EU-based firms engage in data transfers with the United States, highlighting the centrality of the transatlantic corridor for international business operations.[10] Indeed, North America and Europe continue to generate the most intensive and commercially valuable cross-border data flows in the world, solidifying the transatlantic hub as a cornerstone of the global digital economy.
Transatlantic submarine cables exhibit a significantly higher data carriage capacity compared to their transpacific counterparts. They facilitate the transmission of over 55% more data, effectively handling more than double the traffic volume observed on the second busiest route (transpacific) and the third busiest (intra-Asia). Data compiled by TeleGeography reveals a remarkable 60% increase in transatlantic bandwidth capacity between 2018 and 2020, reaching a record-breaking 136 Terabits per second (Tbps) by 2022. However, projections suggest that demand could potentially surpass the designed capacity by 2025, highlighting the ever-growing need for further infrastructure development. [11]
Unleashing the potential of subsea communications with Colt Technology Services
As a global digital communications service provider, Colt Technology Services (Colt) is a member of ICPC (International Cable Protection Committee), ESCA (European Subsea Cables Association) and NASCA (North American Submarine Cable Association), and distinguishes itself by offering a multifaceted range of solutions and adaptability to partners and customers on a global scale, with a strong emphasis on the transatlantic corridor. Colt maintains an outstanding portfolio of five geographically diverse subsea fibre optic routes. These routes include:
- Grace Hopper: Connecting Bellport (NY), United States to Bude, United Kingdom;
- Dunant: Linking Virginia, United States to Saint-Hilaire-de-Riez, France;
- Yellow: A route between Bude, United Kingdom and Bellport (NY), United States;
- Atlantic Crossing 1 South: Spanning from Whitesands, United Kingdom to Brookhaven (NY), United States;
- Apollo South: Connecting Lannion, France to New Jersey, United States.
Boasting a significant presence across multiple countries (UK, Ireland, USA, Belgium and France, plus Germany, Denmark and Sweden), Colt maintains a robust network infrastructure with 8 cable landing stations.
Colt’s customers benefit from expansive digital infrastructure connecting in the backhaul network with over 32,000 buildings across 230 cities, more than 50 Metropolitan Area Networks and 250+ Points of Presence (PoPs) across Europe, Asia, the Middle East, Africa and North America’s largest business hubs. This includes our cross-Channel terrestrial optical communication capabilities in the Eurotunnel linking the UK with Continental Europe, which strengthen our transatlantic subsea capabilities.
Such capability allows Colt to be the partner of choice in global communications with subsea capabilities, including the formation of industry consortiums with traditional and new stakeholders.
Sources:
[1] TeleGeography. “Submarine Cable 101”. February 2024. Available: https://www2.telegeography.com/submarine-cable-faqs-frequently-asked-questions
[2] Center for Strategic and International Studies (CSIS). “Securing Asia’s Subsea Network: U.S. Interests and Strategic Options”. April 2022. Available: https://www.csis.org/analysis/securing-asias-subsea-network-us-interests-and-strategic-options
[3] The New York Times. “With a Repair Ship Many Days Away, Tonga Faces Weeks of Digital Darkness”. January 2022. Available: https://www.nytimes.com/2022/01/19/world/australia/tonga-volcano-internet-cable.html
[4] U.S. Department of Justice. “Team Telecom Recommends the FCC Deny Application to Directly Connect the United States to Cuba Through Subsea Cable”. November 2022. Available: https://www.justice.gov/opa/pr/team-telecom-recommends-fcc-deny-application-directly-connect-united-states-cuba-through
[5] European Commission. “Recommendation on the security and resilience of submarine cable infrastructures”. February 2024. Available: https://digital-strategy.ec.europa.eu/en/library/recommendation-security-and-resilience-submarine-cable-infrastructures
[6] U.S. National Archives. “Establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector”. April 2020. Available: https://www.federalregister.gov/documents/2020/04/08/2020-07530/establishing-the-committee-for-the-assessment-of-foreign-participation-in-the-united-states
[7] U.S.-EU Joint Statement of the Trade and Technology Council. https://www.whitehouse.gov/briefing-room/statements-releases/2022/12/05/u-s-eu-joint-statement-of-the-trade-and-technology-council/
[8] The New York Times. “How the Internet Travels Across Oceans”. March 2019. Available: https://www.nytimes.com/interactive/2019/03/10/technology/internet-cables-oceans.html
[9] ION Analytics. “Going deep for subsea cable investment returns”. May 2023. Available: https://community.ionanalytics.com/going-deep-for-subsea-cable-investment-returns
[10] Foreign Policy Institute, Johns Hopkins University SAIS/Transatlantic Leadership Network. “The Transatlantic Economy 2023”. March 2023. Available: https://www.amchameu.eu/publications/transatlantic-economy-2023
[11] LightReading. “Bandwidth demand set to rebound: TeleGeography”. June 2022. Available: https://www.lightreading.com/digital-transformation/bandwidth-demand-set-to-rebound-telegeography
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