LATENCY IS THE NEW CURRENCY
By Dag Aanensen
January 19, 2021
When I started my career in Telecoms 25 years ago, data had to travel twice over the Atlantic to be processed, even if the local providers where only a few houses apart. Quality was poor due to packet loss and the cost per Mbit was extremely high. Then the internet arrived and by end of 1997 internet had more than 100 million users. As the internet grew rapidly in the EU there was a need to connect EU with the US providing more capacity.
Tat-12/13 consortium priced an STM-1´s IRU at $25 Million. The last STM-1 IRU circuit sold on the Gemini cable was priced at $18 million. Then Global Crossing appeared on the market announcing the AC-1 in March 1997, a Transatlantic submarine cable system consisting of 4 fiber pairs with 258 repeaters.
The original design was 10Gbps per fiber pair. In May 1998 AC-1 started to carry voice and data traffic opening up a new market. The first SMT-1 IRU sold on AC-1 was priced at $8 million. (The current median price for a Transatlantic 10G IRU wavelength is close to $100.000.) The maintenance contracts were priced at share of maintenance plus 10% or minimum $250.000 per STM-1. Backhaul from Whitesands to London were priced at approx. $500.000.- per STM-1.
Approaching the 2000´s Internet traffic continued to grow, and national internet exchange points and peering traffic grew exponentially. After the installation of AC-1, AC-2, Tat-14 and FLAG there followed a glut in the submarine cable industry. In early 2010 old consortium cables began being replaced by new private submarine cable systems, anchored by the OTT´s. The FX trading firms, and the financial markets requested more time sensitive capacity and latency became an important factor when selecting a capacity provider.
In the last decade, the OTT´s have brought a new era of growth to the submarine cable industry. The traditional 4 or 6 fiber pair fiber cable systems are now being replaced by 12 or even up to 24 fiber pairs systems, capable of producing up to 26 Tbps per fiber pair. Bringing the prices for capacity down to a typical industry level of cost plus 10% margin.
The internet growth rate is now increasing rapidly on all continents, and as new submarine cable systems are being installed, they play an important role in delivering fast and reliable access to cloud services, apps, and local content.
Digital dependency is here to stay, and with the growth of time sensitive applications submarine cable infrastructure matters more than ever. However, the speed of light is defined by the laws of physics. Any shorter route provided by a new submarine cable system will become a more attractive routing path and have the potential to take more data traffic.