May 31, 2022
We’re seeing accelerated capacity roll-out across many routes to meet rising demand. Capacity is building on unprecedented recent growth. During 2016-2020 lit capacity has tripled on many routes and 5x on trans-Atlantic routes. $11b worth of cables was constructed between 2016-2020 across all major routes. Almost the same again is being built and coming online in the current period to 2023. New cable systems have more fibre pairs, higher core counts and are open access cable systems providing flexibility and interoperability with multi-provider network backhaul. Capacity is also increasing due to evolving technologies allowing higher density and increased paths within existing cables whilst avoiding interference or loss.
Capacity increases however are not keeping pace with lit capacity growth, which is currently being driven by tech giants and hyperscalers with an increasingly complex and data-heavy product mix including search, content, mapping, cloud and enterprise solutions. Further cloud service availability zones, datacentre and megacity infrastructure growth particularly in the Middle East, Africa and west Asia is fuelling demand for increased capacity and diverse pathways on trans Europe – Asia routes through the Gulf and into Africa. Hyperscalers and content providers are increasingly procuring wholly-owned fibre pairs and cable systems to meet their expanding needs. At the same time, their expanding direct involvement is also removing demand from the addressable wholesale market, pressuring traditional cable operators reliant on wholesale sales.
It is widely acknowledged however that this recent demand growth and capacity expansion will not continue forever. It is not yet clear what impact emerging technologies such as AI, VR and use of IoT ecosystems involving pervasive M2M communications will have on international capacity demand. Further direct connections by hyperscalers and content providers, together with widespread adoption of edge networking and computing with enhanced local caching, is expected to dampen international capacity demand and instead localise traffic patterns. Sources of future capacity growth will likely come from further internet enabled devices, increased internet penetration in developing markets such as Africa, improved broadband access and speeds in more developed markets and wider use and demand for data bandwidth intensive applications for both consumer and commercial. Also as mentioned in our previous article, there are also growing calls from infrastructure owners that they should be able to share capacity investment burdens with tech giants and hyperscalers who account for the bulk of traffic on their networks, which could have a positive effect on infrastructure capacity developments across the globe.