CABLESHIPS
CAPACITY
CONNECTION
EDITION FOUR: DYNAMICS OF THE SUBMARINE CABLE BANDWIDTH MARKET: THE EMERGENCE AND GROWTH OF HYPERSCALERS BY JOHN MAGUIRE INTRODUCTION
Welcome to Edition Five of Capacity Connections. In previous editions we have looked at subsea technology, regulation, commercialization and the evolution of telecommunications services and their respective, yet all interconnected, influences on the market for subsea connectivity. From our familiar, lofty altitude, in this edition we will explore the emergence of what we know today as hyperscalers. Initially known by the then-dominant telcos, in a nod to their mode of delivery with respect to telco services, as “over-the-top” (OTT) providers, the emergence and growth of hyperscalers has been nothing short of phenomenal, both in the speed and the breadth of their influence. It can be argued that what has happened over certainly the last 15—perhaps as few as 10—years, is that the telco world has been turned on its end. Rather than hyperscalers being OTT with respect to telco services, telco services have become the hyperscalers’ last mile: telcos are now how users access hyperscalers’ services. Players such as Apple, Google and Microsoft, through their respective app stores, have become the world’s go-to providers of value-added services.
EMERGENCE
As their reach and influence has grown, as they have become not just essential but central elements of consumer, enterprise and government communications, hyperscalers, especial-
30 SUBMARINE TELECOMS FORUM MAGAZINE
ly Google, Meta and Microsoft, have increasingly taken the lead in building and controlling submarine cable infrastructure, a role historically dominated by telcos. This shift began around the early 2010s, has rapidly accelerated since then, and continues to accelerate. Prior to 2012, hyperscalers accounted for less than 10% of the total usage of submarine cable capacity. By 2020, however, this figure had surged to over 65%1. Google and Meta have been particularly aggressive, investing in numerous submarine cable projects worldwide. Google, for instance, has been involved in at least 182 such projects, including high-profile cables like Equiano, while Meta has invested
in major initiatives like the 2Africa project, set to be one of the largest submarine cable systems globally. The companies have also worked together in Dunant and Echo—and in Africa Pearls. If one is possessed of a nostalgic streak, it is poignant to note that 2Africa surpasses Sea-Me-We3 (SMW3) as the world’s longest submarine cable system just prior to the latter’s withdrawal from service. Having long been as difficult to work with as it has been valuable, SMW3, with its 92 parties and five suppliers, is probably the apotheosis of telco consortium cables3.
1 https://www.datacenterdynamics.com/en/analysis/ submarine-cables-find-new-impetus-under-hyperscalers/
As we’ve already seen, the emergence of the OTTs in the late 2000s into
2 It can be difficult to keep up with Google’s announcement of new subsea cables, usually published at https:// cloud.google.com/blog/products/infrastructure.
FLIPPING THE RELATIONSHIP MODEL OTTS AS BUYERS
3
https://en.wikipedia.org/wiki/SEA-ME-WE_3