Monday, August 18, 2008

Fiber Optics for Wireless

Interesting article on my new favorite topic - Fiber under the sea.

Can Undersea Optic Cables Presage a Boom?
Communications links among countries are like transportation routes in the past, opening up new territories to trade and an economic upsurge
by Om Malik

One thing I've learned about the optical network business, having followed it for more than a decade, is that the boom and bust cycles of the business often mask patterns that have long-term implications. The overbuilding of U.S. networks in the 1990s foretold a bust in the telecom industry. The buying up of bankrupt carriers' assets indicated the rise of new players, including Google, which has built a fearsome infrastructure. These days, all the excitement in the optical business is around new undersea cables being laid (or planned), bridging previously unconnected parts of the world. These cables are, in fact, the early warning signs of a coming economic boom.
Let me explain. In the 1990s, we saw a grotesque number of cables laid under the Atlantic and Pacific, connecting the U.S. with Japan, parts of Asia Pacific, and Europe. Those three regions went through an unprecedented boom, much of it inspired by technological changes that brought millions of people to the Internet. The boom, also inspired by deregulation of the telecom infrastructures in those countries, led to further spending on such communications as wireless phone calls and the high-speed Web. Unfortunately, the demand (captured quite well by bandwidth provider Global Crossing (in the early days) led to overbuilding, oversupply—and eventually a bust.
A similar scenario is now playing out in the Trans-Pacific Region, where cables are being built rapidly, and the bandwidth capacity on existing cables is being doubled. Many more cables under construction will connect with India and China, both of which are going through their own economic booms. According to the World Bank, China is the world's second-largest economy, and India claims the fourth spot. These countries have become economic hubs—not only buying but also selling to the outside world. And a key ingredient of trade is the ability to communicate, which in turn requires the large amount of capacity that can come only with undersea fiber cables.
Connecting Up Africa
The latest such effort is Seacom, a $650 million, 15,000km cable connecting East Africa with Asia and Europe. It is expected to be completed next June and provide 1.28 terabits per second of network capacity. This is just tip of the iceberg. According to TeleGeography, a research firm that tracks the global broadband business, 12 cables either in planning stages or under construction will connect Africa to the rest of the planet. Those connections will have a theoretical capacity of more than 13 terabits per second, and construction is estimated to cost more than $3 billion.
Why so much connectivity? After all, PC penetration is abysmally low in Africa. The answer is cell phones. At the beginning of 2008, the continent had a quarter of a billion mobile subscribers, according to the International Telecommunications Union, and Portio Research expects the number to increase to 378 million by 2011. Local companies are furiously building out networks, and by all indications, overall market penetration is going to increase from the 28% mark reported at the start of this year. Cell phones require networks to transfer calls between countries, so there is a need for networks to circle the continent—or at least countries where demand is greatest, such as Kenya, Nigeria, and South Africa.
In the recent past, India went through a similar cycle, in which a spurt in mobile sales acted as a catalyst for the overall economy. Phone calls provide the vital connections for trade to flourish in areas hitherto unconnected. Something similar is happening in Africa, where mobile banking has emerged as a facilitator of cross-border trade.
You can see a similar scenario set to play out in other parts of the world. About five cables on the drawing board or under construction will connect Cambodia, Bangladesh, Vietnam, and some of the smaller countries in Asia. All these countries are going through an economic upsurge and are becoming part of the global economic system.
This leads me to my conclusion: Building new cables is the equivalent to adding new roads, new shipping lanes, or flights. The undersea fibers of today are what sea trading routes were in the past—an indicator of future economic activity and a subsequent boom.

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