Datacentric - Fiber Optics

The business you are in shapes your mindset

The core business of companies that most depend on fiber connectivity -and in the future will depend even more- and have the capital to build them, is advertising, software, data mining, intercontinental submarine cables and datacenters.

Big Tech had to start from scratch and have added in-house expertise of physical infrastructure. Compare with the easy ride that benefited the mobile revolution of the 90s that drew skills from the fixed line networks.

The datacentric network is going to need more and more fiber optic connectivity. Lots of it. How has OTT run its traffic so far? Over legacy fiber optic networks. The wireline operators had thousands of Km of fiber on the ground and owned the electric poles. And, most important, being utilities, they had the right of way and were well-connect to the municipalities.

Unglamorous but huge: as the Cordiant Digital Infrastructure site has it: "Digital is, McKinsey Global Institute and JPMorgan estimate, the third largest infrastructure asset class after energy and roads."

We do not read news of operators announcing new or expansion of fiber optic networks to route traffic to hyperscalers cloud nor for Datacenters' interconnections. The datacenters are using that same fiber networks built to backhaul 3G and 4G.

The fiber networks for 5G have not yet been built.

When you read about Europeans clamoring for the U.S. tech giants to pay to build infrastructure because they are flooding their networks with data, they are asking for the U.S. tech giants to build fiber optic networks for 5G.

Fiber optics is the soul of the U.S. tech giants. How will you ramp the data in and out of the cloud? Over fiber. How will you connect the hyperscalers to submarine cables? Very few geographies allow investors to deploy their datacenters closer to the Cable Landing Station. You need redundant terrestrial backhaul from a few carrier-neutral third parties.

The fiber networks M&A frenzy after the financial crisis of 2008-2009.

After the 2001 Tech Bubble, aka Dotcom Bubble, burst fiber optic networks tanked. Internet History: The post-bubble network was vastly overbuilt and underused. In late 2002, consulting firm TeleGeography estimated only 10% of the long-haul fibers installed in Europe and North America carried any signals, and that only 10 percent of the wavelengths in those fibers were lit.

But in the following, 3G was in full swing and operators were preparing for 4G. These fiber networks became prized assets.

As reported in a recent Wall Street Journal article citing statistics from investment bank Cowen & Co., there were 14 acquisitions in the fiber network business and 45 since the demand for fiber networks began to show a comeback in 2006.

As capacity keeps growing, we may see another round of M&A in the fiber space. But this time will be expensive. The best assets have been already bought, post Quantitive Easing and Near Zero Interest rates cost of capital is high and resources are scarce to build new fiber

Liberty Networks Germany’s helloFiber has confirmed its sudden exit from the German fibre optic market and that the company has filed for insolvency... citing inflation, interest rate levels and access to external capital. Further reasons were the rising fibre rollout costs with a shortage of construction capacity and the increasing challenge of attracting communities with suitable characteristics, he added.

The only solution is to build more fiber but where will the builders -people to design, plan, build, operate, and maintain these networks- come from?

By about 2008, the available fiber optic network managers and engineers started retiring. They had come from the copper era and ported their skills to fiber optic. Copper? Yes, you might have experienced the copper era's last hurrah using ADSL.

While submarine cables' keep going up, both, in terms of capacity, photonics technology, and business models, -see the rise of the Independent Infrastructure Developers below- the skills terrestrial fiber optic network became rare because all those engineers and managers that moved from the copper networks to fiber have, in its, majority, retired.

Other sectors have experienced the effects of this retirement wave: Construction, oil&gas and mining to name a few. In the last 15 years, to get fiber optic people the industry relied on the Asian subcontinent as westerners retired. But these ones aren't getting younger either.

The new western engineers and managers shun fiber optic, which is mostly civil works' construction. The average 'work from home' professional does not want to be a fiber optic guy or girl. They are comfortable in an office -or at home- having a coffee shop downstairs to go for a chat.

DATACENTERS ARE CONNECTIVITY HUBS

Data is no stationary. Data moves. Talking about datacenters' expansion without talking about fiber, is akin to discussing real state without discussing the plumbing. That water plumbing that we take for granted. When designing a facility, plumbing has no glamour but it is the glamour that sells.

Northern Virginia – Dark Fiber Network Map

iColo Nairobi Fiber Connectivity

How many submarine cables land are there? How old are they? Are they landing at the right places? Or are they new but need an upgrade? Upgrading a submarine cable is a big investment and if they are owned by consortia, the owners might not be willing to re-invest.

If you look at Africa, most major cities are on the coast, and easier to connect. But Johannesburg and Nairobi are both inland. These need CLS to Datacenter fiber optic routes. Then consider the landlocked countries to connect through.

Bayobab , Paratus Namibia , Liquid Intelligent Technologies are African companies working hard in the gargantuan efforts to bridge Africa overland. They know that Big Tech and Big Cloud IP Transit, wavelength and dark fiber revenues are there for the taking.

Africa is big, but how long do the fiber routes need to be? To give one idea this is WIOCC fiber network. The higher-resolutionknow-how map of WIOCC Global Network is here

Yes, routes are long and there are require big investments but, luckily, Africa has two big advantages:

1) The availability and the low cost of labor to build fiber networks.

2) They have the know how. The Chinese built fiber big and transferred the technology.

During the Chinese -decade 2003-2013- Huawei and ZTE took a market that was the province of incumbent telecom vendors: Siemens, Ericsson, Alcatel and Nokia. They build big fiber projects to sell complete fiber optic solutions to the expanding 3G and 4G mobile network operators. Digging to deploy fiber was the cost of doing the optical business.

Most national backbone fiber in Africa runs on OPGW, the cable above the electrical wires in transmission electrical lines. Not only Safe and Cheap to build but these keep getting extended across borders.

This, below, was last week's news: Just splicing two OPGW cables and you are in business across borders:

In partnership with the Kenya Electricity Transmission Company (KETRACO) and Ethiopia Electric Power (EEP), Liquid’s new link connects Nairobi and Mega, a town in southern Ethiopia, and provides a capacity of four terabytes per second. Complementing the existing terrestrial routes across this border, the Kenya-Ethiopia route will now have carrier-grade connectivity, which serves to rapidly expand data traffic on this important route.

And between the 2 countries, there is another fiber cable running from Kenya SUSWA electricity hub to Ethiopia via a just commissioned HVDC power line that can be lit for further redundancy.

More power lines, railways, and roads are being constructed across Africa and it is cheap to lay high-count new fiber backbones along those infrastructures.

Americans and Europeans have extensive optical fiber on the ground -as they already had power lines, railways, and roads once the Internet took off- are very well capitalized and sophisticated but upgrading and expanding the optical fiber networks is getting trickier.

The labor shortage is starting to bite and Europeans are planning to tap African resources for fiber deployment:

Geodesia, a builder of digital infrastructure expanding in the German market, is tapping Morocco to develop skills in the field of fiber optic deployment.

Over the course of 15 months, Geodesia has emerged as a key player in worldwide fiber optic infrastructure deployment, presenting an invaluable opportunity for thousands of Moroccan workers to acquire essential skills in the sector.

Morocco and Germany have agreed on a pilot project expected to create 9,500 jobs in optic fiber engineering, which is becoming very important in today’s modern telecommunication.

The Moroccan and German ministers stressed the need for the two countries to conclude a new generation “win-win” agreements benefiting from international mobility opportunities.

Meet BEAD a $42.5 billion plant to extend fiber access in the U.S.

Labor and materials are the main obstacles to the broadband funding rollout, Zachary Perconti, director of government affairs at Power and Communication Contractors Association (PCCA), told a panel at this week’s Fiber Connect 2023. And the federal government inevitably will have a hand in whether the broadband industry can overcome those "twin bottlenecks."

One solution to solve the optical labor shortage? Advocating?for immigration reform in federal legislation is “one possible solution"?PCCA is pursuing to help overcome the workforce shortage.

Perhaps soon the H1-B crowd going to the United States will consist of more fiber specialists and fewer coders.

How datacenters' operators will move beyond using legacy fiber? This deal could show how the maket will act: A deal between Brookfield and datacenter company Digital Realty could point to the future Ascenty is a leader in hyperscale data center infrastructure in Latin America. In 2019, we partnered with Digital Realty Trust (DLR) to jointly acquire the company.

Here in Kenya, NTT owns the Dimension Data (former Internet Solutions) and owns fiber infrastructure. It can become the first datacenter non-carrier operator in Kenya to own fiber optic infrastructure as they have said "...we're looking at Nairobi, Cape Town. Warsaw, Milan, Ho Chi Mihn, Singapore, and more."

WHAT IS THE FUTURE OF DATACENTERS?

The market is abuzz with tA.I. but let's see why we are where we are here today. Datacenters startedis Everything and still are at the center of the first mover of the Internet economy. The United States. From the U.S., datacenters picked up in Europe, which became the world's Internet entrepot. A bridge between US and Asia with 2 ramifications: One to LatAm and another down to Africa.

Underground Empire — how America uses its data networks to control the global economy

The Dangers of U.S. Adversaries Weaponizing American Data

Why the US fighting a Data Cold War against China? Data Centers Contribute $2.1 Trillion to US Economy, New PwC Study Finds. The United States, obviously, does not want to lose the supremacy while China want a big piece of the action.

But there is EMC: Everyhing Moves Constantly. Capital costs are up as Quantitive Easing is ending. The energy was cheap as Europe was plugged into Russian cheap gas pipelines butonce electricity prices went up, it started affecting the datacenter industry.

In the long term financing and energy costs will continue to be the main drivers of the datacenter geography.

Where are the opportunities? In routing, both terrestrial and subsea, look to where there are gaps to be bridged are, case in point from Southern Europe to Africa and bottlenecks that need alternatives as well as routes that need diversity.

BREAKING THE BOTTLENECKS

There is a type of bottleneck that has come to the fore recently. These are routes that pass in countries where the telecoms are still in the hands of the state. Although they have access to finance from the World Bank, to go through through these countries is expensive. Therefore bypassing such a country provides opportunities to grab capacity.

Look to areas where cables are mostly telco consortia, thus, old and low capacity.

Spot the Indian prices

Or where there is needed for redundancy. For instance, Angola Cables SACS need redundancy to Brazil.

For many in the fibre optic cable industry, Egypt has chanced its luck for too long.

Spot where Telecom Egypt Makes Money

Saudi Arabia wants to have a go at the Egyptian bottleneck.

How Saudi Arabia is redrawing the map of the future with fibre-optic cables

Egypt is considered a choke pointis by the fibre-optic cable industry due to the lack of alternative routes across a geo-strategically critical part of the world.

The Saudi by Pass

Another example, traffic from Sudan to Cameroon over Chad can be diverted to Niger Republic and from there to Benin Republic bypassing Cameroon as there is the Chinese pipeline Niger - Benin.

A new coming for Submarine Cable Systems

We are seeing the beginning of the Subsea cable's third generation. The first was the telco-owned. relic of the regulated and state-owned era. Next came content-cloud-big tech, now we are seeing the rise of the third wave: the Independent Infrastructure Developers., (IIDs). The number of independent infrastructure developers over the last 4 years has grown to 10. Put together they are set to own and operate 25 submarine cables by 2021, representing a significant percentage of major submarine cables that will be operational by that time, writes Suvesh Chattopadhyaya

High cost of electricity. Imposition of unrealistic demands to reduce emissions. Moratorium on the construction of datacenter

Datacenters being long-term investments can end up in a geography where electricity skyrockets and new datacenters competing with yours are deployed where electricity is cheaper. That is the challenge the Europeans have been facing since the Ukrainian conflict started.

The opportunities are in countries that can leverage lower electricity costs to attract datacenters and their workloads. Germany is the leading European country in data centers, its Bill, or “Energieeffizienzgesetz,” aims to reduce emissions by imposing energy efficiencies on all industrial sectors. Data center operators have criticized it for making unrealistic demands, including low PUE scores and fast adoption of waste heat reuse.