White Paper

THE DATA EXPLOSION

As the explosion of data continues to happen around us, the underlying infrastructure plays an ever- increasing pivotal role in moving the data from its source to the destination in a reliable, secure, and latency-sensitive way. In its journey the data (packets) could be traversing various types and numbers of networks including Wi-Fi, small and large cell networks, terrestrial fiber networks, and subsea fiber networks. The various networks interconnect with each other and exchange traffic mainly at a Network Access Point (NAP).

According to the research firm TeleGeography, the international Internet capacity growth in 2020 was 35%. Similar traffic growth statistics are reported from around the world from cloud providers, content distribution networks, Internet exchange points, and others. DE-CIX, which owns and operates the world’s largest neutral interconnection platform, saw a total of 32 exabytes of data traffic flow through its global platform in 2020 – roughly the same amount of data required for an 8eight-million-year-long video call or the amount of data that can be stored in 32 million laptops (assuming each laptop has 1TB hard drive).

SUBSEA CABLES:
A VITAL PART OF INTERNET INFRASTRUCTURE

The subsea cables carry above 99.7% of all international data traffic. It is estimated that the subsea cables represent USD 10 trillion worth of transactional value every day — five times the market cap of Apple and greater than the combined GDP of Japan, Germany, and Australia (Source: FCC).

To meet the exploding demand for data, the subsea cable industry has seen 107 new subsea cable builds, totaling a distance of 400,000 kms and USD 13.8B in value creation between 2016 to 2020. It took 162 years for 448 subsea cables and four years for 107 (Source: TeleGeography). This resurgence has been led by new players in the subsea sector (hyperscalers), and also newer (small) consortium models and faster deployment cycles.

HYPERSCALERS IN SUBSEA

The hyperscalers’ appetite for building data centers and leasing quality data center space continues to grow. In markets and situations where time-to-market is key, the leasing of quality space from trusted data center providers continues to expand. At the same time, the hyperscalers continue the land acquisition strategy to build and operate their own mega- campuses. Alongside this strategy, there has also been the foray of hyperscalers in subsea. In the last 10 years, we have seen multiple projects around the globe where hyperscalers have been investing in subsea infrastructure and capacity. This trend will continue.

At the end of 2020, approximately 34 subsea cable investments were made by hyperscalers, and that number continues to grow. These hyperscalers include Google, Microsoft, Facebook, and Amazon. Google owns approximately 102,362 kms of subsea cables (8.5% of all subsea cables); Facebook is at 91,859 kms; Amazon is at 30,557 kms; and Microsoft is at 6,605 kms (Source: BroadbandNow). By another count, over 60% of trans-Atlantic subsea capacity is now privately owned.

This has led to new partnerships, such as joint-build agreements of a small number of parties (one to three companies) and much faster deployment timeframes (less than two years for a trans-Atlantic system). Under the old consortium model, a large number of incumbent carriers used to invest in a shared subsea system, many times with projects lingering for years in the “agreement phase” before execution.

Going forward, large enterprises will likely become involved in subsea over the next five years following the lead of hyperscalers, as they build out their own private networks.

THE EVOLVING SUBSEA/CLS/DATA CENTER LANDSCAPE

The landing point of the subsea cables is the Cable Landing Station (CLS), which is commonly located near the beach where the subsea cable exits the water. The typical CLS houses the optical terminal equipment (SLTEs), the power feed equipment (PFEs), and provides the initial point of interconnection between the subsea and terrestrial networks.

With the advancements in optical technology, new systems can be designed with new express point-to-point architectures and even be significantly longer, while carrying more traffic per fiber pair. This has also allowed system designers to redesign the CLS, allowing only critical power equipment to be deployed close to the beach in small scale “PFE huts,” designed as lights-out shelters while moving the optical gear into the data center.

The end-to-end subsea design is driven by the needs of system owners and the availability of modern and diverse terrestrial backhaul facilities. In some cases – particularly hyperscalers – will want to optimize for a data center-to-data center design, while carriers may want to find points of interconnection or NAPs where they have access to a plethora of terrestrial network and content providers.

Multi-tenant data center providers have started to view subsea operators as strategic partners and vice versa. Subsea cables enable global connectivity and have become a catalyst in building network-dense, carrier-neutral NAPs. The subsea industry can realize the inherent benefits in terms of resiliency and redundancies built into the data center design, as well as the rich interconnection to terrestrial networks.

THE GENESIS OF AN INTERCONNECTION ECOSYSTEM

Having open and neutral cross connect policies helps make the proposition stronger for various network parties to colocate in a carrier-neutral facility that has clear interconnection rules and facilitates open interconnection between various parties. From a subsea perspective, having the Submarine Line Terminal Equipment (SLTE) in the facility is a cost benefit, but it cannot always be done due to technical design limitations. When the SLTE is colocated in a carrier-neutral, multi-carrier data center with operational excellence, the subsea traffic can be directly interconnected to other network providers including terrestrial fiber providers (both dark and lit), Content Distribution Networks (CDNs), Multiple System Operators (MSOs) or “eyeball” networks, Software-Defined Networks (SDNs), cloud on-ramps, and general colocation customers. QTS Data Centers has taken this strategic approach to establish such interconnection-rich ecosystems or NAPs in Richmond, Virginia; Hillsboro, New Jersey; and

THE NEED FOR DIVERSITY

Within the United States, there are a handful (less than a dozen) of major Internet peering points or interconnection hubs. These hubs are generally known by their addresses as opposed to the builder owners or operators. This is where the majority of the Internet traffic exchange takes place. There are less than a dozen such interconnection hubs in the U.S. and probably as many (or less) across the world.