skip to main content
Close Icon We use cookies to improve your website experience.  To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy.  By continuing to use the website, you consent to our use of cookies.
Global Search Configuration

Ovum view

Summary

Much of the discussions at the “Submarine Networks Europe 2018” conference in London this February focused on the evolving relationships between traditional carriers and the new kids on the block, the web-centric OTT players. While several of the largest OTTs are bypassing the wholesale market by investing in their own submarine cable infrastructure, the consensus was that they form a key (albeit demanding) wholesale customer segment.

OTTs are changing the submarine cable marketplace

Since 2015, several of the largest OTTs, including Amazon, Facebook, and Google, have invested millions in buying their own fibers in new submarine cables instead of buying capacity from wholesale carriers when they need it. Although one speaker at the recent Submarine Networks Europe 2018 conference stated bluntly that OTTs pose an existential threat to carriers, most of the speakers and delegates agreed that these web-centric companies present an important opportunity for wholesale carriers.

One delegate, from Facebook, reassured the conference that the primary reason why OTTs are buying their own fibers on submarine cable systems, such as Asia-Pacific Gateway, Jupiter, and Unity, is to sidestep the delays in getting members of a traditional cable consortium to agree. Another delegate, from Apple, stated unequivocally that the OTTs are not interested in operating networks or becoming telcos themselves.

Representatives of carriers and submarine cable operators agreed that the OTTs are accomplished buyers that demand that carriers provide diverse, resilient, and cost-effective solutions and services. OTTs are also less risk-averse and more pragmatic than many established members of cable consortia. They are willing to invest in newer technologies if the expected benefits outweigh the risks.

OTTs want data center-to-data center connectivity, without having to negotiate licenses with regulators or obtaining their own terrestrial backhaul from landing stations. However, they are acutely aware of the vulnerabilities of terrestrial backhaul, particularly where the same routes and even ducts may be used by supposedly diversely routed backhaul.

Having an OTT as an investor and anchor tenant in a new submarine cable system can make new projects feasible where carrier traffic alone is insufficient. Furthermore, OTTs present opportunities to carriers to earn additional revenues from operating their infrastructure for them, and from providing value-added services over that infrastructure.

However, submarine cable operators and wholesale carriers must remember that although they have a lot in common, the individual needs of OTTs can differ widely. One speaker suggested that the so-called Silicon Valley OTTs are dinosaurs in comparison with some of the Asian OTTs, such as Alibaba and Tencent, which are only just starting to expand internationally.

Although OTTs are challenging customers and partners that are rapidly changing the shape of the submarine cable business, they are only a threat to carriers that are unwilling or unable to adjust to the new market for international capacity.

Appendix

Further reading

OTT Media Companies: An Important Opportunity for Wholesale Carriers, TE0012-000565 (January 2016)

Digital Economy 2025: Wholesale Telecoms, TE0012-000548 (November 2015)

Author

David James, Practice Leader, Wholesale Telecoms

david.james@ovum.com

Recommended Articles

  • Service Provider Markets, Consumer & Entertainment Services,...

    MWC 2018 Highlights

    By Ronan De Renesse 27 Feb 2018

    Over 20 of our senior Ovum analysts and consultants attended this year’s Mobile World Congress in Barcelona at the end of February. In between meetings, briefings and presentations, our analyst team were blogging and tweeting about key developments, trends and rumors. Have a look through our daily MWC 2018 Highlights to find out what happened.

    Topics 5G AI IoT Cloud Payments SDN/NFV Smart home

  • Internet of Things

    IoT Viewpoints 2018

    IoT Viewpoints explore the IoT opportunity in 2018 and beyond. Download our latest e-book to get our newest collection of thought leadership articles on the emerging IoT trends, technologies and opportunities.

    Topics IoT

  • Consumer & Entertainment Services

    US pay TV: Is it facing an existential threat?

    By Adam Thomas 28 Mar 2018

    With US pay TV having endured the worst year in its history, thoughts have inevitably turned to the future. The likelihood remains that the immediate future will remain highly uncomfortable for everyone except the scaled multinational digital platforms.

;

Have any questions? Speak to a Specialist

Europe, Middle East & Africa team - +44 (0) 207 017 7700


Asia-Pacific team - +61 (0)3 960 16700

US team - +1 646 957 8878

Email us at ClientServices@ovum.com

You can also contact your named/allocated Client Services Executive using their direct dial.
PR enquiries - Call us at +44 788 597 5160 or email us at pr@ovum.com

Contact marketing - 
marketingdepartment@ovum.com

Already an Ovum client? Login to the Knowledge Center now