ATLANTIC UPDATE:Where do we go from here?

0900-0910

Wayne Nielsen, Managing Director

WFN Strategies

@PTCouncil #PTC18

TRANSATLANTIC OVERVIEW

• 14 current systems (+1 from last year)

• 8 planned systems (+3 from last year)

• New cables being proposed due to:• New Routes

• Mid-Atlantic USA to Europe

• South America to Europe

• South America to Africa

• Bandwidth requirements outpacing upgrades

• Infrastructure requirements from OTTs

• System age

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CURRENT SYSTEMS

• AVG systems length of 10,250km

• Similar routing between USA and Europe

• Systems rollout• 1994: 2• 1999: 2• 2000: 2• 2001: 4• 2003: 1• 2004-2014: None• 2015: 1• 2016: 1• 2017: 1

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RECENTLY ADDED SYSTEMS

• 1 new system in 2017 - Marea

• System length of 6,600km

• Total capacity of 160 Tbps

• Highest capacity along transatlantic route

• Highest single capacity cable in the world

• Single handedly increased total transatlantic capacity by 52%

• First system to Mid-Atlantic (Virginia Beach)

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CAPACITY

• Still world’s highest capacity cable route

• Total available capacity since 2015 increased by 164%

• Steady capacity growth

• Regular upgrades

• Continued push from OTTs driving most growth

• AVG Global lit capacity is 15%

• Transatlantic lit capacity• 2015 – 20%• 2016 – 22%• 2017 – ~18% (with Marea)

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2013 2014 2015 2016 2017

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Transatlantic Capacity Growth

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Lit Total

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PLANNED SYSTEMS

• 8 planned systems

• 3 South America to Africa

• 1 Europe to Mid-Atlantic USA

• 1 Brazil to Europe

• 1 USA to Africa

• 1 Arctic to Europe (very different to traditional routes)

• 1 Traditional Transatlantic Route

• Only 2 systems CIF so far

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OLD VS NEW

• Pre-2015 - nearly all Atlantic cables followed same route

• 2017 - first new route to Mid-Atlantic USA

• Future systems pushing southern Atlantic routes

• Almost all future systems OTT driven

• 76% Ashburn data center growth since 2013

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OLD VS NEW - CAPACITY

• 16 Tbps average system capacity for systems installed pre-2015

• 97 Tbps average system capacity for systems installed since 2015

• 50+ Tbps average system capacity for all planned systems

• Older systems running out of upgrade paths, new systems required0

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Pre-2015 2015-Present Planned

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LOOKING FORWARD – CONCERNS

• Age• Pre-2015 AVG age is 17 years

• Running out of upgrade paths

• Business• Questionable traffic along proposed routes (South America to

Africa)

• Low CIF rate as of end 2017, <30%

• Systems stuck in business case limbo

• How long OTTs driving cables?

• Price• Continues to trend downward

• New systems might cause price erosion

• Technical• Planned systems through 2021 increase capacity by 65%

• Marea at 160 Tbps (1/3 of existing capacity)

• AVG 50 Tbps capacity per new system

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LOOKING FORWARD – DEMAND POSITIVES

• Trend of OTTs being involved in cable builds is here to stay

• Guaranteed infrastructure demands

• OTT provided services are more necessary to daily life and increasing

• Increase in mobile usage and cloud computing also provides high and increasing bandwidth demand

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LOOKING FORWARD – TECH POSITIVES

• Future cables beginning to look towards embracing new technology

• Industry working hard to bring 400G and other technology to market

• New repeater technology

• New shore end technology

• New fiber techniques

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LOOKING FORWARD – MARKET POSITIVES

• Consumer demand continues to increase at a rapid pace

• Seemingly insatiable demand for bandwidth may continue to push top tier OTTs for new infrastructure without pause

• Amazon has yet to really enter the cable game

• “Tier 2” OTTs may soon see the need to build infrastructure as well

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CLOSING THOUGHTS

“The current activity levels observed are great and should be enjoyed while they

last. However, the industry must stay cautiously optimistic and not get taken

in by promises of a build frenzy.”

SubTel Forum Industry Report, 2017

Or

“Laissez les bons temps rouler”

"Let the good times roll”

NOLA Cajun French