| Subsea Cable Convention Sets Sights on Future Challenges |
 The 4th International Convention on Undersea Communications, SubOptic 2001, continued into its third day Tuesday at the Kyoto International Conference Hall with addresses by three keynote speakers.
The Plenary Session began at 9:00 am with a speech from Stephen Baker, the Vice-President and Chief Technology Officer of 360networks, who talked about the changing face of global networks and emphasized that the rapid technological change in the sector is a disruptive influence and that the financial markets have yet to adapt to its consequences.
Second to speak was Owen Best, the Vice-President of FLAG Telecom Asia, who chose as his theme, "The New World for Global Optical Networks", an in-depth look at trends within the industry.
Following Best, the session was wound up by Christian Reinaudo, the President of Alcatel Optics, who dissected some of the emerging technological and economic changes affecting the industry and looked to the Internet as the source of future growth for the sub-optic sector.
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| The Technology is Disruptive |
 The first speaker of Tuesday's Plenary Session was Stephen Baker, the Vice-President and Chief Technology Officer of 360networks, who offered the audience his personal vision of the changing face of global networks.
Baker began his address by stating five important precepts: firstly, that so-called "club" cables were becoming obsolete in the current climate; secondly, that the demand for data transmission, as opposed to voice, is driving capacity needs; thirdly, that sub-sea is only a part of the circuit path; fourthly, that the technology is disruptive; and lastly, that the financial markets have not yet adapted to the changing situation. "The technology is disruptive of the existing order," he said, "and the financial sector doesn't yet understand how much." Among the industry's customers, IPs are currently consuming most of the available capacity in most regions. "But today's customers have regional and global requirements," said Baker. "They want city-to-city, or POP-to-POP. And these customers aren't limited to SDH. All kinds of corporations are buying up circuits. Also, they want virtual circuitry on demand and fast provisioning." Looking at the existing service axis model, Baker described it as a vertical model. "We began with voice channels and then modified them for data use. Later we added other channels such as DVDM, and eventually optical fiber, with each successive level providing higher speed than the level below. "He also said that the current gateway-to-gateway systems were beginning to give way to city-to-city systems, and illustrated how today's ring networks function using the example of the Los Angeles - San Francisco system and explaining the immense difficulties involved in connecting ADM channels between rings and ensuring that circuits are established.
"If we don't have voice in our network and we just think about data, we will shift the service axis from vertical to horizontal," Baker explained. "This will be the next step." The interesting thing about horizontal network systems is that speed is no longer the major consideration, so in terms of heirachy we can move from a speed stack to a service stack.
He also pointed out that even using the same hardware environment, the horizontalmodel provides a much richer variety of services. "You can even go pre-emptive, which is an extremely cost-effective solution for certain kinds of users."
Stressing the versatility of horizontal systems, Baker said that optical private virtual networks are now available and that beyond this we can offer direct 1 Gigabit and even 10 Gigabit Ethernet services, as well as rate adapted GigE, adaptive optical switching services, g.MPLS, etc. "Optical services are flexible," he added. "The global net means that even if an entire city goes down, we can reroute traffic around it, and restoral times are extremely rapid."
Baker's global vision sees everybody involved in the industry, including suppliers, customers and competitors, as partners in a single endeavor. "What we're building is all about making life better for all individuals around the world. It's our responsibility to think about how we can help humanity."
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| "Not All Fiber and Kit" |
 Today's second speaker was Owen Best, Vice-President of FLAG Telecom Asia. From his perspective as regional head of FLAG's business operations in Japan, Korea, China, Hong Kong, Singapore,Thailand and India, Best spoke about "The New World for Global Optical Networks", including a wide-ranging discussion on the trends driving the sub-optic industry.
"We must keep in mind that the aim of our industry is to deliver services to customers," Best stressed, "and we need to develop emerging applications that deliver more bandwidth, speed and capacity." Agreeing with Stephen Baker that the technology is disruptive in the marketplace, Best added that it is also stimulating. "I don't believe in the bandwidth glut," he said, insisting that the industry was behaving rationally in investing in anticipation of future demand, and pointing to the massive growth now occurring in such emerging markets as Russia and China, and the huge strides made by South Korea towards optical systems.
"There has been a lot of over-speculation in the entire dot-com, IT and communications sector," he admitted. "So we need to have a good deal of rationalization."
In Europe, he explained that there has been an over-build of pan-European fiber networks, but on the plus side, he pointed out that this infrastructure provides ample scope for new services to appear. Meanwhile, in Asia, price erosion and demand jitter are major factors in today's market.
Also, an inefficient backhaul and access market, particularly the extremely high price of land lines, is holding back progress.
 However, Best believes that this will change in the near future. Prices will drop, and the market in Asia is going to move in the direction of pay-as-you-use. Indeed, he thinks that continuing price erosion will result in a drop of 40-50% in land line prices over the next two years, and that this will further stimulate demand.
Submarine cable suppliers are also facing a credit crunch, Best said. But the problems need not be insurmountable. "There are capital constraints, but these can be overcome by sharing development costs in order to manage risk. Moreover, there is plenty of incentive for companies to provide value-added services. "In the medium term, Best sees deregulation as driving the demand for cable services in Asia. He quoted the growth innative language servers and the continuing penetration of E-business as among the most important sources of new demand.
Coming onto the network as a whole, Best sees the future as moving toward all-optical networks that meet the criteria of ubiquity, scalability, interoperability, flexibility, supportability, speed, cost efficiency and adaptiveness. "These are the mantras of the industry," he asserted, adding that "the architecture trend is toward layer compression and functionality migration within the layers."
But Best also reminded the gathering that "it's not just fiber and kit. We have to deliver services to customers in the way that they want them delivered."
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| Innovation Aids Capacity Growth |
 The final keynote speaker at Tuesday's Plenary Session was Christian Reinaudo, the President of Alcatel Optics, which regroups Alcatel's activities in terrestrial and submarine optical networking, optoelectronic components and related research and development. Reinaudo began by noting the brisk pace at which the industry has been moving since the previous SubOptic Convention in San Francisco four years ago. "We've been through a lot of revolutions since 1997," he remarked, "in which the submarine business has often paved the way for the entire optics industry." He said that the most spectacular changes have taken place in the area of business models, mainly as a result of the privatization and deregulation that began prior to 1997 but which has gathered pace since then.
"The industry has been revolutionized by the emergence of new kinds of players, such as carriers' carriers," he commented. "The rise of the global submarine network, often from entrepreneurial beginnings, is the most striking feature of the customer landscape. This is notably illustrated by the possibility of a start-up, with no existing network infrastructure, being able to initiate a submarine network." This has led to new ways for operators to manage their business. According to Reinaudo, outsourcing is now a significant practice among submarine network operators, just as in other industries.
At the same time, upgrades are now increasingly used to develop networks, whereas in 1997, the conventional wisdom was that network capacity would always be fully developed from the start. But since then, Reinaudo explained, new carriers' financial constraints and technological innovations have made it both essential and possible to grow network capacity over time. In other words, the most important criterion for carriers is short-term profitability, while mid-term capacity can be smoothly upgraded thanks to DWDM.
Network architectures and technologies have also experienced significant changes, he noted. "The loop has become the dominant long-haul architecture for submarine and terrestrial networks alike. Also, wet and dry optical networks have developed. Internet traffic being global by nature, there is no reason why the Internet-enabling networks should not also be global. Therefore, the submarine network has come to be an integrated part of an operator's network, instead of a stand-alone link. "Looking forward into the future, Reinaudo struck an optimistic tone. "From now on," he told the convention, "we see that business plans and profitability outlooks are going to rule the industry even more than in the consortia's time. The only question pertaining to vendors and carriers is going to be: how to respectively sell and purchase capacity at the lowest possible cost to offer the most attractive services to end-users. Beyond the low cycle that the industry has just entered into, the answer to this question will be brought by the emergence of new technologies and business models." Reinaudo also pointed out that while new technologies may drive the advent of new business models, it may also happen that emerging business models will drive the development of new technologies.
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| More Interviews with Top Executives and Engineers |
SubOptic 2001 was attended specialists from around the world, some of whom were interviewed as to their areas of interest, and their future expectations of the submarine cable industry.
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| Mike Downie |
 Mike Downie is Chief Executive Officer of Global Marine Systems Limited, the world's leading provider of subsea cable installation and maintenance services to the telecom sector. With the largest cable ship fleet in the world, the company has performed over 40% of all recorded repairs on fiber optic systems worldwide, and laid cables at depths of up to 9,000 meters. Downie said that the biggest problem his company faces is "external aggression" - industry jargon for cable damage caused by bottom fishing trawlers and ship's anchors. On the future prospects for the industry, he's a guarded optimist. "There's been a tremendous boom driven by deregulation and the growth of the Internet," he commented. "And although new players have entered the market, traffic has been growing rapidly, in some places by as much as 50% annually. Cable construction tends to run ahead of demand because it's relatively easy to put in new capacity." He believes that the current cable glut in Asia is temporary, and that the prospects for the subsea business in the region are excellent. "After all," he quipped, "Asia is separated by water, and that's good for sub systems."
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| Tom Boasberg |
 Tom Boasberg is Senior Vice-President of Level 3 Communications Limited, a broadband infrastructure company providing an end-to-end IP closed network to communications-intensive companies. As a total IP services supplier, Level 3 has a unique role among the major builders in that its cable systems are not independent profit centers but form a part of its overall network systems. "In the United States we are one of the top IP backbones," Boasberg commented, "so we are not dependent on submarine capacity, but on the other hand submarine capacity is an important input that helps us sell our IP services to the market. "Level 3 embraces the total ownership business model. According to Boasberg, "We're building global systems in which we own the wet and dry. This ensures the lowest possible cost baseas well as allowing us to maintain a high quality of service." Also, this model allows the company to offer extremely fast seamless services, with installation times as short as one week in the USA and three weeks in Asia.
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| Alan Robinson |
 Alan Robinson is the Vice-President of Cable & Wireless in charge of the company's global operations engineering services and global network operations. In his view, the prospects for the growth of the submarine cable industry in Asia remain good. "There is definitely something happening in Asia," he told us. "Market forces are causing price erosion, and as prices come down, investors are motivated to back new ventures."
Robinson remains upbeat despite the current capacity surplus in Asia. He describes the situation as "chicken and egg". He explained that excess capacity drives competition among suppliers, so things get developed to fill the capacity. He characterizes the industry as conservative in forecasting the capacity supply situation, because building new cable systems is capital intensive. But he remains adamant about the need to invest for the future. "You might say that to have too much capacity is a sin, but to run out of capacity is a greater sin," he smiles. With respect to SubOptic, Robinson commented that "the convention has grown steadily over the last 15 years and has become a great venue for the commercial as well as the technical side of the industry."
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