Google-owned YouTube accounts for 35% of all global mobile internet traffic, according to network equipment firm Sandvine’s recently published ‘Mobile Phenomena’ report – this is just one reason why Scotland has witnessed several hyperscale data centre announcements in the last few years.
Content provider-owned hyperscales are disrupting the marketing, resulting in a resurgence in and radical restructuring of the subsea market.
The growth in hyperscale data centres, such as the Pyramids data centre in Bathgate, and the Queensway data centre in Glenrothes, is a result of our insatiable demand for Internet-based content and the explosion of cloud services.
Sandvine demonstrates the dominance of video traffic on fixed and mobile networks around the world in its 2019 ‘Mobile’ and 2019 ‘Global Internet’ phenomena reports.
Increasing business cloud and consumer video consumption are driving the demand for hyperscale data centres. The number of these is expected to almost double by 2021 from 338 in 2016 and represents more than 50% of the data centre install base by 2021.
Figure 1 – Global hyperscale data centre growth. Source: Cisco global cloud index, 2016 to 2021.
Google Disrupts and Leads Resurgence
Content providers, primarily led by Google, are disrupting the subsea market, resulting in a resurgence. The huge amounts of time-sensitive content processed by hyperscales require subsea fibre networks to bring the data onshore as close as possible to the data centre campuses to minimise latency.
Typically, the subsea fibre market has been dominated by consortiums of large, global telecommunications operators sharing multimillion investments. This dominance has been disrupted through the ascendancy of hyperscale.
Intelligens Consulting analysed all subsea cable deals announced between January 2018 and January 2019. Of the 46 deals announced within this period, nearly one-quarter of announcements involved at least one major content provider, such as Google, Facebook, Amazon or Microsoft.
Conversely, there were no such deals made by these providers just ten years ago; underlining how recent and influential their impact has been on the industry in such a short period of time.
Google is the most active provider investing in subsea fibre networks, having participated in 14 deals. Facebook follows closely, with 10 subsea deals having been finalised while Microsoft and Amazon participated in four and three respectively.
Figure 2 – Number of subsea deals by content provider. Source: TeleGeography, other press web sites, 2019
Ownership and Control
Content providers prefer their own subsea fibre networks, and there are three key reasons why they are building their own networks as opposed to leasing managed capacity services from a traditional telecom-owned consortium.
Firstly, owning the subsea fibre network means content providers can lay the fibre cable directly between their hyperscale data centres, which may not be possible if they were to rely on third-party networks.
Secondly, providers prefer owning dark fibre pairs, given the huge amounts of data that they transport. Dark fibre gives them access to a bandwidth capability and capacity that is potentially unlimited. Leasing managed capacity services is inhibitive in regards to costs and meeting bandwidth requirements.
Finally, there simply isn’t enough spare capacity in most existing subsea fibre networks to offer dark fibre. Of the subsea fibre deals announced last year, more than two-thirds deployed between four and six fibre pairs. Offloading a fibre pair to a content provider, as such, is not feasible.
However, the multimillion-dollar cost of deploying subsea fibre networks means that content providers are more likely to invest as part-owners. Intelligens Consulting estimates that anywhere up to 80% of provider-led subsea fibre deals involve another investor; which is usually another content provider.
Only 10% of deals involved content providers as the sole investor.
Bring it Home
Scotland remains poorly connected to international destinations by subsea fibre networks, despite marked growth in hyperscale activities across the country. A subsea fibre network connecting Scotland to say, mainland Europe, or elsewhere in the world, would underpin and highlight Scotland as a hyperscale destination.
Investment in the necessary digital infrastructure is known to promote sustainable economic growth.