J’son & Partners Consulting presents brief results of the study on telecom transit market between Europe and Asia including by Russian terrestrial routes and submarine cable systems. Market forecast on capacity demand is presented till 2018.
Key Questions of the Research
Experience of building of transit telecom routes between Europe and Asia as well as strategies of Russian and international operators are analyzed in the present study. Main focus has been done to not only the description of existing routes, major points of traffic exchange etc., but mainly to analysis of key factors influenced on volume and structure of capacity consumption, choice of international capacity supplier, pricing by various routes.
Value of the Research
By results of own market modeling made by J’son & Partners Consulting on the base of detailed analysis of actual date of capacity consumption by major countries at Eurasia since 2007, development of global cable systems and strategies of international operators, the following estimations has been done:
• Forecast of transit capacity demand between Europe and Asia till 2018 in US dollars and Tbps;
• Detailed demand by geographical routes from East Asia, South East Asia, countries of Indian region and Persian Gulf, the Middle East, Central Asia;
• Market share of Russian operators in transit segment from East Asia, as well as perspectives of other terrestrial routes.
The research is aimed at Russian and International operators, vendors of telecom equipment, venture and investment funds, marketing agencies.
Meet with J’son & Partners Consulting’ analysts at Capacity Russia 2015 conference on 15th September 2015:
• Sergey Shavkunov, executive director – Forecasts & Industry Trends session
• Mikhail Shekhovtsov, managing director on media projects – Interaction between Content Providers and Operators session
Additional information: http://json.tv/event/capacity-russia-cis-2015-20150821015557
It is well-known that development of Internet networks is the main driver for growth of transit capacity demand. In global scale it is necessary to consider not only explosive growth of digital content, but also the unevenness of its distribution in the world, as well as the widespread growth of broadband access and the number of broadband devices at the consumer.
According to TeleGeography, annual growth of international capacity demand in major submarine cable systems remains high in the world, while in the run up to 2020 in the segment Europe - Asia transit it will be among the highest and amount to more than 35%.
Currently, the transit of telecommunication traffic between Europe and Asia can be carried out on three routes: across the US, the Indian Ocean and land routes across Eurasia. The main reason for such a distribution of traffic is a well-developed transit infrastructure, the geographical proximity of certain countries to international traffic exchange points of regions and the relatively low cost of transit. Land routes pass through countries such as China, Mongolia, Russia, Kazakhstan, Ukraine, Belarus, Turkey and others.
On the basis of its own models and analysis of historical data analysts demand J'son & Partners Consulting prepared a forecast of the market of international transit capacity between Europe and Asia until 2018. A distinctive feature of the adopted methodology is the consideration of the geographical focus of demand major countries of Eurasia. According to the forecast J'son & Partners Consulting this market will increase by almost 4-fold, reaching over 41 Tbps in 2014 - 2018. The structure of the market in physical terms by geographic areas undergoes certain changes – it is expected to increase demand for the direction of the Indian and the decline in demand from the Middle East. In monetary terms, the market of Europe - Asia transit capacity will grow and will reach 863 million dollars.
In order to identify the main factors influencing the choice of a service provider of transit traffic, the company J'son & Partners Consulting conducted a survey of leading international operators providing rental services of international channels. It is worth emphasizing that, as a rule, international operators are also consumers, and data services from other operators, such as national or regional operators to meet the needs of its customers in the some countries, where the big players do not have their own network. The survey was conducted among the conference participants of Capacity Russia (6-7th October 2014) and the Capacity Europe (3-5th November 2014). It was attended by 53 international operators from Europe, Asia, North and Latin Americas. 29 operators are among the largest operators in the world by revenue according to the Global 100 list published annually by Terrapinn. According to the survey identified seven most important factors for operators.
It should be noted that the price of the services traditionally is the first priority of the operators making wholesale purchases of telecommunications capacity in order to develop its network and meet the needs of customers. However, the survey showed that the operators began to pay more attention to the quality of services and ensure their guarantees (SLA), the share of answers "very important" quality even ahead of price.
All Russian operators of the land route between Europe and Asia - Rostelecom, TransTeleCom and Megafon - the most important factor of the premium referred to his route and the shortest distance, respectively, the minimum signal delay (RTD). In recent years the impact of RTD increases and it becomes an important factor in choosing a supplier of international capacity. In this regard, all Russian operators - participants of transit Europe - Asia involved in a competitive race to achieve the lowest possible results.
To estimate the demand and the competitiveness of Russian transit routes the company J'son & Partners Consulting has addressed the major suppliers and consumers of telecom capacity on land routes through Russia. Their comments are below.
Head of branch at Department on work with international operators, Rostelecom
How do you estimate the annual growth rate of demand for land route Europe - Asia through Russia? What are the main drivers of this growth?
The main driver of growth is IP-traffic of Chinese operators extending their backbones China - Europe. According to our observation, for past 2 years the capacity of Chinese operators at China-Europe route through the Russian Federation is increasing annually by about 200 Gbps. But at the same time the increase of capacity significantly reduced its reasonable cost for Chinese operators, and as a result margins for Russian operators in this business.
How do Russian operators prepare for commissioning of new submarine cable systems (SMW 5, etc.), which will have greater capacity and reduced latency?
In our opinion, the main danger of these systems for the main transit market via Russia will not be a large capacity and signal delay, and the relatively low unit cost of traffic passing through them. Now we are also working on the adaptation of the existing business model of transit to the new realities associated with the introduction of the commercial use of these systems. In general, in our opinion, in the near future use of transit network for the China-Europe transit by Russian territory only will be uneconomical. Commercial effectiveness of the provision of services in the territory of the Russian Federation can only be achieved using a telecommunications infrastructure in parallel with the other needs of the company. For example, for Rostelecom it is the provision of transit on the common backbone infrastructure of the company, used in parallel to provide a large number of telecommunication services in the Russian Federation.
Is the offer to sell the 100 Gbps channels?
Yes, it is. But while the effect of commercial and technical aspects - the market is not yet ready to use them. In our view, they become relevant since the second half of 2016.
What are the prospects of EPEG project in the near future?
EPEG project takes its specific niche in the transit market. By virtue of the original business model of the project - as a consortium, today EPEG can not aggressively compete on price with cable systems via the Suez Canal, so today the volume of traffic sent to EPEG is significantly lower amount of traffic transmitted via sea cable systems reaching through the Suez Channel. Global operators, who need a geographically diverse route, use EPEG. We believe that this system is to maintain the market iits positioning.
Head of Representative Office in Russia, China Unicom (Europe)
How do you estimate the perspectives of Europe - Asia land route through Russia?
Terrestrial cable routes to Europe via the territory of Russia is traditionally in demand by all major telecom operators in China, in particular, the company China Unicom. Operators are interested in the smaller signal delay compared to alternative competing routes and the possibility of diversification.
Currently due to objective factors land routes from Asia to Europe do not enjoy the same high demand as routes across the Pacific and Indian Oceans. In this regard, operators providing transit to its area of responsibility, first of all need to work together to decrease their costs to provide transit traffic in order to bring the level of output prices to competitive submarine routes. This one will induce many operators and their customers to the choice of land routes and significantly increase its share in the total transit between Europe and Asia.
Business Communications, MegaFon
How do you estimate the perspectives of DREAM project at Europe - Asia land route through Russia?
MegaFon’s project DREAM is one of our major investment projects in recent years, in which we have invested about 600 million rubles in 2013. DREAM route (Diverse Route for European and Asian Markets) intended for the passage of all types of telecommunication traffic between Europe and Asia. In the first phase of the project MegaFon has provided its foreign partners DWDM-reliable communication channels with a speed of 1 to 10 Gbps, it organized by dedicated and specially trained routes. Highway is potentially ready to pass traffic at speeds up to 8 Tbps.
DREAM project is the only high-speed fiber optic backbone between Europe and China, built on regions with seismic activity of less than 1 point, which virtually eliminates the seismic risk. Geographically DREAM route with length of 8700 km passes through the territory of 7 countries (Eastern China, Kazakhstan, southern Russia, Ukraine and Slovakia). Since the launch of the DREAM project the largest operators of China and Europe become our customers - China Telecom, China Unicom, TeliaSonera, Deutsche Telecom and the number of partners is steadily increasing.
The optimal geographical route is characterized by a minimum RTD between Hong Kong and Frankfurt - 175 ms. It is 2-3 times less than that of sea cable systems, and 10-20 ms less than the delay in land highways. DREAM is an example of coherent Euro-Asian partnerships between the leading operators, which are: MegaFone - in Russian, Interoute - in Europe, Kazakhtelecom - Kazakhstan, China Telecom - in China.
In 2014 DREAM was named the Best European project of the year according to the Global Capacity Awards, that sets us a very high standard and a powerful incentive to move and develop further. For us it means that towards B2O segment (working with telecom operators) MegaFon will continue to focus the development of high service availability, optimal signal transmission delay between Europe and China, as well as efficiency in connecting clients.
Assistant VP Head of Region Russia and CIS PCCW GLOBAL
How do you estimate the perspectives of Europe - Asia land route through Russia?
The demand for Asia – Europe transit circuits is still growing as well as the supply. We see the increased number of new offers for this route in all possible combinations. The new players include terrestrial routes transiting Kazakhstan, Mongolia, and new subsea routes such as AAE-1 and SMW5. Cable investors are getting more cautious to analyze return of investment (ROI) due to increasing options available to the market.
Both terrestrial and submarine routes have their pros and cons. As for the end customers, the deciding factors for choosing one over the other are mainly diversity, stability, ease of trouble shooting, latency, pricing, commercial model and also the branching locations. Commercially, long-term IRU (indefeasible right of use) and leasing are usually available for submarine cables, whereas it could be less flexible for terrestrial routes depending on the telecom regime of individual transiting countries.
Within the next few years, the terrestrial routes will continue to be the premium route. With more branching locations, more consortium members will participate in submarine cables therefore delivering more favorable economy of scale.
Marketing Manager, China Telecom (Europe) Ltd.
How do you estimate the perspectives of Europe - Asia land route through Russia?
China Telecom’ Euro-Asia Network (ENS) consists of 6 independent terrestrial and 2 submarine cables from Europe to Asia. ENS has the most resilient links available between China and Europe and can fulfill the various data demands of multinational companies. It is a superior solution offering exceptional reliability and secure connectivity between all major POPs in Europe, China, Asia and Hong Kong. Based on state-of-the-art fibre optic network technology, China Telecom’ Euro-Asia Network significantly enhances customers’ business efficiency between Europe and Asia.
Head of Marketing and Sales Support Department, TTK
How do you estimate the perspectives of Europe - Asia land route through Russia?
Initially, Russia was a premium route at the transit market between Europe and Asia, it was “focused” on the maintenance of extremely time-sensitive corporate traffic, mainly financial. In fact, in 2012-2013 Russia has become an active competitor of submarine cable systems by launch of 10G channels offer on the long-term lease (IRU) at a price comparable with underwater systems at best time-delay parameter on the market. This has led to the growth of capacity in the Russian route. In 2014-2015, capacity growth slowed once again, primarily due to a slowdown (in % terms) of the uplink demand of the Chinese market. In addition, a consortium of Chinese operators took part in the creation of a new cable system to Europe, which, in our opinion, could lead to a reverse transfer of Russian route into premium category in 2017.
Detailed Results of the Research are presented in the full version of the Report:
«Perspectives of Telecom Transit Market between Europe and Asia»
Content of the Report:
1. State of the art and analysis of market perspectives of international telecom transit
1.1. Analysis of experience of global telecom carriers on development of transit routes
1.1.1. Major international players on transit market between Europe and Asia, including submarine cable systems
1.1.2. Strategy analysis of operators providing transit services between Europe and Asia
1.2. Forecast of demand on international capacity in submarine cable systems in 2015 - 2020
1.3. Description of major transit routes
2. Analysis of international capacity demand between Europe and Asia
2.1. Analysis of international capacity demand
2.2. Major market trends on international transit till 2018
2.3. Factors influenced on transit volume and its structure
2.4. Factors influenced on consumption of transit services by key market players
3. Opportunities for potential new routes between Europe and Asia
3.1. Major choice factors of transit capacity supplier
3.2. Main point of traffic exchange in Europe and Asia (TOP-5 cities)
3.3. Pricing forecast for international capacity by major geographical routes between Europe and Asia till 2018
3.4. Main factors influenced on pricing on international routes
3.5. Analysis of competitive environment and major success factors at Europe - Asia routes
4. Conclusions and recommendations
List of figures
Fig. 1 Telecom transit structure between Europe and Asia by routes
Fig. 2 Transit networks of Russian operators
Fig. 3 Map of Rostelecom’s transit network
Fig. 4 Map of Europe – Asia terrestrial routes of Rostelecom
Fig. 5 Map of Europe - Persia Express Gateway cable system
Fig. 6 Map of Russia Japan Cable System
Fig. 7 Map of TransTeleCom’s transit network
Fig. 8 Map of HSCS submarine system
Fig. 9 Map of MefaFon’s transit network
Fig. 10 Map of DREAM network
Fig. 11 Map of Rascom’s network
Fig. 12 Map of MTS network (Eurotel)
Fig. 13 Map of RETN transit network
Fig. 14 Map of TASIM Trans-European Highway Information network
Fig. 15 Map of Turk Telecom’s transit routes
Fig. 16 Project Express submarine cable system (project)
Fig. 17 FASTER cable system (project)
Fig. 18 SeaMeWe-5 cable system (project)
Fig. 19 AAE-1 cable syste (project)
Fig. 20 BRICS cable system (project)
Fig. 21 Gulf Bridge International / MENA cable systems
Fig. 22 ROTAKS Russian cable system in the Arctics (project)
Fig. 23 Arctic Fiber Canadian cable system in the Arctics (project)
Fig. 24 Usage of EIG submarine cable system by Saudi Telecom to connect to Europe
Fig. 25 Kazakhtelecom’s terrestrial routes between Europe and Asia
Fig. 26 NTT Communications's global network
Fig. 27 Multiple reservation of PCCW Global’s network at terrestrial route between Euope and Asia
Fig. 28 Interoute pan-Eyropean international transit network connected to Russia
Fig. 29 Flag Europe – Asia private cable system owned by Global Cloud Xchange
Fig. 30 Share of private cable systems in different regions of Eurasia by installed capacity
Fig. 31 Atracom’s network – peculair terrestrial consortium in Ukraine
Fig. 32 Allied Fiber multi-fiber cable network in the USA
Fig. 33 Multiple reservation of China Telecom’s network at terrestrial route between Euope and Asia
Fig. 34 Multiple reservation of China Unicom’s network at terrestrial route between Euope and Asia
Fig. 35 Multiple reservation of China Mobile’s network at terrestrial route between Euope and Asia
Fig. 36 Geographical distribution of submarine cable breaks
Fig. 37 Round-trip delay at Europe – Asia routes and its comparison with other international routes
Fig. 38 Rostelecom’s offering with various RTD options at Europe – Asia routes
Fig. 39 TransTeleCom’s offering with various RTD options at Europe – Asia routes
Рисю 40 MegaFon’s offering with various RTD options at Europe – Asia routes
Fig. 41 RTD at summarine cable routes to Persian Gulf countries, ms
Fig. 42 Change of geographical structure of transit capacity at submarine routes in 2013 – 2020, by capacity
Fig. 43 Change of geographical structure of transit capacity at submarine routes in 2013 – 2020, by revenue
Fig. 44 Map of submarine cable systems
Fig. 45 Capacity of international cable systems
Fig. 46 Lit capacity at major submarine cable systems in 1999-2012
Fig. 47 Share of lit capacity vs. built capacity at major submarine cable routes in 1999-2012
Fig. 48 Building of new submarine cable systems in 1998-2014
Fig. 49 J’son & Partners Consulting’s approach for demand forecast on international capacity between Europe and Asia
Fig. 50 Forecast of annual growth rates of capacity demand by major international submarine routes in 2013 – 2020
Fig. 51 Capacity strucure by network types in 2000 – 2014
Fig. 52 Forecast on annual price erosion for 10 Gbps channels at various international routes in 2013 – 2020
Fig. 53 Installed and used capacity at terrestrial routes from Europe to East Asia in 2007 – 2013
Рис 54 Forecast of transit international capacity at Europe – Asia routes in 2013 – 2018, Gbps
Fig. 55 Change of geographical structure of transit capacity between Europe and Asia in 2013 - 2018, by capacity
Fig. 56 Forecast of transit international capacity at Europe – Asia routes in 2013 – 2018, mln US dollars
Fig. 57 Change of geographical structure of transit capacity between Europe and Asia in 2013 - 2018, by revenue
Fig. 58 Share of Russian operators in transit from Europe to East Asia by capacity and revenue in 2007 - 2013
Fig. 59 Digital content growth in 2009 – 2020
Fig. 60 Global sale volumes of smartfones, tablets and electronic readers in 2005 – 2015, mln pcs
Fig. 61 Digital content distribution by geographical regions
Fig. 62 Growth of fixed broadband lines in the world in 2004 – 2018, mln
Fig. 63 Growth of fixed broadband subscribers by regions in 2004 – 2018, mln
Fig. 64 Growth of mobile broadband subscribers in the world in 2005 – 2015, bln
Fig. 65 Growth of speed of fixed broadband access in the world, in Europe and Asia, 2013 – 2014
Fig. 66 Fig. 65 Growth of speed of mobile broadband access in the world, in Europe and Asia, 2013 – 2014
Fig. 67 Number of mobile users by technologies in 2010 – 2019, bln
Fig. 68 Growth of social network users in the world in 2011 – 2017, mln
Fig. 69 Global market of managed networks in 2011 – 2016, bln US dollars
Fig. 70 Regional shares of IP VPN and Ethernet services by regiona in 2011 – 2016, %.
Fig. 71 Growth of fixed broadband subscribers and demand for international IP capacity in China in 2007 – 2013
Fig. 72 Growth of fixed broadband subscribers and demand for international IP capacity in Singapore in 2007 – 2013
Fig. 73 Growth of fixed broadband subscribers and demand for international IP capacity in Malasia in 2007 – 2013
Fig. 74 Growth of fixed broadband subscribers and demand for international IP capacity in Saudi Arabia in 2007 – 2013
Fig. 75 Growth of fixed broadband subscribers and demand for international IP capacity in Turkey in 2007 – 2013
Fig. 76 Average value of international IP capacity per broadband user in Asian countries in 2007 – 2013, Mbps per user
Fig. 77 Consuption of international IP capacity per broadband user vs GDP per capita (by PPP) in Asian countries in 2013, Mbps
Fig. 78 Influence of mobile broadband traffic in 2005 – 2015
Fig. 79 Asia location between two major centers of digital content – Europe and the USA
Fig. 80 Structure of IP capacity demand vs geographical proximity to the USA or Europe of selected Asian countries
Fig. 81 Structure of demand on international transit capacity by types of network, 2013
Fig. 82 Structure of IP traffic in international networks, 2013
Fig. 83 Distribution IP VPN ports by capacity in Asian and Persian Gulf countries, 2012 - 2013
Fig. 84 IP capacity concentration by largest players in Asia in 2009 - 2013
Fig. 85 Major factors for choice of international transit capacity supplier
Fig. 86 Major Internet routes in Europe
Fig. 87 Major Internet routes in Asia
Fig. 88 Concentration of international capacity of IP networks among largest regional players
Fig. 89 Average annual price erosion at major transit routes between Europe and Asia in 2008 - 2013
Fig. 90 International capacity demand of Japan and price for 10 Gbps channels to Europe in 2007 – 2013
Fig. 91 International capacity demand of China (Hong Kong included) and price for 10 Gbps channels to Europe in 2007 – 2013
Fig. 92 International capacity demand of Singapore and price for 10 Gbps channels to Europe in 2007 – 2013
Fig. 93 International capacity demand of India and price for 10 Gbps channels to Europe in 2007 – 2013
Fig. 94 International capacity demand of the Middle East and price for 10 Gbps channels to Europe in 2007 – 2013
Fig. 95 Comparison of 10 Gbps channel prices at London – Mumbai and London – Singapore prices in 2007 – 2013, US dollars per month
Fig. 96 IRU price calculation (for 10 years) vs curent chanel price erosion
Fig. 97 Comparison of international capacity demand to Europe from EastAsia and supply capabilities of Russian operators in 2007 – 2014, Gbps
Fig. 98 Growth of used capacity of Russian operators on Europe – Asia route in 2007 – 2014, Gbps
Fig. 99 Indicators of network availability and price discounts by SLA
Fig. 100 Comparison of price for 10 Gbps capacity in 2008 – 2013, US dollars per month
Fig. 101 Proposals of Hawe, polish carrier for shortening of Moscow – Frankfurt route
Fig. 102 Potencial risks at international transit market
List of tables
Table 1 Major Rostelecom’s international routes
Table 2 TransTeleCom’s EuroasiaHighway routes
Table 3 Top-100 rating of largest international operators, 2013.
Table 4 Advantages and disadvantages of submarine and terrestrial cable systems
Table 5 Major nodes of Russian operators in Europe and Asia
Table 6 International transit capacity market by submarine cable routes in 2012 – 2020, Tbps
Table 7 International transit capacity market by submarine cable routes in 2012 – 2020, mln US dollars
Table 8 Lit, built and used transit capacity by submarine cable routes in Athlantic ocean in 2012 – 2018, Tbps
Table 9 Price forecast at London – New York route for 10 Gbps channels in 2012 – 2018
Table 10 Lit, built and used transit capacity by submarine cable routes in Pacific ocean in 2012 – 2018, Tbps
Table 11 Lit, built and used transit capacity by submarine cable routes in South-East Asia in 2012 – 2018, Tbps
Table 12 Lit, built and used transit capacity by submarine cable routes at US – Latin America routes in 2012 – 2018, Tbps
Table 13 Lit, built and used transit capacity by submarine cable routes at Europe – Asia routes in 2012 – 2018, Tbps
Table 14 Lit, built and used transit capacity by submarine cable routes at Europe – Africa in 2012 – 2018, Tbps
Table 15 Built and used transit capacity at terrestrial routes via Russia in 2012 – 2018, Tbps
Table 16 Grouping of major traffic-generating countries in Asia by geographical regions
Table 17 Demand for Internet capacity in East Asia in 2007 – 2013, Gbps
Table 18 Demand for Internet capacity in South-East Asia in 2007 – 2013, Gbps
Table 19 Demand for Internet capacity in the countries of Indian region in 2007 – 2013, Gbps
Table 20 Demand for Internet capacity n the countries of Persian Gulf in 2007 – 2013, Gbps
Table 21 Demand for Internet capacity in the Middle East in 2007 – 2013, Gbps
Table 22 Demand for Internet capacity in Central Asia in 2007 – 2013, Gbps
Table 23 Forecast for international transit capacity between Europe and Asia by regions and countries in 2013 - 2018, Gbps
Table 24 Table 23 Forecast for international transit capacity between Europe and Asia by regions and countries in 2013 - 2018, mln US dollars
Table 25 Users of social netwoksby regions in 2011 – 2017, mln
Table 26 Global IP traffic in 2013 – 2018, PB per month
Table 27 Split of global IP traffic by local and transit ones in 2013 – 2018, PB per month
Table 28 International IP capacity per one broadband user in the major Asian countries in 2007 – 2013, Mbps per user
Table 29 List of operators taken participation in survey of choice factors for international capacity supplier
Table 30 International Internet capacity by major European cities in 2007 – 2013, Gbps
Table 31 International Internet capacity by major Asian cities in 2007 – 2013, Gbps
Table 32 Largest ISPs (by number of regional ASN)
Table 33 Dynanics of 10 Gbps IP capacity pricing in Europe in 2009 – 2013, US dollars per Mbps per month
Table 34 Dynanics of 10 Gbps IP capacity pricing in Asia in 2009 – 2013, US dollars per Mbps per month
Table 35 Prices for 10 Gbps capacity by geographical routes between Europe and Asia in 2007 – 2013, US dollars per month
Table 36 Forecast for 10 Gbps capacity prices by geographical routes between Europe and Asia in 2013 – 2018, US dollars per month
Table 37 Forecast for transit capacity price per 1 Mbps by geographical routes between Europe and Asia in 2013 – 2018, US dollars per month
Table 38 Indicative coefficients for price calculations for various channel capacities
Table 39 Major advantages and disadvantages of IRU and capacity lease
Table 40 Economic indicators and development of broadband services in Central Asia in 2007 – 2013
Table 41 Economic indicators and development of broadband services in China in 2007 – 2013
Table 42 Economic indicators and development of broadband services in Persian Gulf countries in 2007 – 2013
Table 43 Economic indicators and development of broadband services in the countries of Indian region in 2007 – 2013
This Information Note is Prepared by J’son & Partners Consulting, We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material. J’son & Partners Consulting reserves the right to revise the data after publication of new official information by the market players.