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The Russian market of international communication channels in the future 2011–2021

FebruAMry 2017

Analytical Report (full version)

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Analytical Report (full version)

The Russian market of international communication channels in the future 2011–2021
The Russian market of international  communication channels in the future 2011–2021
FebruAMry 2017

The Russian market of international communication channels in the future 2011–2021

FebruAMry 2017

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According to J'son & Partners Consulting, for the period 2011-2021 the total demand for international communication channels in Russia will grow more than 20 times and will reach over 28 Tbps. J'son & Partners Consulting presents brief results of a study devoted to the main development trends and prospects of the Russian market of international communication channels up to 2021.

 

The development of the market of international communication channels is largely determined by a country's position in the international division of labour, role of domestic and international transnational corporations in the national economy, economic development and the penetration rates of various communication services and, first and foremost, the level of broadband access to the Internet. In addition, one of the most important roles is played by the geographical location of the country relative to the historically developed transportation and communication flows.

 

In relation to Russia the authors of the report distinguish the following main factors of the demand for international channels. They are:

  • The Russian operators’ need for connections to international Internet traffic exchange points and the concentration of various types of content (video, games, etc.). Due to the hierarchical structure of the international Internet traffic exchange, such demand exists on the part of operators of several countries which want to join the Russian segment of Internet.
  • The demand of Russian companies and government agencies for connection with their foreign offices and, therefore, a similar demand from foreign Telecom operators concerning organization of communication channels for their transnational clients and international institutions.
  • Transmission of transit international traffic through Russia by global operators.

 

 

The most important market trends

 

The total involved international capacity consists of two major components – the capacity dedicated to Internet networks and the rent of allocated international channels. It should be noted that the segment of Internet capacity has a great importance for evaluation of the Russian market of international TV, since very few operators have their own cable systems in Europe, the place which the main traffic flow out of the country focuses on, and, thus, they have to rent capacity from other operators.

 

According to TeleGeography, in 2011-2016, the total demand of Russian operators for the international connection to the global Internet increased from 1.6 to 6.5 Tbit/s. However, the main exchange points are located in Frankfurt (Germany), Stockholm (Sweden), Kiev (Ukraine), Amsterdam (Netherlands), London (UK).

 

Source: TeleGeography

 

Estimates from above show that the main geographical direction of international channels is the direction to Europe via Scandinavia. This route has developed backbone networks owned by major global players. Russian operators also built their own network on the basis of lease of dark fibers. As a result, this route provides the lowest prices and through it the main flow of Internet traffic.

 

Another important direction is Ukraine and Belarus. The Ukrainian route has been developed by competitive conditions due to the presence of several operators which owned backbone networks in the country. The Belarusian route was predominantly used by the Russian mobile operators to enter Kaliningrad oblast. Recently increased interest in the Belarusian direction is growing due to its short path and low latency. Both areas are being actively used for transit traffic between Europe and Asia.

 

Historically, Russia has always been a transportation and communication bridge between Europe and Asia. Today, all Russian operators of the land call the route from Europe to Asia a critical factor due to the route’s short distance and a very low signal delay. Moreover, the influence of this factor in recent years is increasing and it has become one of the most important factors for selecting providers on this route. The main benefit of the route between Europe and Asia is its geography, other routes are objectively longer and lose the delay.

 

Source: TeleGeography, J’son & Partners Consulting

 

Another important aspect is the necessity of redundant submarine cable systems for mission-critical traffic. Despite the abundance of submarine cables running from Europe in the direction of the Persian Gulf, India and South-East Asia, they all merge in the Red sea and in narrow corridors on the territory of Egypt. This region is associated with intense maritime traffic and is located in a seismic zone. Political aspects of the region should also be considered. The Red sea area (especially Yemen), North Africa (including Egypt), the Middle East countries are areas exposed to prolonged military conflicts and terrorist actions. In the future five years, these issues are unlikely to be resolved until the end, and the possibility of a ground transit route for telecommunication traffic through Russia will remain in demand.

 

In general, according to J'son & Partners Consulting, the Russian economy stabilization will lead to positive growth in the telecommunication market, meanwhile the annual revenues in the market of international communication channels shall be within 10 % in 2017-2021. Principal growth points will be the transit Europe – Asia, operators of the CIS countries (Belarus, Ukraine and Kazakhstan) and potentially the interest to content services (games).

 

 

Commentaries from the market participants

 

1. What kind of projects does your company develop in the market of international channels?

 

"Rostelecom" continues focusing on the development of traditional transit projects like "Europe – Asia" and "Middle East/Caucasus – Europe and CIS Europe". The total capacity of the monetized transit channels through the "Rostelecom" network in 2016 exceeded 1 Tbit/s. At the same time in 2016 "Rostelecom" increased contracted (rented for international customers in terms of annual leases or contracts IRU) capacity of the system "Transit Europe – Asia (TEA)" 120 GB/s. Nearly 80% of the incremental capacity "Rostelecom" monetized with partners on long-term contracts under the IRU scheme in the direction China – Europe. Thus, the total commercially used capacity of the "Transit Europe – Asia" system by the end of 2016 increased to 650 Gbps.

 

2. What are the main trends in the market of international communication channels you can mark in 2016?

 

The main trends, in our opinion, are the following two: first, the continuing trend of increasing the requested channel bandwidth with reducing the unit cost of bandwidth, and secondly, by the end of 2016 by there has appeared a trend of the major transit capacity buyers to buy and use Nx100 GB/s channels. That is why in 2016 in the framework of the TEM project "Rostelecom" purposefully focused on the monetization of an additional channel capacity of Nx10 Gbps on the IRU terms as from the beginning of 2017 the company is expecting to significantly lower prices on the monthly rent of Nx10 Gbps channels on the route “Europe – Asia” due to entering the market by large amounts of supply of Nx100 GB/s channels in submarine cable systems at prices significantly below the current level.

 

 

1. What kind of projects does your company develop in the market of international channels? What are the main trends in the market of international communication channels you can mark in 2016?

 

In 2016 the volume of the Russian route for traffic transit to China was gradually increasing. In terms of Central Asia (Kazakhstan), we see an increase of the natural volume and a reduction in cash. The market of the South Caucasus region has experienced and continues experiencing a fairly active development in connection with increased interest from Iran. In addition, last year, there was launched a number of interesting projects for the establishment of new traffic routes to Western Europe, which will allow Russian operators to further diversify the distribution of their needs and to improve the reliability of the transit for their strategic needs.

 

"TransTeleCom" in 2016 strengthened its position on the market of Azerbaijan, where the company's share grew from 15% to 40%, and became the first Russian operator, which sold the 100 Gbit/s channel in the Caucasus. Also, TTC holds nearly one half of the market of traffic transit in the direction of China. In the past year, the company increased the cash value of concluded long-term deals with Chinese operators by more than 70% in comparison with 2015.

 

 

 

1. What kind of projects does your company develop in the market of international channels? What are the main trends in the market of international communication channels you can mark in 2016?

 

 

 

Currently, VimpelCom is focused on establishing a network of transport infrastructure in regions of presence. This infrastructure allows to offer the market a full range of modern telecommunication services and to ensure 100% reliability and fault tolerance of services for the operating companies and international clients, as well as Telecom operators.

 

 

 

 

 

Detailed results of the research presented in the full version of the report:

“The Russian market of international communication channels in the future 2011–2021”

 

 

Contents

 

Introduction. General analysis of the Russian market of international channels.

 

1. Segment of the market of international channels "from/to Russia"

1.1. General (own) country’s demand for international capacity in real terms (Gbps) – Russia, Ukraine, Belarus, Lithuania, Latvia, Estonia, Sweden, Finland, Armenia, Georgia, Azerbaijan, Turkey, Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, Turkmenistan.

1.2. Assessment of the dynamics of demand for international capacity in natural (Gbps) and cash (US dollars) by the main directions with allocation of demand to/from Russia, as well as the price dynamics

- Russia – Europe

- Russia – Baltic States, Belarus, Ukraine

- Russia – Transcaucasia (Armenia, Georgia, Azerbaijan)

- Russia – Central and Middle Asia (Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan)

 

2. Segment of the market of international channels “Europe – Asia”

2.1. Assessment of the dynamics of demand for international capacity in natural (Gbps) and cash (US dollars) expressions by the main directions of land transit between Europe and Asia, as well as the price dynamics

- East Asia (China, Japan) – Europe

- Gulf countries (Iran and others) – Europe

- South-East Asia, India – Persian Gulf – Europe (potentially up to 2021)

 

 

3. Principle international points of traffic exchange

3.1. Principle points of traffic exchange in Europe and Asia by the volume of terminated international capacity in 2011-2016

-       European nodes (Frankfurt, Amsterdam, London, Stockholm and others)

-       Asian nodes (Tokyo, Hong Kong and others)

-       Presence of major Russian and foreign operators in the international exchange points

 

 

4. Players of the Russian market of international channels

4.1. Major players on the Russian market of international communication channels 

4.1.1. International operators.

4.1.2. Russian Federal operators.

4.1.3. Large Internet companies.

4.1.4. Major regional/national operators

4.2. Evaluation of the market share in terms of revenue at the international channels by major Russian operators in 2011-2016

4.2.1. General competition between Russian operators in the market of international channels

4.2.2. Competition between Russian operators in the segment of international channels "from/to Russia"

4.2.3. Competition between Russian operators in the “Europe – Asia” transit segment

 

 

Conclusions

 

 

 

List of figures

 

Fig. 1. Approach of J'son & Partners Consulting to the preparation of the forecast of dynamics of demand for international capacity between Europe and Asia

Fig. 2. Signal delay on submarine cable systems to the major countries of the Persian Gulf, ms

Fig. 3. Comparison of delay on the route Europe – Asia and other international routes

Fig. 4. Utilization degree of submarine cable systems capacity in major global routes in 2005-2014

Fig. 5. Major Internet routes in Europe

Fig. 6. Major Internet routes in Asia

Fig. 7. The main factors of choice of a telecommunications capacity provider in the international market

Fig. 8. Map of the Orange Business Services network

Fig. 9. Map of the Carrier Telia network

Fig. 10. Map of the Linxtelecom network

Fig. 11. Global network NTT Communications

Fig. 12. Massively redundant network of China Telecom on the land route between Europe and Asia

Fig. 13. Massively redundant network of China Unicom on the land route between Europe and Asia

Fig. 14. Massively redundant network of China Mobile on the land route from Europe to Asia

Fig. 15. Multiple redundant network operator PCCW Global land route from Europe to Asia

Fig. 16. Map of the Rostelecom trunk network

Fig. 17. Map of the land routes Europe – Asia of "Rostelecom"

Fig. 18. Map of the Europe Persia Express Gateway cable system

Fig. 19. Map of the Russia Japan Cable System submarine cable system

Fig. 20. Map of the "TransTeleCom" backbone network

Fig. 21. Map of the HSCS submarine cable system

Fig. 22. Map of the "MegaFon" backbone network

Fig. 23. Map of the DREAM network

Fig. 24. Map of the "RASCOM" network

Fig. 25. Map of the MTS backbone network

Fig. 26. Map of the RETN backbone network

Fig. 27. Map of DATAIX

Fig. 28. Global SDN-network from Google

Fig. 29. Map of the Obit network

Fig. 30. Map of the STC "Fiord" network

Fig. 31. Map of the "Datagroup" network

Fig. 32. Map of the "Kazakhtelecom" network

Fig. 33. Map of the TransTeleCom network (Kazakhstan)

 

 

 

List of tables

 

Table. 1. PEST-analysis of global factors affecting the Russian market of international communication channels

Table. 2. The market of international channels rent by key segments, Gbps

Table. 3. The market of international channels rent by main segments, mln.

Table. 4. Total included international capacity by selected countries in 2011-2021, GB/s

Table. 5. International Internet capacity by selected countries in 2011-2021, GB/s

Table. 6. International channel capacity by selected countries in 2011-2021, GB/s

Table. 7. Distribution of international channels "from/to Russia" by main directions in 2011-2021, GB/s

Table. 8. Distribution of international channels "from/to Russia" in detail by main countries in 2011-2021, GB/s

Table. 9. Distribution of international channels "from/to Russia" by main directions in 2011-2021, $ mln.

Table. 10. Distribution of international channels "from/to Russia" in detail by main countries in 2011-2021, $ mln.

Table. 11. Point of decision to purchase telecommunications services for transnational corporate user

Table. 12. Specific prices for international capacity on routes "from/to Russia" for 1 Gbit/s in 2011-2021, $ per month

Table. 13. Examples of price offers for channels of 10 GB/s by separate areas for 1 GB/s, $ per month

Table. 14. The total demand for transit between Europe and Asia in selected countries and regions in 2011-2021, GB/s

Table. 15. Demand for international channels in the main areas of terrestrial transit Europe – Asia in real terms in 2011-2021, GB/s

Table. 16. Demand for international channels in the main areas of terrestrial transit Europe – Asia in monetary terms in 2011-2021, $ mln.

Table. 17. Signal delay on different operator routes between Europe and Asia

Table. 18. The total demand for international channels from the Persian Gulf, the Indian region and South-East Asia to Europe in real terms in 2011-2021, GB/s

Table. 19. The total demand for international channels from the Persian Gulf, the Indian region and South-East Asia to Europe in monetary terms in 2011-2021, $ mln.

Table. 20. Specific prices for international capacity in global submarine cable systems on the route Europe – Asia for 1 Gbps 2011-2021, $ per month

Table. 21. Specific prices for international capacity on the land route from Europe to Asia via Russia for 1 Gbit/s, in 2011-2021, $ per month

Table. 22. Dynamics of growth of international capacity in the main cities of Europe in 2011-2016, GB/s

Table. 23. Dynamics of growth of international capacity in the main Asian cities in 2011-2016, GB/s

Table. 24. Presence of major Russian and foreign operators in the international exchange points, December 2016

Table. 25. Points of presence of the company Linxtelecom

Table. 26. The length of backbone networks of major Russian Telecom operators, thousand km (for the 2nd quarter of 2016)

Table. 27. The main international routes of "Rostelecom"

Table. 28. Description of EuroasiaHighway routes from "TransTeleCom"

Table. 29. The total incomes of the Russian operators in the rental market of international channels in 2011-2016, $ mln.

Table. 30. The market share of the Russian operators in the rental market of international channels in 2011-2016

Table. 31. Incomes of the Russian operators in the segment of lease of international channels ("from/to Russia") in 2011-2016, $ mln.

Table. 32. The market share of the Russian operators in the segment of lease of international channels ("from/to Russia") in 2011-2016

Table. 33. Incomes of the Russian operators in the segment of lease of international channels (Europe – Asia) in 2011-2016, $ mln.

Table. 34. The market share of the Russian operators in the segment of lease of international channels Europe – Asia rent in 2011-2016

 

The newsletter was prepared by J'son & Partners Consulting. We make every effort to provide factual and forecast data that fully reflect the situation and are available at the time of the release of the material. J'son & Partners Consulting reserves the right to revise the data after the publication of new official information by individual players.

 

 

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According to J'son & Partners Consulting, for the period 2011-2021 the total demand for international communication channels in Russia will grow more than 20 times and will reach over 28 Tbps. J'son & Partners Consulting presents brief results of a study devoted to the main development trends and prospects of the Russian market of international communication channels up to 2021.