Internet video, iPhones, explosive growth of mobile phones in Asia, flat-rate broadband pricing… these and more have sent capacity demands on the Anywhere Network through the roof in the past year. Many of the packets these activities generate end up queuing for intercontinental transport via one or more of the Earth’s submarine cabling systems.

In London last week I had a chance to catch up on the implications of demand and approaches to submarine cabling finance from an Anywhere industry insider, Vinod Kumar. Vinod is President and COO of Tata Communications and a long-time communications sector leader. Among many other submarine cable activities, Tata Communications operates SEACOM, the big cable that recently reached the shores of East Africa from Mumbai, opening up network capacity in Africa in a big way.

Bandwidth demand is booming around the world right now. Do we need more undersea cabling?

“If you wanted to write a check for more right now, I’d say the Atlantic Ocean needs another cable. Not necessarily because of bandwidth demand in total, but rather because of the rise in demand at various landing spots. I’d run one from south Florida at one end, to southern Europe at the other. South America needs another, so I’d run a branch cable down there off of the new one.”

Public markets aren’t enthusiastic about financing big speculative projects right now – and the debt that supported private equity backers is harder to get now, too. How are these projects getting funded these days?

“They can take $250M to $1B at a go. In the old days, the way it used to be funded was through the formation of massive industry consortia. Tata [via the 2006 acquisition at its core, Indian state-run long-distance network firm VSNL] was involved in quite a few. You’d get 60 to 80 firms to commit up front to the commercial demand for the capacity when the cable got laid, in order to get the project financed. But these cable consortia are tremendously complicated to manage; for one thing, you need to control how a consortium’s members push for capacity upgrades before the bulk of the project cost has been recovered.”

“Then you had the speculator model, which boomed in the late ‘90s… for instance, the private equity firm Blackstone funding SEACOM. Rather than go through all the hassle of securing demand in advance, proponents of this model had a ‘build it and they will come’ approach. That boom, though, led to several busts, when the investors didn’t sew up enough commercial commitments before proceeding.”

“Tata then pioneered a model which seems to bring some attributes of each of those models towards the middle. Maybe you’d call it the ‘private club’ model. We own the main intercontinental cable we lay, and various landing parties own the various cables that branch off regionally to local waters, like to Vietnam or the Philippines. It’s less complicated than the consortium approach because there are fewer members. The main asset is 100% owned by Tata, but about 60% of the demand for its capacity is covered by the club members who run branches off it. It’s better for Tata, since we ourselves only have to risk 40% of the investment cost and it’s easier to manage a much smaller group. It’s better than the completely speculative model for the club members, since they get to buy the capacity at our cost plus a limited markup, less than 10%, and since Tata is an experienced undersea cable operator, they can hold us to extremely strict SLAs [service level agreements] to get comfort about reliability. Since we’ve started doing that, others have mimicked the model and it’s become pretty popular.”

But with exploding demand, and Tata’s balance sheet, aren’t you tempted to go the speculative route yourselves?

“Traffic is growing at 60% a year — but no one foresaw the irrational pricing that’s driving some of that. We’ll never take a speculative undersea cable project to Tata’s board — because we don’t need to. We tell the board what our own organic load will be, and we can find the rest of the funds to keep it prudent. It’s a small industry. We have investments in almost 80 cable consortia, so people know us, and we’re good at the work itself, like figuring out how to put cables where other cables aren’t. Those sound like small details, but the earthquake off Taiwan earlier this week disrupted several cables – not ours.”

My conversation with Vinod was on a day when he and other members of the firm’s management team were showing how far the formerly India-only operator has come in the provision of global connectivity. Vinod’s ambition: for Tata Communications to become ‘the Singapore Airlines of network services’. In an episode that reminded me of those times when you suddenly start hearing about the same movie or restaurant multiple times within a few days, a lot of the rest of our talk was about the new models for wholesale network services. I’ll do another post on that shortly.

On the 24th of August 2007 an earthquake that measured 8.0 on the Richter scale hit the coast of Peru.  The epicenter was just off the coast and located about 150 kilometers SSE of the capital city Lima. Over 150 people died. There was some damage in the capital but most was confined to the towns on the coast.

The mobile networks collapsed due to damaged network infrastructure from the quake, the loss of electrical power and the sheer volume of calls to the affected areas from concerned friends and relatives.

Even while the operators were trying to put their networks back together the Peruvian government started a public firestorm over the outages. “This should not have happened!” was the general tone. The President, Alan Garcia ordered the regulatory bodies to investigate and multi-million dollar fines were bandied about. Operator management was distracted by the public savaging and the need to respond to government officials at a time when they should have been concentrating on restoring services.

Seven months later, the regulator fined Telefonica, America Movil and Nextel a collective 2.8M Peruvian soles or just over USD300K each, an amount that maybe looked good in the newspapers but was nothing more than a face-saving slap on the wrist.

Last Saturday morning (Feb 27 2010) an earthquake measuring 8.8 hit the coast of Chile. Since the Richter scale is logarithmic, the Chilean quake was 6 times as strong, heavily damaging parts of the capital city of Santiago some 317 kilometers to the north of the epicenter. As of this morning (Mar 1, 2010), over 700 people have lost their lives.

Again the mobile networks have collapsed. Again for the same combination of reasons largely beyond the operators’ control. The most affected parts lost internet service but this was restored fairly quickly to Santiago and social networks have pumped out amateur video of the damage.

Since Sunday morning, the country’s chief regulator – Subtel’s Pablo Bello – has been answering customer complaints via Twitter, patiently explaining the reasons for the problems and passing on useful messages from other citizens. The chief problem as he reports it is the lack of electrical power to sites so he has been working to getting vital resources directed to the operators. He has not yet breathed a suggestion that the operators could have done anything in the face of a natural disaster of this magnitude.

His followers on Twitter have received constant updates on his activities to support the restoration of the network and he appealed on the Internet for more satellite telephones. Telefónica has responded. Today we got a region-by-region breakdown of the damage including estimated percentages of the number of base stations affected. Nothing keeps the public from panicking like a constant stream of information from its leadership.

On March 11^th there will be a change of government in Chile and Pablo will most likely be out of a job. The new president is center-right and Pablo is closely associated with the outgoing center-left coalition.

I don’t agree with much of what Subtel decides. It is far too quick to intervene in competitive markets for my taste.

But this kind of leadership in a crisis and clear-headed understanding of the issues demonstrates a level of executive skill that is often lacking in many businesses.

Pablo Bello deserves to get a good job somewhere when all this is over. It will be a loss to the Latin American industry if it isn’t in telecom.

More than 25 percent of Yankee Group survey respondents say they expect at least a third of their infrastructure to move to cloud computing in the next 12 months, but company-wide adoption remains low. To uncover what lies ahead for cloud computing in 2010, Yankee Group interviewed executives from 25 cloud computing pioneers—including early cloud service providers, telecom operators, and infrastructure and software vendors. Their unique perspectives and key strategies tout the power of the cloud and offer a view into its impact: Will cloud computing be an evolution or a revolution?

Zeus Kerravala and I were delighted to have three cloud thought leaders join us for today’s webinar:

• Doug Hauger, General Manager, Microsoft Windows Azure
• Raj Nathan, Executive VP and Chief Marketing Officer and Senior VP, Sybase
• Jayshree Ullal, President and CEO, Arista

The discussion was lively and thoughtful–a special thanks to each of them for taking the time do join us. A replay of the webinar is below. We’re also offering a complimentary download of the report that inspired this webinar: “Clouds in 2010: Vendor Optimism Meets Enterprise Realities.” Register as a guest for access.

The webinar runs about an hour: audio (mp3) and slides (pdf).

While researching my new book ANYWHERE: How Global Connectivity is Revolutionizing the Way We Do Business, I had the good fortune to speak with over 50 connectivity thought leaders. I’m using my blog to periodically share some of the insight that didn’t fit into the book.

In this excerpt from my interview with Paul Sagan, president and CEO of Akamai Technologies, which provides managed services to power the performance and delivery of rich media online, dynamic transactions and enterprise applications over the Internet, we discuss the path to ubiquitous connectivity, obstacles to its growth, and how connectivity is accelerating human evolution.

Paul Sagan, President & CEO of Akamai Technologies (c) W. Marc Bernsau

How is connectivity changing over the next five to 10 years? What’s happening to the network from where you sit?

This is a consumer answer to your question, but I do believe this change will help power business things, too. We’re starting to see the Internet becoming television, replacing the giant gorilla in the home. Call it the HD Web, if you will. You will be able to get competitive quality, variety and control over your ‘IP television’ (that’s an incomplete term, but I don’t yet know what to call it) better than you get with conventional TV today. At Akamai, we are starting to deliver live TV streams of HD-type quality, using the term “HD” loosely. A majority of viewers are now selecting the higher-quality video streams over the lower-quality ones.

We handled the NCAA March Madness [U.S. college basketball playoffs] on the Web for CBS this year, as we have for some years now. This wasn’t the first year that they had cable-network-size audiences. We served hundreds of thousands of live simultaneous viewers, but for the first time, a majority of those viewers selected video streams of 1 Mbps bandwidth or greater. That’s a stunning milestone. And that’s in the U.S., where the potential audience has very low penetration of FiOS-quality broadband to the home.

You could argue that’s not ‘true’ HD, not Blu-Ray quality, but it’s more than watchable—after two beers, you can’t tell the difference, and maybe that’s always how college basketball is watched. ‘Two-beer HD,’ maybe we should call it.

What that means to me is that the Internet is now a challenge to TV. If you extend broadband growth out three, five or even 10 years, it’s still a pretty short horizon. TV gets fundamentally changed, and from there, so does gaming and all home entertainment. That is a sea change in the economy. All of home entertainment was completely analog until not that long ago! That affects all sorts of businesses.

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Because of my current research interests, most of my meetings at MWC 2010 in Barcelona were about mobile broadband and in particular, the crunch that network operators experience as usage soars.

At his press conference, Ericsson’s CEO seemed to breeze by the issue in a “Brave New World” speech (why do these always remind me of films from the 1939 New York World’s Fair?). But it came up in meetings with the rest of his company and with every other vendor I met with from Tier 1 network vendors (Alcatel-Lucent, NSN, Huawei), to OSS vendors (Amdocs, Comverse, Convergys, Telcordia), to mobile backhaul vendors (RAD, Cambridge) and of course with Femtocell vendors (Airvana) and specialists like Allot. It was the “elephant in the living room” in a Telecom TV panel discussion I did on WiFi and it even came up in a discussion with over-the-air TV chip maker Telegent who proposes their solution as a way to off-load streaming TV traffic from the mobile network.

In every meeting the following question either arose naturally out of the discussion or I forced the issue and asked it directly:

Are dongles (mobile broadband modems) or smartphones to blame for the problem?

Hardly surprising that the answers were almost equally balanced between the one and the other i.e. both are to blame. But depending on the country, the principal blame will lie ether with smartphones or with dongles.

In developed markets like North America and Western Europe, the blame lies with smartphones. Sometimes it is bad protocols or bad settings and so sometimes just a software refresh by the device manufacturer gets things under control. But most of the damage is done by apps that constantly poll the network for new information. As the king of the app ecosystem, the Apple gets singled out but the issue isn’t the iPhone per se but the types of applications advanced smartphones like the iPhone encourage users to install.

In emerging markets like Latin America or Eastern Europe or developing Asia Pacific, the issue is dongles. Lack of adequate fixed broadband and heavy marketing by mobile operators mean that 3G wireless connections are increasingly the primary means of accessing the internet in these countries. As I have written elsewhere, that means the devices are stationary instead of in motion, connected for long periods of time instead of just for brief dips into an app or for a quick search and they are often used for heavy video or even peer-to-peer traffic. To state the obvious, this is not the kind of use-case the 3GPP standards bodies had in mind.

The solutions are many but they basically boil down to variations of the following

1. Optimization of device protocols
2. Traffic shaping and prioritization
3. Pricing schemes beyond flat-rate that encourage economic use of mobile broadband
4. Off-loading fixed-use case traffic to fixed networks
5. Waiting for LTE

Of these only “Waiting for LTE” is anything more than a stop-gap, a way to slow down traffic growth and hope that LTE arrives before the seemingly inevitable crash of 3G networks.

Much has been made of Apple’s pervasive industry influence, accomplished without actually participating at the in-person events that make up the annual tech sector calendar. But here at Mobile World Congress in Barcelona this week, Google has been the largest presence without a presence.

“What will Google do next (to us)?” has been the prevailing question in virtually every executive conversation I’ve had. It’s safe to say the industry fears Google’s brand, cash, capabilities, and perhaps most of all, sheer audacity. I suspect if Google announced plans to put a new data center on the moon, the network community would nod sagely and say, “Sure; it was only a matter of time.”

Google CEO Eric Schmidt keynoting the 2010 Mobile World Congress (c) Monty Metzger

Tuesday night, Google CEO Eric Schmidt entered a packed auditorium, nominally to give a conference keynote. What he really did was subject himself to the Spanish Inquisition. He did offer some formal remarks, but following that, with poise a politician would envy, he fielded questions from attendees for close to 45 minutes.

Diplomacy was the order of the hour; he took pains to talk about how honored he was to attend, how Barcelona is now “the place to be” for the computing industry, and how the enormous success of the mobile sector to date is due to the community gathered here this week.

Some highlights:

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I spent half of the first day of Mobile World Congress attending and moderating for an Alcatel Lucent IMS customer showcase event was attended by the normal IMS cheerleaders – France Telecom/Orange, NTT Docomo, Telefonica, Belgacom, SFR and a new face with Verizon Wireless [VZW].  Alcatel Lucent says IMS is the pots and pans you need in the next generation network kitchen.
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Today’s NYT has the story: putting a mobile router in school buses to offset the sometimes long commutes kids have. The students can do homework and chat online with teachers while they cover the miles to and from school and sporting events.

Yet another example of the gradual expansion of the Anywhere Network.  It’s a natural hole to fill in the network fabric.

Here’s another one: Eurostar. I was stunned a few months ago when, after settling into my seat and carefully arranging my work things around me, I discovered that the train — a bastion of regular London-Paris commuters — was completely network-free.

Given that Google seems to be inclined to make large gestures to try to stimulate the behavior of others in the marketplace, perhaps its holiday-time free airport Wi-Fi should be followed up by free Eurostar Wi-Fi — perhaps during Roland Garros?

To be sure, the school students may not be using the access for schoolwork only. But the point is this: eventually we will find it incredibly anomalous to be offline. And talk of “going online” will feel just as incredibly dated. All of the things we will want to do while we’re moving around on public transporation — including the things that the providers of that transportation want us to do, like read their safety instructions and absorb advertising for their on-board food and drink — will require the network.

Today’s announcement by Google that it is exploring deploying an experimental 1 Gbps fiber to the home service in a small number of communities sounds like crazy talk (see Benoit Felten’s analysis for his view on this announcement). Could Google really believe that it could run an fiber-to-the-home (FTTH) service akin to Verizon’s FiOS as a side business? However as I reflected on the announcement and my recent reading of Ken Auletta’s book, Googled, I find myself thinking that this is anything but a side business. I think that this project is Google executing on a key element of its BHAG.

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When researching my new book, ANYWHERE: How Global Connectivity is Revolutionizing the Way We Do Business, I was fortunate to interview more than 50 thought leaders in connectivity. Their input was invaluable and their ideas, advice and examples provide very rich context for the Anywhere vision. I’m sharing selected book interviews through the blog.

In this excerpt from my interview with Axel Haentjens, senior vice president Marketing, Brand and External Communications for Orange Business Services, Haentjens provides his take on how the upcoming ubiquitous connectivity revolution will change how enterprises do business, both internally and with their customers.

What do changes like pervasive connectivity and embedded IP in broader devices mean for enterprises?
I have been in the communications business for 15 years at France Telecom [FT]. In 1995, it was very clear that the desktop had to be connected. Now we’re at the point where we have laptops, BlackBerrys, PDAs, and more. So in the last two to three years, you could access documents and e-mail through a PDA from everywhere — from a train, on holiday, etc. For Orange [FT’s key brand], that translated into a huge success for our Business Everywhere tool. We have more than 1.3 million users.

But this year, we see something else. We’re now at the point of pervasive reachability, where you need to talk to people using various means that are all integrated. We ought to be able to start one way, and then move to another.

And it’s not only human connectivity.

Right. There will be five times more objects to connect than people, at the very least. There are mature applications today in tele-monitoring, fleet management and tracking goods. Orange operates mobile networks in 28 countries, including 15 countries in Europe today: 15 percent of our mobile B2B revenue is already M2M. It comes from SIM cards embedded into devices either for fleet management or remote monitoring, and it’s growing at a rate of about 20 percent per year.

Clearly tele-metering is ready. You’ll find security companies doing it, utilities also, and energy companies doing tele-measuring for gas and electricity. We see a lot of apps in vehicles, helping to manage thousands of trucks via geo-location and route optimization.

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