According to the Wall Street Journal, Microsoft, Meta, Amazon and Alphabet (parent company Google) have captured the submarine cable market. Before 2012, the organizations used less than 10 percent of all submarine cables worldwide. Today, their share peaks at 66 percent.
Countries on the Pacific and Atlantic coasts are connected to a network of submarine cables. Analysts at TeleGeography (telecom researcher) predict that Microsoft, Meta, Amazon and Alphabet will become the network’s largest shareholders in the next three years.
In 2010, the organizations owned a single submarine cable connecting Japan and the US. By 2024, the group is expected to own more than 30 long-distance cables connecting every global continent barring Antarctica.
Traditional providers of submarine cables perceive the trend with caution. Their attitude is understandable. The question is whether we should want the world’s largest technology companies to own the infrastructure on which their services are provided.
Misinformation
Constructing submarine cables costs an enormous amount of money. Thus, submarine cables are traditionally built by governments and national telecom organizations. Today, big tech companies have more than enough resources to venture into the market.
According to the Wall Street Journal, Microsoft, Alphabet, Meta and Amazon pumped more than $90 billion (79 billion euros) into maintaining factories, real estate and equipment in 2020. Parts of the sum were invested in submarine cables.
According to the organizations, the investments are intended to improve connectivity in remote locations such as Africa and Southeast Asia. According to Timothy Stronge, Vice President of Research at TeleGeography, that’s not the full story.
Stronge told the Wall Street Journal that the organizations have been spending heavily on leasing submarine cable capacity for some time. Owning the cables is said to be more cost-efficient. Expenditure on traditional providers is lowered, and bandwidth continues to flow.
The strategy
Meta, one of the growing players, shares submarine cables with competitors and partners. Kevin Salvadori, VP of Network Infrastructure at Meta, confirms that Microsoft and Meta share submarine cable capacity. Simultaneously, Meta reserves some of its capacity for traditional network organizations like Telxius.
According to the Wall Street Journal, the latter is key to the strategy. By essentially giving away network capacity for minimal to non-existent returns, a cable owner like Meta avoids being labelled as a provider. As a result, the organization doesn’t have to deal with the guidelines and regulations designed for providers.
The problem
Ultimately, traditional subsea providers lose. Microsoft, Alphabet, Meta and Amazon don’t need to profit from operating their cables: cutting costs is more than enough. Traditional providers such as NEC, ASN and SubCom are left with diminishing margins.
“All of these ownership changes to the infrastructure of the internet are a reflection of what we already know about the dominance of internet platforms by big tech”, states Joshua Meltzer (researcher at Brookings Institution) in the Wall Street Journal. “You have to imagine this investment will ultimately make them more dominant in their industries, because they can provide services at ever-lower costs.”
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