Broadband penetration in the Middle East is to double every year for the next five years as consumers sign up to gain access to more online content, according to the world's largest submarine cable network operator.
To meet that demand, telecommunications operators will need to diversify and evenly distribute traffic across wireless, fibre-optic and submarine cable networks, said Vinod Kumar, the president and chief operating officer for Tata Communications. "What that means is that you will need very reliable and significant upstream connectivity to the web as well as connectivity between East and West, because content is not just concentrated in the US, it's becoming increasingly diverse," Mr Kumar said.
To help manage the surge in broadband demand that regional telecoms expect, Tata Communications is investing US$200 million (Dh734.6m) to build a new submarine cable network connecting five Middle East countries over the next two years. Submarine cables are the backbone of the internet and are the width of a pen. The fibre-optic cables are used to transmit most of the data for internet use and telephone calls around the world.
Tata's investment was a strategic initiative, Mr Kumar said. The region's telecoms industry was underserviced and growing rapidly, driven by a booming demand for support in India, the Middle East and Africa. The company's network will connect carriers in Qatar, Bahrain, Saudi Arabia, Oman and the UAE, he said. The construction would be contracted to Tyco Telecommunications, based in the US. Alan Mauldin, an analyst with Telegeography, a telecoms consultancy that specialises in undersea networks, said that by adding more cable, the region's internet would become more reliable and resilient to possible damage that in the past had resulted in major financial losses in economies from Egypt to India.
In recent years, the shortage of international connections has been highlighted by two major internet disruptions between the Middle East and Europe, both caused by lines becoming snagged in ship anchors. Mr Mauldin said newly installed cables could also be upgraded as needed, adding that several new cables would be laid on the Middle East sea floor this year, increasing the amount of capacity from 1,990 to 28,230 gigabytes a second.
"This is something that will not be a five-year project that will make a lot of money, it will be major infrastructure investment that will support the region for a long time," he said. "If users have a 1 megabit connection at home today, there's going to be a demand for faster connections as more new users come online each year." Mr Kumar said Tata would charge carriers to use an undisclosed amount of broadband capacity over the lifetime of the submarine cables.
After the carriers use up their allotted capacity, which usually takes between 12 and 18 months, they have the option of buying their traffic volume costs at market prices. "It's a calculated bet in the region for us," Mr Kumar said. "It's a lot like how airlines hedge their fuel purchases." If all goes to plan, he said he expected to see his investment return profit margins of between 20 and 30 per cent over the lifetime of the submarine network.
Each submarine cable typically lasts about 20 years and the company is in talks with other countries to connect. "If you look at the global undersea world, more than 60 per cent of the traffic that gets carried on the submarine cable network tends to originate from broadband users that access global content," Mr Kumar said. Etisalat and du have made moves in recent years to join consortiums in the building of submarine cables to ensure that the fast-growing local internet market will be undisrupted.