The Fibre Optic Link Around the Globe, or Flag, will be 17,400 miles long and coming to a landing point near you – if you happen to be on the route between the UK and Japan, that is. And the work to clear a route on the bottom of seven of the world’s seas and […]
The Fibre Optic Link Around the Globe, or Flag, will be 17,400 miles long and coming to a landing point near you – if you happen to be on the route between the UK and Japan, that is. And the work to clear a route on the bottom of seven of the world’s seas and oceans finally began two weeks ago. Flag Ltd, the Bermuda-based company established to build the link has set September 6 1997 as the day the network will be in service (CI No 2,702). And unlike that other great underwater engineering project, the Channel Tunnel, we are going to deliver the project on time, on budget, promised Joseph Timpanaro, chairman and chief executive of Flag. Nynex Corp is the managing sponsor of Flag and holds a 41% stake. The other shareholders underwriting the $1,200m needed to build the link, are Dallah Al-Baraka Group, a Saudi Arabian diversified multinational company; Telecom Holding Co Ltd, a wholly-owned subsidiary of TelecomAsia Corp; Marubeni Corp, a $15,000m Japanese sogo sosha, or general trading company; Asian Infrastructure Fund, a US-based $1,000m fund that, as the name suggests, invests in projects in Asia, and finally Gulf Associates Inc, a New York-based corporation that has participated in 60 joint ventures thus far. A total of $1,500m financing has been secured, split between Flag, AT&T and Kokusai Denshin Denwa Co, including the $1,200m that is required to build the link. The total is made up of around $500m equity and $1,000m debt. The debt is being provided by Barclays Bank Plc, the Canadian Imperial Bank of Commerce and Marubeni.
Flag has appointed Nynex Network Systems (Bermuda) Ltd as its exclusive marketing agent, and the company has set up two regional sales offices, in Amsterdam and Amman, Jordan. It has had a sales office in Hong Kong since last year. The contract for construction of the cable went to AT&T Submarine Systems Inc and Kokusai Denshin Denwa Submarine Cable Systems. AT&T sub-contracted the majority of the cable-laying to Cable & Wireless (Marine) Ltd, which having begun clearance work, will start laying its 11,000 miles of cable in December from Palermo, Italy as part of its $105m contract. The rest will be laid by AT&T and Kokusai Denshin. The goal is to link Flag to the PTAT-1 transatlantic cable, jointly-owned by Cable & Wireless Plc and Sprint Corp and the North Pacific Cable, in which Cable & Wireless also has stakes in both ends. However, Nick Reda, president and chief operating officer of Flag conceded that Flag is still in negotiations over transatlantic and transpacific link-ups, but at diff erent stages. Flag signed a memorandum of understanding with Teleglobe Inc last year to link Flag to the Canadian’s Cantat-3 cable, which links Canada to the UK, Iceland, the Faroe Islands, Denmark and Germany, covering 4,650 miles (CI No 2,554). John Parry, president of Nynex Network Systems (Bermuda) Ltd, explained that Flag will only be selling capacity to carriers, each of which will get a minimum of 30 64Kbps voice channels over 25 years for their money. To date, $350m of capacity has been sold to 46 international carriers, including the 12 landing parties, which are building and paying for the landing stations.
By Nick Patience
Of these, 16 are European carriers, contributing $80m. In the UK, Cable & Wireless’s Mercury Communications Ltd is building a landing station at Porthcurno, Cornwall, the point where Guglielmo Marconi landed his first transatlantic cable. British Telecommunications Plc has not yet purchased capacity, and neither has France Telecom. Timpanaro said he was very disappointed that France Telecom hasn’t yet participated. Deutsche Telekom AG, on the other hand, was one of the largest purchasers of capacity, according to Reda. Most of the agreements signed so far are non-exclusive, said Parry. In the US, apart from AT&T, Sprint Corp has purchased capacity, as has Pacific Gas & Electric Inc. John Parry said that one or two more are likely to sign before the fourth data-gathering meeting – a complicated way of describing a sales pi
tch – in Dubai this December, and a whole lot more after the meeting. Parry said Vietnam Post & Telecommunications was almost ready to sign. The carriers will not be able to resell their capacity. Conversely, Flag will not be selling to any end-users. The carriers will have to pay up 45 days after September 6 1997 – also known as the Ready for Provisional Acceptance date in Flag’s vernacular. The other 11 landing points are in Spain, Italy, Egypt, United Arab Emirates, India, Thailand, Malaysia, Hong Kong, China, South Korea and Japan. When Hong Kong is handed over to China in July 1997, Flag will have two landing points in the most populous country in the world, something about which it is very excited. The first landing point there will be at Shanghai, and means that Flag is the first international fibre optic cable to land in China. The cost of the landing stations represents around 5% of the $12,000m total. The land crossing over Egypt involves two buried cables placed far apart for 100% redundancy. The submarine cables will be buried in shallow water and will lie on the sea bed when in deeper water. The system will use 326 optical amplifiers en route to boost the signal. Flag envisages a useful life for its cable of 25 years and is not worried about it becoming obsolete in that time; between now and 2022, I’m sure there will be other technologies, said Timpanaro. Flag will have far more capacity in its two fibre pairs than the carriers will want at the start, or that they would have contemplated building, according to Parry. The two fibre pairs will each operate at 5Gbps, offering 120,000 64Kbps digital circuits to the carriers, using Synchronous Digital Hierarchy. In the short term, Flag was not being specific as to when it will hit profitability, or when or if it envisages the fibre being full.
Parry said the cable will be very successful with significantly less than full capacity. However, there is not much danger of a shortage of takers for the capacity with the explosion in the volume of data being sent around the world in the next few years. From the carriers’ point of view, they get flexibility and capacity on demand, according to Parry. He said with other fibre optic links, the carriers build the landing stations and automatically have to purchase a certain amount of capacity up-front to recoup the investment, a lot of which will not be used. With Flag, carriers get what you need, when you need it, said Parry, with Flag underwriting all unsold capacity. He also claimed that Flag would be very competitively priced. Most of the early sales have been for voice traffic, according to Parry, but he added that what type of traffic was carried was largely irrelevant on a digital network. It should perhaps also be noted that Cable & Wireless’s prominent involvement in Flag brings it closer still to Nynex, which can only be of benefit to both (CI No 2,708). Flag may not be doing this for mankind, as Reda, the self-proclaimed father of Flag rather sanctimoniously put it, but as he added, it is also not just a case of dropping it in the sea.