RTI and NEC Announce Marine Survey for SEA-US Hong Kong Extension

RAM Telecom International, Inc. (RTI) and NEC Corporation (NEC) announced today that the Southeast Asia-United States Cable System (SEA-US) is ready for commercial service following acceptance by the SEA-US consortium*, and that construction has commenced on the Hong Kong- Guam Cable System (HK-G) extension.

The consortium’s US $250 million investment in SEA-US delivers an initial design capacity of 20 Tbit/s of capacity, using NEC’s state-of-the-art 100 Gbit/s submarine cable technology. SEA-US’s capacity is essential to facilitating exponentially growing demand for bandwidth between Asia and North America. The new cable also greatly enables onward connectivity to existing and planned submarine cable systems, including the recently announced HK-G by RTI’s affiliate, RTI Connectivity Pte. Ltd. (RTI-C). NEC is the supplier for the HK-G extension.

SEA-US & HK-G Cable Map

Source: RAM Telecom International

RTI-C and NEC also announced today that the marine route survey for HK-G has begun. The detailed information that will be gathered during the survey will shape the final route engineering that will be undertaken. This is a significant development in the construction of the 3,900-kilometer HK-G, which will land in Piti, Guam at the recently completed Teleguam Holdings LLC (GTA) cable landing station, the same facility which is being utilized for SEA-US.

Russ Matulich, RTI’s President and CEO, acknowledged this important milestone stating, “Transpacific capacity demand will continue to outweigh existing supply for many years to come, and RTI’s SEA-US investment is now providing essential route diversity capabilities and onward connectivity options for our clients.” Matulich added, “Initiating the HK-G marine route survey is an important milestone towards our goal of providing fully diverse transpacific connectivity. Once completed, HK-G will seamlessly interconnect with SEA-US, allowing customers to not only diversify their traffic between Hong Kong to Los Angeles, but also enabling them to port their existing capacity to different destinations.”

Mr. Toru Kawauchi, General Manager of NEC’s Submarine Network Division said, “It is with deep pride that NEC, as one of the world’s top vendors of submarine cable systems, has handed over the keys to launch the SEA-US Cable to RTI and the SEA-US consortium members. From the day we signed the contract, we have dedicated our best resources to completing this cable. There are plenty of obstacles for every cable we build, and SEA-US was not immune to this. By working together with the cable owners, we have overcome each-and-every obstacle and look forward to many more years of further enhancing our relationship in order to answer the global demand for connectivity.”

NEC has more than 40 years of experience in the submarine cable business and is recognized as one of the world's top submarine system vendors. NEC has laid a total of more than 250,000 kilometers of submarine cable, the equivalent of six trips around the earth. As a total system integrator, NEC produces optical submarine cable, optical submarine repeaters and equipment for connecting optical transmissions to land, in addition to carrying out ocean surveys, route design, laying optical submarine cable and training personnel for the handover of these systems.

Source: RAM Telecom International Press Release

ANALYSIS: The eastern portion of SEA-US from Guam to U.S.A via Hawaii was funded by RTI, a private company led by former TE SubCom Asia Pacific Sales Director, Russ Matulich. The western portion from Guam to Philippines and Indonesia was funded mainly by Globe Telecom and Telin respectively. The HK-G extension, funded by RTI, will effectively sandwich Globe and Telin between two routes controlled by RTI but available to them at attractive rates.

Raising funds for a private submarine cable is always a huge challenge. RTI not only achieved this for SEA-US but they say that HK-G is already fully funded. An article by the Australian Financial Review in August 2014 highlighted the role of former AAPT CEO, David Yuile, in arranging the funding for RTI’s projects. Mr. Yuile was quoted as saying, “We found the really large infrastructure funds, which initially I thought would be interested, actually thought it was too small. They aren’t interested unless you’re after half a billion dollars,” he said. “At the end of the day, we got a fair few high-net-worth individuals that know the space and have typically done tech before. They are really savvy; they are keen on the mix of infrastructure and internet as an investment.” RTI has never released any information on the mix of equity and debt in these projects. It is also RTI’s policy not to rely on pre-sales of capacity for project funding.

NEC’s boilerplate statement is also interesting because it relies on the increasingly outdated turnkey approach to submarine systems supply. Major competitor, TE SubCom, has already fully embraced the new approach to “Open Systems” where the dry plant supply is disaggregated from the wet plant. NEC focuses on the Asia Pacific market which is perhaps rather more conservative than other regional markets but, as Chinese investors, including Chinese content providers, enter the submarine fiber optic market and drive hard bargains, NEC will have to acknowledge and adjust to this new reality.