A few months back, we launched XKL’s quarterly Tech & Telecom industry news blog. Organizations across numerous verticals employ our optical networking hardware to power innovation, as such it’s important we keep up with the latest trends and use cases. For our Q4 coverage, we’re not only going to cover important activities from the past three months, but also highlight some of the most impactful developments that occurred throughout 2018.
Increased demand for robust compute capacity is driving much of the connectivity growth we’re seeing. The number of physical servers running in data centers is projected to have doubled in 2018 and 73% of those servers are estimated to have a hypervisor or containers running on them – meaning their likely more dense than bare metal. Hyperscale data center operators, such as Google and Microsoft, spent 53% more on CAPEX during the first three quarters of 2018 than in the first nine months of 2017! This momentum is by no means expected to slow down anytime soon. Gartner predicts computing power will only get more intense over the next five years with the rise of quantum computing, which will enable us to solve more complex problems and develop applications that previously were impossible to make a reality.
As businesses developed next-generation applications that required more sophisticated network infrastructure, consumers simultaneously drove additional connectivity demand. A few months ago, CTIA reported that total American mobile data usage was a colossal 15.7 trillion megabytes last year, quadrupling that of 2014. From January to September of this year, the number of fiber-connected homes in the United States increased from 15 million to 18.4 million. Additionally, 5.9 million homes received broadband that previously didn’t have access. The major telcos aren’t the only players capitalizing on fiber to the home; over 1000 “smaller” players were responsible for 29% of this year’s increase. Consumers can also look to the stars for additional capacity—SpaceX received permission from the U.S. Government in November to launch 12,000 satellites into orbit and one of the project’s goals is to deliver affordable connectivity to consumers.
Operators are expected to spend $75 billion over the next five years on optical gear and the North American SDN market is projected to grow at a 25.5% CAGR from 2014 to 2019, with service providers looking to add elasticity to their platforms to meet demand more rapid provisioning.
This past quarter, Information Gatekeepers released a report that projects subsea cable rollout will average 100,000 miles per year for the foreseeable future. Aggressive expansion will likely be bolstered by new subsea frontier, thanks to thawing waters. Operators are now looking at laying new trans-artic cables with less ice in the way; however, the aquatic region comes with considerable political risk.
Throughout 2018, Google announced several subsea cable projects to support its 100+ cloud points of presence. In January, the Alphabet-owned company announced its “Marie Curie” project, due to come online in 2019, which will connect Chile and Los Angeles. The company is also building a transatlantic cable extending from Virginia Beach to the French Atlantic coast. The project Dunant (named after innovator Henri Dunant) is slated to go live late 2020.
Considering the massive investment required to lay a cable across the ocean floor between landmasses, we saw many interesting consortiums and partnerships form to support subsea projects. Google, Facebook, Aqua Comms, and Bulk Infrastructure joined forces to work on the “Havfrue” (‘mermaid’ in Danish) project, which will connect the U.S. to Denmark and Ireland. A group venture consisting of China Mobile International (CMI), Facebook and Amazon Web Services (AWS) hired the NEC corporation to build a new subsea cable linking Singapore, Hong Kong and the U.S. Facebook also kicked off construction of the Malbec cable in partnership with GlobeNet, which will link Brazil and Argentina.
Edge & Rural
Technavio recently released a report claiming the edge computing market will grow 41% CAGR from 2019 to 2023, fueled largely by Internet of Things (loT) devices. Early in the year, AT&T launched an open source group to develop zero-touch edge cloud infrastructure for carrier and enterprise networks. At this year’s Edge Congress, the consensus from investors was that we’re still in the very early stages of edge development and close attention was paid to emerging players that have been developing and/or deploying micro modular data centers to help attract capacity closer to the end users’ “eyeballs”. At its re:invent conference, AWS provided details on its new Outpost offering, which allow customers to receive a private AWS node that lives directly on customers’ edge.
Even though significant R&D is being devoted to edge technology and deployment, there are still many communities lacking internet access, especially in remote areas. Economists this year predicted that the cost to comprehensively extend fiber to underserved rural areas in the U.S. is a staggering $61 billion. Last month, several U.S. States—Arkansas, Georgia, Iowa, Kentucky, Minnesota, North Carolina, North Dakota, New Mexico, Oklahoma, Tennessee, Utah and Virginia—received $91 million in funding from the U.S. Department of Agriculture to help proliferate broadband access.
Considerable investment flowed to Africa in 2018 for network development, which is still largely underserved. The U.K. Government’s finance development arm (the CDC), invested $180m in the Pan-African group, Liquid Telecom, which subsequently announced a $400m network investment in Egypt. First Brick Holdings announced at $50m investment in data centers across eastern and southern Africa. A lack of subsea connectivity was a major inhibitor to widespread access, but luckily the continent also saw several subsea cable projects kick off this year. Vodaphone, for example, completed a fiber cable that connects Ghana to several landlocked countries in West Africa.
Interconnecting Existing Service and Capabilities
In its 2018 report, Right Scale concluded that 81% of enterprise have a multicloud strategy, with the average using almost 5 public and private clouds. Equinix projected that direct and private exchange traffic will grow to more than 8,200 Tbps by 2021, which is 10 times public internet traffic! In Q1, Google launched Google Cloud Partner Connect, which out facilitate connections between proprietary SMB data centers and Google Compute Platform. In July, Verizon and Colt announced a programmatic API-to-API interface between their separate SDN architectures, leveraging automation to provision a combined carrier ethernet solution.
Throughout the year, there was considerable buzz around containers, Kubernetes in particular, which enable applications to easily transfer between a wide variety of platforms with ease. The fluidity containers offer only increase the need of interconnectivity between execution venues.
While third parties figure out innovative ways in interconnect, hyperscale users have been developing new ways to tie all their own disparate locations together. Early this year, Facebook built a distributed, disaggregated network system, called Fabric Aggregator, to help tether their many points of presence within a single region.
Semiconductor IP company, Arm, recently released its 2019 IoT projections, most of which revolved around smart homes, buildings, and cities. Part of the report included a global survey of 2,000 consumers, 66% of which expect technology will become a larger part of their lives and 54% expect to spend more on tech-based gifts. In Q3, 451 Research predicted we will see a 4x growth in cellular network-based IoT connections between 2014 and 2019 (252 million to 908 million connections).
Major players in the internet infrastructure space have revealed new IoT platforms this year.
T-Mobile launched its Narrowband Internet of Things (NB-IoT) across the U.S. This joins one of several IoT protocols currently available, but its purportedly the first to operate in the guard bands that are thought to be immune to spectrum interference. Microsoft launched its Azure IoT Edge Service, which allows users to deploy and run Azure services, AI and custom logic on IoT devices. AT&T signed a deal with Honeywell to deploy IoT devices to the latter’s connected freight and aircraft solutions. Last month, Verizon introduced a new developer toolkit to facilitate IoT applications on AWS.
IoT’s security was continually questioned throughout the year and there have been calls for standardization. In response, CTIA launched a program where IoT devices can be certified for cybersecurity readiness to help assuage concerns. Spending on IoT was estimated to reach $1.5B throughout 2018. We expect that number will increase over subsequent years.