Wholesale operators facilitate the operations of user-facing operators by providing giant capacity on popular routes. George Malim assesses what attributes make up a leading wholesale provider
                         
                                       

                 
John-Paul Hemingway, Ciena: We’re now starting to see
operators request 40 gigabit capacities 
                             
                    
carriers are now relied on to underpin the businesses of all types of operator. Nobody expects a single provider to have the best capacity on the best routes throughout the world so partnerships and wholesale relationships are the rule.
Even so, there’s a vast disparity in the quality and performance of wholesale networks from the newest capacity on the most popular routes to ageing networking technologies on arcane routes.
The network technology used by wholesale operators is regarded as a means by which they can differentiate their services. The intention isn’t to have new technology for its own sake but as a means to reduce costs.
For Diarmid Massey, the vice president of international carrier services for global markets at Cable & Wireless Worldwide, ethernet and dense wavelength division multiplexing are some of the best technologies currently available for wholesale services.
“Adopters of these technologies can expect substantial costs savings and capacity gains,” he says. “They also facilitate quick expansion of capacity on existing routes as there is no requirement for wholesale carriers to replace or upgrade their existing systems. Carriers who switch to these technologies gain a large advantage over their competitors as the industry is facing pressure to increase data traffic while reducing costs in order to remain competitive.”
Christian Fritsch, the head of wholesale strategy, marketing and coordination at Telekom Austria Group, agrees that WDM is a key technology for wholesale operators. “The wholesale ecosystem contains many different types of services such as interconnection, interworking, data and infrastructure,” he says. “Telekom Austria Group relies on a multi-service WDM backbone infrastructure, enabling wholesale services across its geographical coverage.”
Others think technology is becoming a less important factor in the selection process. “Technology is usually not the first part of the conversation,” says Brian Fitzpatrick, managing director of BT Wholesale Markets. “In wholesale, you call a spade a spade and the first dialogue is economics. If you have a billion minutes to move from Asia across the US to Europe, the economic basis has to be the first step, then quality comes in.”
It should be a given, anyway, he adds: “With world-class operators, there’s an inherent, usually excellent quality expected, then the discussion becomes about compatibility. The vast majority of customers couldn’t care less if it’s IP — that’s a technical discussion. The economic criteria are absolute. Nobody will pay me more because I have better technology. I have to offer that.”
From a vendor’s point of view there’s an obvious agenda to sell ethernet and wavelength technologies, even though demand for SDH and TDM technologies show no signs of disappearing any time soon.
“First off, people have to look at what’s going on with those providers that can successfully carry legacy technologies and ethernet,” says John-Paul Hemingway, vice president of strategic development at Ciena.
“The technologies we recommend are delivering 100 gigabit optical Ethernet because it is purely, economically the best way to deliver 10 gigabit and multi-10-gigabit services. We’re now starting to see operators request 40 gigabit capacities for their operator to operator services. 100 gigabit capacity is becoming necessary but operators also have to be able to carry the range of service level agreements necessary.”
Traditionally kilometres of network footprint have been one of the key metrics used to assess the performance — or more accurately, the performance potential — of an operator. Frisch finds route kilometres a simple indicator that is standard across the industry, but finds it can be too simplistic to provide an in-depth assessment of a wholesale operator’s potential performance.
“In general it is a very simple indicator which allows certain standardisation, thus making networks comparable amongst each other,” he adds.
“It is often found in marketing materials, highlighting the global reach of a provider’s network. However, some proponents of this measure may have acquired some infrastructure from a Chapter 11 bubble after the dotcom crisis in 2002, and therefore stick with this form of judgement.
“We clearly see regional differences for the evaluation of routes which would cause additional parameters to be added to an equation for this. Think of in-market rivalry enabling additional momentum on the supply-side for certain routes. Naturally, as we are heavily promoting our distinctive route protection mechanisms, potential assessors should consider service level agreement parameters as well.”
Others think route kilometres are only part of the picture. “The wholesale market is not just about selling bandwidth,” says Massey. “We should factor in quality of service and service capability in the metric when judging how well wholesale providers are doing.”
Fitzpatrick says kilometres aren’t as important as routes covered and wholesale providers are focusing more on picking the fights they can win.
“No operator in the world has everything for everyone,” he says. “For BT, we have a unique network and scale advantage throughout the UK and also across a handful of countries in western Europe to specific pockets in the rest of the world such as the east and west coasts of the US and in areas of south-east Asia. Most successful companies today pick their fights much more clinically where they believe they have advantage and scale. Very few carriers in the world can compete with me in specific geographies, it’s about never losing sight of that.”
Jonathan Wright, director of wholesale products at Interoute, adds another dimension to the debate.
“Reliability is more important than route kilometres,” he says. “Wholesale is absolutely underpinned by the reliability you have. The simple thing is that wholesale is like any business these days. If you are a wholesaler you need to be so big that people can use you and affect their business in terms of cost.
Route kilometres are ultimately important because they get you there cheaper. However, you can have a lot of route kilometres in the wrong place that don’t really go anywhere and don’t strengthen your proposition.”
In common with the retail market, providers face the issue of customers demanding greater service quality for lower cost and are having to balance those conflicting requirements. The balance is fine, as Massey recognises.
“We need to understand that service quality has to come with a cost,” he says. “Carriers should not only be looking at cost efficiency when dealing with customers but also need to focus on meeting the business needs of their customers. Service quality is a key differentiator for wholesale providers which offer value added services through the level of quality and prioritisation they can offer.”
Fritsch says that Telekom Austria Group prefers to focus on its core competences when it comes to balancing the pros and cons of a specific wholesale offering. “Learning from the past and knowing about the force of disruptive technologies, we are continuously proving our fitness by interacting with the market,” he says.
“Improving our fitness in line with the strength of our highly skilled engineers, we are also in tight contact with suppliers, learning from each other, even from different markets. In the past, we experienced some sort of self-healing power in the market itself, bringing up some new market entrants quickly as well as squeezing them in between well established players.”
Hemingway acknowledges the balancing act facing wholesale operators. “It is always a fine balance,” he says. “You need flexibility but it can come at a price so people use a hybrid model with the technology best suited to the service level used.”
For Wright, cost efficiency is the single most critical factor. “The basic thing is that you have to be cost effective,” he adds. “To do that you have got to be big and you have got to have depth of capacity. To be able to deliver you have got to own ducts and fibre, you can’t be leasing anymore because you have got to have the ability to continually compress your cost base.”  GTB 
                       
                       
Egypt: Feeling the Suez squeeze
                       
The recent political unrest in Egypt has highlighted the global exposure to unrest faced by wholesale operators. The majority of the world’s links pass through Egypt along the route of the Suez Canal. The cables typically run overland and the Egyptian government has made the most of the monopoly it holds, charging operators disproportionately high rates to traverse its territory. Even so, the inflated cost is only part of the issue.
“We’re seeing the actions of the Egyptian regulator get more and more involved and stopping cables south of Suez and charging operators an unearthly premium,” says Jonathan Wright at Interoute. “But it’s not just the cost. Off the coast of Alexandria a well-aimed ship dragging an anchor could pull up 80% of the connections passing through the region. That horrendous lack of diversity is compounded by fix times of approximately ten days.”
Wright points out that, if you’re the only game in town, you can charge what you can get away with and that’s what Egypt has done. His colleague John Brown adds: “The reason why there’s such a concentration of cables passing the area is historical and geopolitical,” he explains.
“Ultimately you can’t join up a circuit across the Middle East because it’s very difficult to get the Saudis talking to the Syrians. It’s a situation where you’re stuck with hard negotiations or trying to find an alternative.”
That is now what several operators are assessing. “It’s ironic,” adds Brown, “because there’s an opportunity for Egypt to maximise itself as a telecoms hub but it has kind of overplayed its hand. However, the charges mean it makes sense to go for the politically more complex route up through the desert through Syria and Jordan. There is a need for a new staging point for traffic from Europe to China, Russia and south-east Asia and big carrier communities are looking.”
However, the options are limited. “Cairo, Istanbul and Dubai are all blighted by the same problems,” says Brown. “They have relatively closed trading capabilities and they need to open up or it just won’t happen.” GTB