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June 2018

Seaborn Innovates Around its Independent Subsea Operator Model; New Cable to Argentina Now in the Works

Seaborn Innovates Around its Independent Subsea Operator Model; New Cable to Argentina Now in the Works

Amazon is a massive $178 billion/year business that operates with Swiss clock efficiency and Silicon Valley intelligence and boldness.  Its track record is simply amazing:

  • In book retail, Amazon enables book-lovers to browse books, read reader reviews, and buy overstocked books from independent bookstores;
  • In cloud computing, Amazon’s AWS service continues to lead the compute-on-demand revolution;
  • In fast shipping, Amazon leases dozens of cargo planes and pays the Post Office to home-deliver for its Prime 2-Day service; and
  • In food retail, Amazon bought Whole Foods to raise the value of brick-and-mortar stores and create a new market for fast, direct-to-the-home perishable grocery delivery.

In each business Amazon enters, incumbents enjoy all the advantages of market share and experience.  But Amazon still finds a way to win through its independent thinking, operating excellence, and drive to offer customers greater value.

Well, Amazon-like innovation and operating excellence is steadily coming to telecom, too.  In TRI’s recent research study of wholesale market trends, for example, we highlighted the arrival of new global SDN partnerships and bandwidth on-demand services for enterprises.

The undersea cable business is another telecom sector where Amazon-like challengers are active.  By market share, the undersea business is still dominated by consortium cables.  But independent undersea operators are shaking up the status quo by: selling fiber wholesale; getting funded by large banks and OTTs; proving their operational dexterity; and making it easy for customers to do business with them.

One such independent undersea player on the move is Seaborn who went live in September 2017 with Seabras-1, its straight-shot cable between New York and São Paulo, Brazil.  I caught up with Seaborn’s CEO, Larry Schwartz, at the ITW show where he gave me a concise update on Seabras-1’s commercial success, a new cable build from Brazil to Argentina, and Seaborn’s latest business plans and progress.

Dan Baker, Editor, Top Operator: Larry, when we spoke in early 2017, Seaborn had not yet giving birth.  Your 11,000 kilometer Seabras-1 cable was about to be spooled into the belly of the Alcatel-Lucent cable laying ship in New Jersey.  But you’ve now been live and operational for almost a year and Seabras-1 is now a proven commercial success.  Congratulations.

Larry Schwartz: Thanks, Dan.  The uptime on the system has also been spectacular so far.  You can partly attribute that to Seabras-1 being a brand new system with fewer active elements — fewer things to go wrong.  But also, this is a direct POP-to-POP route from New York to São Paulo where Seaborn manages all the underground backhaul and metrofiber from the landing station straight into metro São Paulo.

The system uptime is also a credit to Seaborn’s Ops & Engineering Department.  We hired a dedicated and growing team of people who take full responsibility for our network operations.  For instance, we run our own network operations centers (NOCs) with our own people and supply our own employees in the landing stations, such as our landing station in Brazil.  We are a fully integrated carrier model; we do everything ourselves.

We’ve matured and innovated in other important ways, too.  For instance, we can activate circuits faster than anyone else in the industry — in a matter of hours, not months.  This is a key differentiator for us.

Another first in the undersea cable business is our pay-as-you-grow model, called SeaCloud.  The customer makes an initial modest capacity commitment, then pays for usage above that threshold.  It gives them great flexibility and ensures they don’t have bandwidth constraints on the growth of their own business.  SeaCloud is especially key for customers who are uncertain about their own capacity demand growth.

We’re also selling dedicated internet access inside of Brazil through our relationship with Cogent.  This service has really taken off in Brazil, and we’re especially thrilled because it’s opened up for us a larger, more diverse customer base.

As you’d expect, Seaborn is also growing as an organization.  Recently, we announced the addition of a new Chief Sales Officer, David Zimmer.  David started with MCI, had a long, successful career at Level 3, was most recently Senior Vice President at Earthlink, and is a terrific addition to our organization and to our C-level team.

In term of the services you offer in the marketplace, I hear the financial sector is a hot one for you.

Yes, our customers in the financial vertical get great value from Seabras-1 since we have the lowest latency, all-fiber route between Carteret (New Jersey) and the B3 datacenter in São Paulo.  We enable the most reliable, ultra-low latency route between the U.S. stock exchanges and the Brazil stock exchange.

The service is designed for high-frequency traders and other proprietary asset management players who are looking for a unique differentiator for themselves.  These are largely algorithmic-driven traders, so New York-to-São Paulo is an important route for them.

On another note, our program to deploy ARBR — a new Argentina-to-Brazil undersea cable — is without question our most active and fastest moving new-build project.

Seaborn Map

Great, a new build.  What’s the commercial model for this new ARBR cable?

Well, the ARBR cable project is co-owned by us with Grupo Werthein, an important family group of companies from Argentina.  Most recently, Grupo Werthein was the second largest shareholder in Telecom Argentina and they also own other significant investments in critical infrastructure across Argentina.  We also recently announced the addition of Maximo Lema to the advisory board of Seaborn Networks.  Maximo is the former head of Wholesale at Telecom Argentina.

So with these strong partners and relationships, the ARBR project pair ups Seaborn — an independent (not controlled by an incumbent) submarine cable developer-owner-operator with a strong Argentina-based group of companies with expertise that is closely tied with Argentina’s telecom sector.

Coming out of Buenos Aires, customers can transit through our Praia Grande cable landing station and go straight up Seabras-1 to our New Jersey landing in Wall Township, New Jersey.  From there, we take customers into metro metro New York, to numerous different POP locations in a variety of the largest data centers of the region.  Alternatively, we can take customers transatlantic or elsewhere, thereby connecting Argentina to the rest of the world.

What were some of the advantages you saw in building the ARBR cable down to Buenos Aires?

Certainly one of the first things we noticed is the price of capacity between Argentina and the U.S. is four to five times higher than it is from Brazil to the U.S.  Because subsea cables are critical digital trade routes to the rest of the world, its clear that Argentina’s economy would benefit if we can bring prices down to a more competitive level.

Now besides price, we also noticed the aging infrastructure.  Trans-oceanic cables have an average expected life of 22 years, and the other primary cables that service Argentina today are already almost two decades old.

The other advantage we bring is our independence.  We are, of course, not a big incumbent in the region.  We do not compete against our customers for big enterprise business, nor do we offer pay TV or mobile phone service.  All we are is a team of submarine guys — and our “independent carrier” story really resonates in the market.

I also think this is an exciting opportunity for the economies of Brazil and Argentina.  Obviously there are still challenges to work through, but we believe that both countries have gone through the worst of their economic challenges and are now headed in the right direction.  As you know, we made a big, long-term bet on the region and long-term we remain very bullish and are grateful to participate in both of their local economies.

Another key point: Brazil and Argentina never saw the big overbuild the U.S. saw in the late 1990’s.  So that sets the stage for tremendous growth and build out of new data centers, new mobile cell towers, improved terrestrial capacity, better aerial and underground fiber routes.  All of that is playing out as we speak — and it’s exciting.

I’m curious about the growth prospects for the independent subsea cable business you’re pioneering.  If you look at cables actually deployed around the world, the carrier consortium model remains the most prevalent by far.

I think our fast provisioning and pay-as-you-grow SeaCloud model shows the kind of innovative services an independent player can offer.  And it may be hard for the traditional undersea consortia to offer something comparable.

Also, what gives our customers confidence is we take on the full responsibility — not just as the project manager of the build, but also as the operator of the system.  Taken together, it gives Seaborn great agility in serving customers with a system that we know from the ground up, and that includes through flexible payment plans, fast activation, and the philosophy of treating everyone we serve as an equally important customer.

Going forward, the large telecoms of the world face a dilemma.  On the one hand, submarine cables are absolutely essential to global communications.  On the other, building them is non-core to their primary lines of business.

Long term, we think the more attractive investment opportunity for them will be to pursue higher margin pay TV, mobile, and other services.  And as they steadily entrust their undersea cable needs to an independent undersea specialist and operator like Seaborn, that opens up a niche play for someone like ourselves.

Good luck with the cable to Argentina.  Great to see the success of Seabras-1 is leading to bigger opportunities.

Thanks, Dan.  It’s a busy time for us, but maybe the most exciting thing of all is the continued growth of sales on Seabras-1 itself.  I don’t want to lose the fundamental point here, which is that we are an owner-operator with, we think, the finest Brazil-to-US submarine cable system out there.

Copyright 2018 Top Operator Journal

 

About the Experts

Larry Schwartz

Larry Schwartz

Larry is Chairman & Chief Executive Officer of Seaborn Networks, a leading independent developer-owner-operator of submarine cable networks, including Seabras-1 between New York and São Paulo which has a committed ready-for-service date of June 2017.  Seabras-1 is the first direct POP-to-POP submarine cable between the commercial and financial centers of North America and South America.

Larry previously served as CEO, board member and co-owner of a company that owned and operated one of the world’s largest fleets of cable ships.

Before entering the cable ship business, Larry served as a Senior Vice President of a Fortune 1000, Nasdaq-listed wholesale telecommunications carrier with a global network infrastructure.  Larry has also been a co-founder, board member, investor and officer of numerous other telecom, data center, marine engineering and technology companies.   Contact Larry via