 Hey everybody, welcome. This is JSA TV, the newsroom for tech and telecom professionals. I'm Janie Scott-Cutaya of JSA. On behalf of my team, welcome to our monthly virtual CEO roundtable. These monthly broadcasts lead us up to our on-site CEO roundtable at our Executive Networking Event, the Telecom Exchange, or TEX, we love our acronyms. And new for 2019, we are now quarterly. Just go, we just got back from Wednesday's first TEX Dallas pop-up. And our next one up is actually coming up soon. We are going to have our ninth annual TEX New York, May 14th through the 15th. So hope to, if we didn't get a chance to meet in Dallas, hope to get to see you in our flagship New York event that's at the W. Hoboken Hotel. So go ahead and check us out, more info at thetelecomexchange.com. And let's get started. It's why we're here today. Our topic, Trans-Pacific Connectivity Challenges and Opportunities. We have an executive lineup from three absolutely innovative companies joining us today. Weighing in, Mark Gittleman, CEO of 5x5 Telecom, Elaine Stafford, managing partner of DRG Undersea Consulting, and Joe Hilt, Vice President of Sales and Marketing from ANOVA Financial Networks. Welcome, welcome everybody. Such a great topic with such great thought leaders. We're excited to have you guys join us. Thank you again. Let's go ahead and get started with introductions. I'm going to ask each to tell our viewers just a little bit about your companies and your unique perspective in the Trans-Pacific Connectivity Space. Elaine, would you like to kick us off? Sure. First, Jamie, thank you very much to you and the rest of the JSA team for inviting me here today. It's a real pleasure to be with you and with the other panelists. DRG Undersea Consulting is about a 20-year-old company. We're a small core team that has a lot of experience, decades of experience in undersea cable networks. And we advise clients all over the globe on planning, financing, buying, implementing new undersea networks. And the Trans-Pacific Networks right now, the Trans-Pacific Market is booming for undersea cable. Actually, the market is booming as a whole. But the Trans-Pacific especially is growing kind of like the Atlantic, driven by folks like you've got on this panel today, by those that want to connect data centers, often private data centers, but sometimes other data centers as well. So the OTTs are driving many, many new builds across the Pacific and also within Asia. So it's really a good time. There's already a lot of cables there, and we'll talk more about that later. But the OTTs themselves, the Facebooks and the Googles, the Amazons all have their own reasons for doing their own thing, which we'll get into more. But that's kind of the introduction for me and move on to the next person. And absolutely. And DRG being the renowned thought leader in consulting that subsea space, we love your work. And I appreciate, Elaine, you've taken the time to be here for us. And Mark, give us your perspective from your company's point of view in the Trans-Pacific connectivity space. All right, well, thank you for having me. Jamie, as Elaine said, to you and the JSA team. Pleasure to be with you and you, Joe. So 5x5 Telecom is an ISP in Southern California. We're spun out of a real estate company to look at some of the things we're talking about today, which are how do we best connect our tenants, whether they're an office tenant or a data center tenant, to their consumers and the products and the services that they're offering out in the world. So combining the ISP side and the data center investment, my interest in Trans-Pacific connectivity and undersea cabling ties directly to that, no pun intended. We have office tenants who have a market overseas. We have people overseas that are trying to reach US services and products. And specifically on the call, one of the things I'm really interested in talking with a panel about is about the resiliency and the diversity of that platform. And also we have to say, with your beautiful background, you're clearly representing West Coast phenomenally here on this call, so appreciate that, Mark. And Joe, tell us a little bit about ANOVA and your unique perspective. Hi, Jamie. Thanks again. Thank you, Elaine and Mark for the time. I really appreciate it. ANOVA Financial Networks is celebrating our 10th year in business this year. Started out as really a market data provider and an exchange connectivity provider for the financial community. We've started our real roots within the United States, within New Jersey in the very important equity corridor and also in Chicago, between New Jersey and Chicago in that marketplace. Most recently, ANOVA's moved into the Asian marketplace and we've released our first networks between Tokyo and Singapore. We have Shanghai, Taiwan and Hong Kong as the big exchanges still to come here shortly. And we're seeing tremendous growth in that marketplace and hope to see how we can help to serve marketplace between the two continents. Thank you. I love your financial marketplace expertise. I appreciate you being here as well. Thank you. So getting on to our topic here today, there is a shared and arguably largely untapped opportunity that exists between American technology companies and their Asian counterparts as tech companies pursue new business opportunities across that Pacific Ocean, high speed interconnection, data center access between that continent. These are critical, critical conversations and critical needs. Now Asia Pacific has bolstered its ban with resources, with the completion of several subsea cable systems, which Elaine will further discuss, but including, for example, the Asia Pacific Gateway, APG, NPC, CX-1, IGG, Southeast Asia, Japan, Cable, SJC, all built, but is it enough? Is it too much? What's driving all this demand? Who's benefiting? Who's paying? Let's explore. This brings me to the very first question for the panel. We'll go around the horn here and starting with Elaine. Set the stage for us, Elaine. What do you see as the current state of interconnection between the US and Asia Pacific? I don't think that anybody would say that the US and Asia Pacific is not at all well connected right now. It is very well connected because it's one of the most important markets. In the undersea space, we kind of think of the Asia Pacific market as two basic markets. One is trans-Pacific going from US to Asia, and the other is within Asia, but they all kind of work together. And what we're seeing today is that they're kind of converging to a degree because to your point about technology, although it's a different layer of the technology than you alluded to, the undersea technology in terms of how much capacity you can get through a fiber and how far that fiber can stretch from point to point gets better all the time. It's not quite getting better at the pace that it used to get better at, but what's happened over the past 10 years or so is that the cables that used to go largely, initially from US to Japan, because that's about 9,000 kilometers, and then later US to China, which is a couple thousand kilometers longer, is now stretching directly, and everybody wants a direct connection for some of the reasons that we'll talk about later, diversity and all that other kind of stuff, security. It now stretches from Hong Kong to the US. So there are a lot of new cables being built from Hong Kong to the US, as well as cables being planned all the way from Singapore to the US, which is an even longer distance. And so the traffic that used to go from Singapore to Hong Kong to Japan and then across will now be able to go directly from Singapore to the US in, I would say, two, three years from now, which is a big boom. So there are a lot of new cables being built to complement some very good ones, which had been in service for a while and will continue to perform for a while, but there are needs for more. And we in DRG are predicting and experiencing actually a lot of new builds that are in the works and continue to be planned moving forward. And there is that need because a lot of the... The need is really there. I mean, if you look at the market as a whole, the transatlantic is clearly the biggest market in the undersea space for capacity. It's on the order of double the capacity right now of the Pacific, if I remember my numbers correctly. But there are certain things associated with network robustness and diversity and the probability of cuts in Asia Pacific, which is more seismic issues and more cable faults and longer times to get out and fix a cable. That means you actually need more cables to make the mesh to keep it reliable. So for that reason, as well as the growing demand, et cetera, and some of the reasons why Facebook and Google want their own cables, there's a big growth in the number of cables that are being built across the Pacific and within Asia. It really is very heavy right now. And Joe, of course, your expertise of building Hiberny Express, first transatlantic table, the past 10 years. Can I ask you, what do you see as that current state of inter-connection? Maybe how does it compare to the Atlantic versus Pacific? Yeah, I think, as Elaine said, the Pacific is always a little bit behind, right? And for us in the financial market, it's a volume game. Whether our customers have the opportunity to arbitrage between mostly the CME, Chicago Mercantile Exchange, and then some of the exchanges in New York, with some of the ones that are primarily mostly in Tokyo today, Singapore, Hong Kong, and Taiwan, are the kind of the emerging markets. I see Tokyo as kind of being the Pacific complement to London, right? But from Tokyo, there's a lot of the places that are really important. And what tends to happen in our marketplace today, from a high speed trader perspective, is that our customers go to Tokyo and then extend out from Tokyo. As Elaine's discussing, some of those cables that potentially go directly to Singapore and Hong Kong and other places like that, could become tremendous value for those feed traders who would like to get to Chicago Mercantile data, especially into those areas. I think second, for more of our institutional clientele, diversity, as Elaine also alluded to, and we could talk about in some degree, is definitely tremendously important. Yeah, and that's a good transition. And it's a marked care mark. What do you think is the current state of interconnection to the US and Asia pack? Well, I'm actually not the best person on the panel to opine on the state of the interconnection. Only, obviously, Joe and Elaine are covering that well. But data center tenants in properties that I invest in, it's something that continually comes up. How many routes out of the building can we get that will bypass certain areas, let's just say in downtown LA? How do we get from the data center directly to the shore? It's the best way to say it. And that's what, that's what I really am interested in. Right, it's that access and that diversity. Data center user being able to have diverse routes to get to either their customers or where their computing power may be. Yeah, love it. And that kind of talks about what are the new technologies that are really impacting the Pacific in terms of interconnection, as well as data center access between continents. And maybe Mark you can start us out there from the data center perspective. Well, obviously we have the over the top providers and the content providers. Content is obviously king is the saying goes. And a couple of the things that we've talked about is the gaming markets are just phenomenally large. Yeah, the need for low latency by bandwidth, the need to be able to accelerate graphic performance across the network to end devices that don't have that performance is where we're seeing a lot of bandwidth consumption. And then something that we, if we touched on earlier in our pre panel discussion is the idea of removing the friction in the economy of being able to capitalize or utilize the computing power throughout the world. The devices that are coming online and the rate that they're coming online, the sharing economy directionally should get us to be able to take full advantage of the billions of devices that would be online. And if we're not able to in a low friction method, then we will not have efficient development of more devices. We won't have efficient utilization of computing power. We won't have efficient utilization of power resources in general. And all of those things directionally are great for the world economy. They're great for the environment. And they're great for the industries that are relying on the technology. Absolutely, absolutely. And in order to get these efficiencies and get to those smart cities that IoT and 5G is hot on our heels here, we need more data center access and then interconnectivity. Can you speak, Joe, to what you're seeing? Increase of new technologies? Yeah, sure. So I mean from one from a data center perspective, it's a little different for the financial markets, right? Obviously, you tend to follow where the telcos go from actual physical presence perspective, but it's really an exchange based marketplace, right? So wherever the exchanges are coming, wherever the exchanges who are open to doing additional business through additional markets, that's where we really see the data centers forming, right? So I think about in Saqqaqis, whether it's where exchanges have decided to go into actual data centers like an Equinex and Saqqaqis, or whether they've built their own like a Mawa where the New York Stock Exchange is done in New Jersey, relatively close. Important that they're close by transatlantic cables and close that they're through cables and microwave networks that are able to get out to Chicago, but still based on where the exchange is really pulling them to. And Elaine, how are you seeing this? Well, I think we're all gonna kind of say the same thing. People are literally connecting data centers these days in the undersea cable world when they build new systems. So I'm working on a number of projects right now and it's hard for me to think about one that is not really focused on connecting data centers except a little one in the Caribbean where people are again looking for diversity and competitive access. And there aren't a lot of big data centers down there. Most of the major new undersea cable builds across the globe are being driven by, as I said before, the likes of Facebook and Google and Amazon and their Microsoft has been not quite as strong in that space as recently, but they're all connecting their own data centers. And something that's a little bit interesting is that cables used to land right near, they still do land on shore, obviously, and they used to go into what we would call a cable station, which would have all the equipment that was associated with the end of the cable, including the transmission equipment. But what's happening now is some of the equipment is staying right on the beach, stuff that sends the power down to the repeaters underneath the ocean. But the bulk of the gear that goes on the end of this cable to provide the transmission capability is being backhauled through, again, the burst routes all the way back to the data centers. So the cable stations that we used to think of for decades are now really distributed physical facilities and a good portion of them, the brains, the guts, all of that really belongs back in the data centers, whether it's a data center like Equinex or whether it's Google's own data center or whether it's Facebook's own data center or Amazon's place where they have their cloud services. And actually, when all these guys cooperate together to build a cable, they send their fibers to different places because they wanna own and operate and manage those fibers independently from their own space. And besides those guys driving cables, it's interesting also to see that some independent data centers are now talking about participating in building cables themselves. So the market is evolving in a very interesting way. The trick right now in the undersea cable space is to get as much capacity through these pipes as you possibly can, because there just seems to be an endless, and don't quote me, you're gonna quote me because it's a video, but nobody wants to be saying there's an endless demand, but it feels that way, I guess I should say. It feels like the demand keeps growing and growing and growing. And we've analyzed demand on different routes with the support of some of our friends at Telegeography who are the best in our view at doing that stuff. And when you plot the curves of the growth of demand over years on the international routes, and it just keeps going and going and going, I can't tell you how many clients we've had ask us, will this continue? It can't possibly continue. Nobody can imagine it'll possibly continue. And we create the charts that show for them. It's been going for 20, 30 years and everybody always says it can't keep going, can it? And we said, well, it's hard to imagine how it's gonna keep going, but it has. And that question and answer back and forth and disbelief and it's always there. It's ever present. I remember it from the late 80s. Oh, we can't possibly need a new, so today's goal, build a bigger and fatter pipe and the suppliers of undersea cables are finding ways to put more fiber pairs than I ever dreamed, quite honestly, across the oceans. So that's what's going on. That makes me think of an IVM marketing survey that's been quoted recently on our last virtual round table actually by Vinay, that in the last two years alone, 90% of the data has been created. And so again, it kind of speaks to this y equals x squared exponential graph that we're seeing driving demand. Mark, where do you think this bandwidth consumption is so unprecedented? Is it gonna keep going? What's it coming from? Your predictions there? Well, it's coming from some of the things that we've obviously touched upon about media is obviously a large one, but there's only a finite amount of media that can be consumed, right? If you're talking about your same graph, if we lived in a leisure society and all we did, everybody, all waking hours was consume media. I think there was a nice shit-like episode of Black Mirror or something about that, right? There. It would be just a little messed up, but there's a finite amount of media because you can really only consume so much at one time. So I think that you can plot what the demand ultimately could be for that, and there is an economic function of the production of it, which does limit the asymptote of how much media you could ever push through a pipe, ultimately. But what we're seeing more of now is IoT and sensor-based traffic and one of the things that we want to call it local, if you have an autonomous car, I'm in LA. I don't want that traffic and that decision and computing power necessarily being done overseas than coming back to make a decision about what my car is gonna do at that moment. But there are all sorts of things that can improve at scale, the general world that we live in, with IoT transactions that don't need to take place locally. And there, again, we get into where we can most efficiently compute. And that's where I see, I'm gonna come up with a phrase for it. The transactional efficiency of computing by location or by geography relative to latent capacity, power rates at the time, something geographically happening that is reducing demand in a certain area. And that's where I see the traffic will be coming from. Sensor-based, IoT-based computation. Yeah, and now we're on the edge of talking about the edge and that prioritization of data, which is really another interesting conversation. But Joe, bring us back. What are you seeing from financial markets in terms of this unprecedented bandwidth consumption? Is it gonna continue up for our exchanges? Well, yeah, so it's funny, but from the financial market perspective, we're nowhere near to consumption of, especially the OTTs and the media houses. Financial markets are probably, Mark talked about efficiency before, we're probably the most inefficient. On Friday at four o'clock through Sunday morning, there's literally nothing happening on those bandwidth lines. So I don't think that the financial markets will actually be the ones pushing capacity requirements. I think financial markets will continue to do steady growth, especially on the institutional side, but from the more proprietary trading side, what they'll concentrate on is speed and how to actually consume less bandwidth and just do it quicker in any way that they can. Yeah. And Mark, one last question for, well, it's not gonna be my last question for you, I have one more after this, but how are you seeing all this trans-specific connectivity, this consumption? How is it affecting the data center real estate market on the US West Coast? What are you seeing? Again, when we, so when you look at like the acquisition of a data center that I'm an investor in, it's in downtown LA. And during the acquisition process, people, they will, what's the value of having a data center in downtown? Why pay for real estate in downtown? Why pay for power rates in downtown? Why are Google and Facebook and Microsoft and all these other companies building data centers far away from large cities? And again, when it comes to the geographic location of a data center, we've had some talk about the financial, a trading aspect, obviously the closer things might be, the faster you can trade, but where we are, we're in the second largest city in America. And when Netflix, who is at least in real estate everywhere in Los Angeles, wants to get data to their consumer, the closer they can put it to their consumer, the less expensive it is for them to deliver it. And we know that, but it needs repeating because I just talked about the capacity and the generation of media is really only going up and people want to be able to access it quickly. So having that information, that media local is important. Then you also get into sensor-based technology, like I mentioned about a car, as more and more decisions around you are being made in the cloud or by AI, when we think it's important that we have low latency for high-frequency trading, people are gonna really want low latency for the robot that's operating on them when it's accessing cloud data to be really fast. So I think of those two different paradigms. Absolutely. I mean, it makes tons of sense from an OTT perspective, wanting to get closer to the end user's eyeballs. Global financial houses, Joe, what do you see the benefit of all this interconnectivity going for them? Yeah, I mean, again, like we talked about a little bit, when you look at the financial marketplace, most of our customers are trading in places all over the world. And as a respect, have offices all over the world. So whether it be just simple connectivity between offices, whether it be data mirroring or whether it be trade execution, every bit of connectivity is important. And again, looking at the financial side of it from a speed trader or proprietary trading house, some of these cable systems and the ultimate data centers that they end up at, the closer that they are, much like Mark was saying about the internet or things, but the closer that they are to the exchanges, allows for more interesting things to happen from a local perspective. Now whether that means diversity and diverse entrants into buildings, whether that means a lot of things that they know it does, which is, you know, microwave capacity of the back of these systems in order to actually speed them up and do it through the air. And we haven't even gotten into the effects of the location and distance as quantum computing becomes more prevalent. Correct. All right, well, maybe this is part of my last question for you guys. Take out your crystal balls and tell me what are your predictions for the trans-specific connectivity market in the next three years ahead? Elaine, my friend, I'll start with you. I didn't see that one coming. Maybe I was supposed to read the Q sheet at a time. I think we're gonna see a lot of tables and I wanna put in a plug in here for Suboptic in April in New Orleans, a big conference. So search on Suboptic 2019. For those of you that are interested in the undersea cable space, that'll be a big event, one of the most important ones in the industry. And you can hear a lot about a lot of these things there just within the next few weeks. But I think there will be a lot of cables, a lot more cables across the Pacific in the coming years. And I think there'll be a lot more cables within Asia. There's been a lot that are being built down to Australia now. I think that will not go at the same pace that it's been going at for the past couple of years, but it will certainly go through its own refresh cycle. I actually think one of the most difficult things to predict for me right now, and I think generally speaking in the undersea cable world, in Asia Pacific especially, is that these cables that are being built there, unlike the ones in the Atlantic, often have some of the principal incumbent telcos still cooperating with the ICPs. So China Telcom, China Mobile, China Unicom, all Korea Telcom, NTT are partners of the ICP, the US-based Facebook, Google, et cetera, the GAFAS building these cables. And the Chinese equivalents of the US-based GAFAS, the Alibaba's, the Tencent's, the Baidu's are all behind them buying capacity because that's the way things work in Asia. They have their way of doing these things and we sitting here in the US have our ways of doing things, right? And I think it's a big question in the undersea space when if ever are the Chinese GAFAS which are growing at phenomenal paces and doing phenomenal technology things and I wouldn't be at all one to position that I know enough about them. But when will they step out more broadly and start building their own or go sufficiently global and you can see by looking at their progress they are going broader than outside of their home region so that what's happening now with the Googles and Facebooks in Amazon's building their cables also happens for the Chinese internet providers to do the same for themselves. And I think that'll somehow, and I don't know how end up with an even an equally equivalent growth spurt at some point in time. Three years might be a little optimistic about when that happens but I would suspect we'll see that five to 10 years from now. So that's my prediction. Very interesting, very interesting. Joe, from a financial perspective perhaps what are your predictions? Yeah, I mean, so it's tough to expect the financial houses to actually drive based on capacity and Elaine's completely right. We see the OTTs and automated carriers in some of those cases from a capacity standpoint driving the marketplace. But I think the financial community has in the past especially in the case of an express in the transatlantic space stepped up and been a big part of some cable systems that have happened. And I think the appetite is there again whether that be to new places rather than the traditional cities we've seen today or the city pairs that we've seen today. But I think there's a definite opportunity for the people who would like to build cables to really include the financial marketplace in there and have them actually be a major contributor to some of the costs that associated with it. Excellent, and Mark final word. Sorry, there's a I was gonna say in a final word for your prediction. The one thing that I think we will see a large amount of attention paid to large investment directed at is security of the cables themselves. They're on one hand, national security resources whether it's literally from a national security service whether it's literally from an information standpoint or from an economic standpoint and looking back through history some of the earliest disruptions in communication were when telegraph cables were cut and then wrapped with hide. So you couldn't tell as you were right on the train like looking at the telegraph cable to inspect it and going back through 40s, 50s, 60s and then through the Cold War games we'll call them that were played amongst whether it's nation states or now even companies that have the resources to do these types of things. So the surveillance and protection of the infrastructure I think is what we're gonna see even more investment and attention paid to. It is certainly getting a lot of attention these days you're right. And it's an open issue that needs to be addressed. It's on a lot of people's mind Mark you're absolutely right about that. Yes. Fascinating views today. Thank you very much our all-star panelist Joe Hilt, ANOVA Financial Networks Elaine Stafford, DRG Undersea Consulting my friend Mark Gittleman, 5x5 Telecom. Viewers thank you so much for tuning in and if you liked today's content come here us live at our CEO roundtables at Telecom Exchange. Next we'll come out flagship text event in New York in May then Toronto in October LA November. We are filling up our C level speaker seats now. So if you do have a C level that wants to participate check us out at ctelecomexchange.com to feature your thought leader here next time on our monthly virtual roundtables email us at pratjsa.net or events at jsa.net. Okay, that's it for this Friday. Thanks for tuning in to JSA TV until next time, happy networking. Thanks all.