How the need for more and closer connectivity is changing the market in Latin America
As you might expect, as the COVID-19 pandemic spread around the globe, we’ve been watching things carefully, and initially, as manufacturing and retail shut down, there was a lot of uncertainty. Some developments expected to cause significant disruption in CALA like 5G and IoT were well ahead in the planning phase but others, like the increase in teleworking or online education directly linked to the pandemic needed significant acceleration.
So how has and will this impact the CALA market?
Signs of future investment
Firstly, let’s consider what’s happening in the submarine segment. It may have seemed in the past that the available capacity was striding too far ahead of both demand and capability of the regional terrestrial networks to reach potential new consumers.
Right now, the picture looks very different. We’re seeing new investment in submarine cables. New southern routes such as the Malbec cable connecting Argentina and Brazil, and the Curie cable, spanning Chile, Panama, and the United States are either in their earlier stages of services or close to completion. So why this sudden investment? Where is the new demand for capacity coming from?
This is about adding capacity to provide connectivity to support delivering content closer to the users in all the different and edge data centers. They need to get their content closer to the rapidly growing number of consumers in the CALA region. And in turn, new demand for their content has in no small part been accelerated by the stay-at-home necessity arising from the pandemic.
But there is a second dynamic that we are seeing, albeit still at a very early stage in the region. When consumers get more access to content and make more use of applications, the user experience becomes even more important. For applications in the cloud, or applications making use of data in the cloud, the delay (or latency) becomes a very critical issue. As new applications are developed such as those making use of augmented or virtual reality, for remote monitoring or control of industrial proceses, or even just for online gaming applications, performance is increasingly dependent on ever-lower delay.
When consumers get more access to content and make more use of applications, the user experience becomes even more important.
Since one of the elements of delay is distance, a way to reduce this is to move the data centers closer to the point of use. So, we are seeing the need to build far larger numbers of edge data centers in more distributed locations in order to host media and applications locally, and ultimately be closer to the user. The Latin America data center market by investment is expected to grow at a CAGR of 7.6% during the 2021-2026 period. This movement of applications and content closer to the user is a clear driver for high performance connectivity with far greater reach than ever before.
How does CALA differ from other service provider markets?
Consumers and businesses around the world have largely the same desires and drivers regardless of where they are. As a result of this, we’re seeing the trend for data and applications moving to the edge of the network in all regions, but it’s fair to say that the CALA region is still at an early stage, especially for places that are away from the major urban centers. However, the CALA region is catching up fast and the impetus to do so is only boosted as the benefits of automation, monitoring and control become better appreciated in all industries and sectors. This growing need for better performance from cloud applications puts pressure on service providers to invest in extending their network reach and architecting it for ultra-low-delay and high-speed connectivity.
Historically, the service provider market in this region is very fragmented. While there are some large national and regional carriers, many countries in the region also have very large numbers of smaller local providers. From the architectural point of view, it’s also very common in this region for service providers to offer a range of services through a single IP-MPLS infrastructure rather than managing multiple networks. This has potential efficiency benefits, but it can also result in complex and unpredictable protocol stacks, which add delay, are costly to manage and difficult to scale. In many areas, service providers also face challenges with the quality of existing fiber infrastructure and with sometimes uncoordinated civil works disrupting network operations and degrading resilience.
Service providers need an IP infrastructure that goes beyond what is achievable by just upgrading the capacity of the existing routers.
These challenges require technical solutions that maximize the performance of existing infrastructure, while scaling to suit the needs and business plans of service providers, both large and small. Service providers need an IP infrastructure that goes beyond what is achievable by just upgrading the capacity of the existing routers. They need to evolve their IP network architecture to become automated, open and straightforward, leveraging a highly programmable, converged and optimized infrastructure that is based on standards protocols and highly instrumented providing real-time telemetry. With IP going deeper into the network, the adoption of an intelligent automation layer allied with powerful machine-learned-based analytics is the only way to provide the scalability and performance the new applications are requiring without negatively impacting network operation capacity and costs.
Are there other factors that indicate increased future demand?
5G rollout is still in its infancy in most places around the world, and this is certainly true in the CALA region. However, it is a game-changer not only for the wireless connectivity performance it promises to provide for consumers and businesses, but also for the step-change in Radio Access Network (RAN) transmission performance that is required to make it feasible.
5G requires a far higher number of cell sites than 3G or 4G, and not only that, but 5G cell sites can also have large numbers of remote antennas, each requiring multiple gigabit connectivity also leading into what we call IP network densification. In addition, the 5G network requires a programmable infrastructure with intelligent control to create physical and virtual network slices that provide customized and diverse network performance characteristics to suit a very wide range of applications. This spans very-high-capacity radio links for streaming entertainment or for advanced business applications, through to ultra-low delay and ultra-reliable connectivity for a massive numbers of connected devices.
Service providers hoping to compete in the xHaul market supporting 5G rollout will need to leverage cost-efficient technologies with intelligent control in order to make a business case for this level of performance over such a wide area.
There is no doubt that it is an important time for CALA service providers, as they work to get ready to address the new opportunities emerging as a result of new cloud-based applications and services. The forward-thinking service providers we work with realize that it is time to change the way the edge of the network is defined, and moving it from a static “geographic” location, to a dynamic point based on where cloud application consumption resides at any given time.
It is clear that while today’s complex routers work in the core, they are just not agile enough for the edge. At Ciena we understand that the increased demand for faster, closer, smarter service access points at the edge of the network will require a new, more efficient, lightweight IP routing approach that can be distributed across the metro network taking advantage of the perfect balance between distributed and centralized intelligence, and achieving the required adaptability the future networks will need.
Figure 1: Adaptive IP closed-loop IP network automation, from access to metro
By combing our history of innovation, extensive work with service providers and belief that open architectures allows services providers to select best in breed approach that is right for their business we are helping our customers with these evolving metro and edge network demands.
We look forward to working with our customers leveraging our experience and deep understanding of these drivers to keep them competitive in a fast-moving market.